Day Traders Diary
1/31/14
The stock market ended a disappointing month on a lower note as the S&P 500 lost 0.7%, extending its January decline to 3.6%. The Nasdaq outperformed, falling 0.5%, while the Dow Jones Industrial Average slid 1.0%.Equities began the session sharply lower but a day-long rebound helped the major averages finish the trading day with more palatable losses. The S&P 500 made a very brief afternoon appearance in positive territory before retreating again in the final hour.
Today's cash session kicked off amid significant weakness in Europe where markets were flirting with losses close to 2.0%. The region-wide weakness was led by Germany after the country saw a 2.4% year-over-year drop in retail sales (+1.9% expected). A disappointing CPI reading for the eurozone (+0.7% versus 0.9% consensus) also played a part in the weakness.
Furthermore, the early selling once again coincided with yen strength as dollar/yen dropped as low as 102.00 before staging a modest recovery which accompanied the rebound in equities. Fittingly, the final hour retreat in stocks was accompanied another rally in the yen. Yen futures added 0.5% on Friday, extending their January gain to 3.0%.
Seven of ten sectors ended in the red with energy (-1.5%) seeing the largest decline. The sector was pressured by Dow component Chevron (CVX 111.63, -4.82), which tumbled 4.1% following disappointing earnings. The broader energy sector ended January behind the remaining nine groups with a loss of 6.3%.
Meanwhile, the second-weakest sector of the month, consumer discretionary, lost 1.3%, extending its January decline to 6.0%. The sector was a significant source of the morning weakness as Amazon.com (AMZN 358.69, -44.32) plunged 11.0% following its disappointing earnings and cautious guidance.
Despite the sharp loss in Amazon.com, the discretionary sector was able to climb off its lows with help from Chipotle Mexican Grill (CMG 551.96, +58.00) and homebuilders. Chipotle spiked 11.7% after reporting in-line earnings while iShares Dow Jones US Home Construction ETF (ITB 24.82, +0.43) added 1.8% as Treasury yields continued their retreat (10-yr yield -4 bps to 2.66%).
With regard to other cyclical groups, financials (-1.1%) lagged while industrials (-0.5%), materials (-0.6%), and technology (+0.2%) outperformed.
Notably, the tech sector drew strength from Google (GOOG 1180.97, +45.58), which jumped 4.0% after reporting earnings. Although the company missed its Capital IQ earnings estimate by $0.28, investors were pleased to see a 13% quarterly increase in click revenue.
On the countercyclical side, consumer staples (-0.4%), telecom services (+0.1%), and utilities (+0.8%) outperformed while health care (-0.8%) lagged.
Participation was well above average, which was likely related to month-end activity as 937 million shares traded at the NYSE.
Monday's data will be limited to the New Home Sales report for December, which will be released at 10:00 ET. It is also worth mentioning that China will release its Manufacturing PMI tonight at 20:00 ET, which is likely to generate a reaction in global markets on Monday. The general consensus expects the reading to slip from 51.0 to 50.5.
Nasdaq Composite -1.7% YTD
Russell 2000 -2.8% YTD
S&P 500 -3.6% YTD
Dow Jones Industrial Average -5.3% YTD
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