Day Traders Diary


The major averages ended with solid gains as the Dow Jones Industrial Average logged its 20th consecutive advance on a Tuesday.

Equities surged out of the gate, but the early enthusiasm faded an hour into the session when the major averages notched their highs, and began their retreat towards Friday's closing levels.

The early action saw nine of ten sectors register gains of at least 1.0%. However, the defensively-geared utilities spent the entire day in negative territory before ending lower by 1.2%. A Deutsche Bank downgrade of Exelon (EXC 32.05, -2.60) weighed on the rate-sensitive sector, which extended its May loss to 7.8%.

Other defensive groups finished mixed as afternoon weakness sent the telecom sector lower by 1.3% while consumer staples ended little changed.

The health care space was able to outperform other counter-cyclical groups as biotechnology displayed strength. The iShares Nasdaq Biotechnology ETF (IBB 183.03, +2.29) settled higher by 1.3% after being up as much as 2.3% in early action.

While defensively-geared sectors finished mixed, the six cyclical groups saw comparable gains.

Financials displayed strength as most majors climbed at least 1.0%. However, mortgage real estate investment trusts like American Capital Agency (AGNC 26.41, -1.31) and Annaly Capital Management (NLY 13.92, -0.50) were pressured by the continued weakness in Treasuries. A decrease in prices creates a headwind for the highly-levered group by lowering the value of mortgage investment portfolios.

The industrial sector trailed behind other growth-sensitive areas as transportation-related names lagged. Members of the Dow Jones Transportation Average were active today as Landstar System (LSTR 53.49, -1.15) lost 2.1% after lowering its second quarter guidance. In addition, CSX (CSX 25.29, -0.21) shed 0.8% after one of its trains derailed outside of Baltimore.

Also of note, airlines finished broadly lower amid reports the Obama administration has proposed raising taxes on air travel by $14 per flight.

Only a handful of names reported their quarterly results this morning. Better-than-expected earnings and revenue from Tiffany's (TIF 79.22, +3.01) provided a boost to retailers as the SPDR S&P Retail ETF (XRT 77.99, +0.40) settled higher by 0.5%.

Aggressive selling across the Treasury complex resulted in 10-yr yield climbing higher by 16 basis points to 2.170%, a 13-month high.

The CBOE Volatility Index (VIX 14.47, +0.48) began the session in the red, but intraday broad market weakness lifted the near-term volatility measure into positive territory.

Today's economic data was limited to just two releases.

The Conference Board's Consumer Confidence report for May brought encouraging news with the index rising to 76.2 from 68.1 in April. The consensus expected a reading of 72.5. The May number was the highest since February 2008.

The uptick in confidence fits with the improvement in labor market conditions and fits neatly with the ongoing strength in the stock market and housing market that have produced their share of positive-sounding headlines.

Separately, the March Case-Shiller 20-city Home Price Index rose 10.9% while a 10.1% increase had been expected by the consensus. This follows the previous month's increase of 9.3%.

Tomorrow's economic news will be limited to the 7:00 ET release of the weekly MBA Mortgage Index. The U.S. Treasury will auction $35 billion in 5-yr notes.

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