Day Traders Diary


Equities ended today's session on their lows as global growth concerns reemerged. The three major indices all lost 0.9%, but the underperformance of small cap stocks was notable as the Russell 2000 slid 2.5%.

Although most markets across the globe were closed in observance of Labor Day, some countries continued reporting their economic data.

China reminded investors of its importance to the global economy as the decline in the country's Manufacturing PMI (50.6 actual, 50.9 prior, 51.0 consensus) along with a disappointing U.S. ISM Index (50.7 actual, 51.3 prior, 51.0 consensus) pressured commodities and commodity-related sectors.

As a result, energy and materials both ended with losses near 1.7%. Crude oil settled lower by 2.7% at $90.95 after today's inventory report revealed that crude stockpiles climbed to 6.696 million barrels, a record high dating back to 1982 when the Energy Information Administration began tracking the data.

Meanwhile, the materials sector declined throughout the day as related metals sold off. Gold futures fell 1.1% to $1455.90 per troy ounce after being down as much as 2.1% intraday. Meanwhile, copper was unable to bounce off its lows as the red metal declined 3.8% to $3.068 per pound.

The relative weakness of gold pressured miners as the Market Vectors Gold Miners ETF (GDX 29.65, -0.71) settled lower by 2.3%. Steelmakers also displayed weakness throughout the day, and the Market Vectors Steel ETF (SLX 41.56, -0.87) slumped 1.9%. Disappointing manufacturing data from China and the U.S. weighed on the group, and Alcoa's (AA 8.43, -0.07) announcement of a possible curtailment of its smelting capacity reflected the sluggish global growth.

Concerns regarding economic health also pressured industrial shares, and specifically, the Dow Jones Transportation Average. The bellwether complex was one of the leaders of the first-quarter market rally. However, the sector underperformed last month, ending April with a loss of 1.2%.

The 20-stock complex kicked off the month on a cautious note as 18 components ended with losses of at least 1.0% while the Transportation Average slid 2.3%.

Stocks saw a brief afternoon bounce when the Federal Open Market Committee released its latest policy statement, which did not contain any groundbreaking news.

As expected, the FOMC maintained its purchasing program at $85 billion per month, and kept its target Federal Funds Rate steady at 0-0.25%. The central bank also reiterated its goal of staying true to the current policy course until the unemployment rate declines to 6.5%.

Today's statement did contain an explicit mention of a possible increase or decrease to the purchase program. However, this wasn't "new" as prior statements from the Fed have already allowed for the possibility of modifications to the program.

Looking back at the day's remaining economic data, total construction spending fell 1.7% in March after increasing an upwardly revised 1.5% (from 1.2%) in February. The consensus expected construction spending to increase 0.5%.

Most of the decline was the result of weaker public construction spending. That sector declined 4.1% in March after increasing 1.5% in February. This drop helps explain why government spending fell substantially in the first quarter GDP report.

Investors will receive a full slate of economic data tomorrow with the April Challenger Job Cuts Report set to kick things off at 7:30 ET. Weekly initial claims, preliminary first quarter productivity, first quarter unit labor costs, and the March trade balance will all be released at 8:30 ET.

Also of note, the European Central Bank will release its latest interest rate decision with many expecting a 25 basis point rate cut from 0.75% to 0.50%.

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