Day Traders Diary

5/7/14

Equity indices finished the Wednesday session on a mixed note as high-growth names weighed on the Russell 2000 (+0.1%) and the Nasdaq (-0.3%), while the Dow Jones Industrial Average (+0.7%) and S&P 500 (+0.6%) outperformed thanks to strength in blue chip listings.
The stock market opened the trading day with modest gains amid headlines indicating Russia's President Vladimir Putin has reached out to OSCE chief and Swiss President Didier Burkhalter, attempting to de-escalate the Ukraine crisis through diplomatic avenues. Initially, the reports boosted overall risk appetite, sending Treasuries and the yen to lows, but those moves were retraced not long after. The yen returned into the middle of its trading range, while Treasuries reclaimed their losses and spent the afternoon near their flat lines. The benchmark 10-yr yield ended unchanged at 2.59%.
Stock indices, meanwhile, surrendered their opening gains during the first hour of action, but only the Nasdaq Composite spent the remainder of the session in the red, while the Dow and S&P 500 rebounded swiftly.
The S&P 500 tested its 50-day moving average (1865), spring-boarding off its early low with help from a handful of large sectors. Consumer staples (+1.0%), energy (+0.8%), and industrials (+0.9%) contributed to the recovery, while financials (+1.3%) finished ahead of the remaining cyclical groups following yesterday's underperformance.
Even though the financial sector posted a solid gain, it was unable to turn positive for the year, trimming its year-to-date loss to 0.01%. Meanwhile, the only other sector that holds a year-to-date lossconsumer discretionary (-0.2%)joined health care (+0.2%) and technology (-0.2%) among today's laggards.
All three sectors contain a fair share of momentum names, which were the source of the relative weakness within the Nasdaq. Most notably, shares of FireEye (FEYE 28.65, -8.48) plunged 22.8% after the company reported in-line earnings, but issued disappointing guidance. Other momentum names fared a bit better, but Facebook (FB 57.39, -1.14) and Twitter (TWTR 30.66, -1.19) lost 2.0% and 3.7% respectively, while Tesla (TSLA 201.35, -5.93) slid 2.9% ahead of its after-hours quarterly report. Similarly, Priceline.com (PCLN 1131.74, -36.62) sank 3.1% prior to its report, which is due out tomorrow.
Elsewhere, biotechnology also factored into the underperformance of the Nasdaq. The iShares Nasdaq Biotechnology ETF (IBB 227.48, -1.85) fell 0.8%, while the broader health care sector (+0.2%) returned to its early high into the close.
The other countercyclical sectors ended among the leaders with the utilities sector (+1.6%) widening its year-to-date gain to 13.8%. For its part, consumer staples (+1.0%) overcame a disappointing quarterly report from Whole Foods (WFM 38.93, -9.02) that pressured the stock back to levels not seen since early 2012.
Participation was above average as roughly 750 million shares changed hands at the NYSE.
Economic data was limited to Q1 productivity and unit labor costs and the Consumer Credit report for March:
Nonfarm business labor productivity declined 1.7% in the first quarter after increasing an upwardly revised 2.3% (from 1.8%) in Q4 2013. The Briefing.com consensus expected the reading to decline 1.2%. This was the first decline in productivity since Q1 2013 when it declined 1.8%. With a 0.1% increase in Q1 2014 GDP, there was no doubt that productivity declined during the first quarter. Output levels managed to increase a minimal 0.3% in the first quarter, but that was dwarfed by a 2.0% increase in hours worked. Hours growth had not exceeded 2% since Q4 2012.
Hourly compensation increased 2.4%, up from a 1.9% gain in Q4 2013. That was the largest increase since Q4 2012 when it rose 10.2%. Given the flat wage data in the April Employment Report, compensation growth is unlikely to remain at its first quarter pace. The combination of higher hours and compensation along with weak output growth caused unit labor costs to increase 4.2% in the first quarter.
Consumer credit increased by $17.50 billion in March, which was higher than the Briefing.com consensus estimate of $16.10 billion. The prior month's credit growth was revised lower to $13.30 billion from $16.50 billion.
Tomorrow, weekly initial claims (Briefing.com consensus 325,000) will be announced at 8:30 ET.

S&P 500 +1.6% YTD
Dow Jones Industrial Average -0.4% YTD
Nasdaq Composite -2.6% YTD
Russell 2000 -4.5% YTD

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