Day Traders Diary


The major averages ended the Tuesday session on a mixed note despite showing early strength. The S&P 500 added less than a point, while the Russell 2000 lost 1.0%.
Equity indices began the trading day on an upbeat note even though the April Retail Sales report that was released ahead of the open missed expectations. The report pointed to soft consumer spending, but had little effect on equities as the disappointing figures suggested there is little need as of yet to worry that the first rate hike from the Fed will come sooner rather than later.
With the data out of the way, the S&P 500 rallied out of the gate, charging past the 1,900 mark for the first time ever. Even though the index was able to creep above that psychological level during the first hour of action, it could not hold its high as the underperformance of small caps weighed on the overall sentiment. Furthermore, the lack of concerted leadership from either the cyclical or the countercyclical side contributed to the caution that was exhibited by market participants.
The four top-weighted sectors were mixed when compared to the S&P 500. Consumer discretionary (-0.3%) and financials (-0.1%) lagged throughout the session, while health care (+0.2%) and technology (+0.1%) registered modest gains after displaying some intraday volatility.
The health care sector posted a slim gain even as biotechnology ended on lows. The iShares Nasdaq Biotechnology ETF (IBB 230.51, -1.41) fell 0.6% after being up nearly 1.0% during the first hour of action.
Elsewhere, the tech sector was kept from pulling away from its flat line by the mixed performance among momentum names. LinkedIn (LNKD 147.67, -4.63) and Yelp (YELP 55.53, -1.07) lost 3.0% and 1.9%, respectively, while chipmakers also struggled, sending the PHLX Semiconductor Index lower by 0.8%.
Even though the top four sectors did not show much strength, the S&P 500 never dipped too far below its flat line as energy (+0.3%), industrials (+0.2%), and consumer staples (+0.2%) outperformed throughout the session. Notably, the industrial sector was underpinned by transports as the Dow Jones Transportation Average (+0.5%) climbed to a fresh all-time high.
On the fixed income side, Treasuries surged after the disappointing Retail Sales report and continued their advance into the afternoon. As a result, the benchmark 10-yr yield fell five basis points to 2.61%.
For the second day in a row, participation was well below average, with less than 600 million shares changing hands at the NYSE.
Economic data featured Retail Sales, Import/Export Prices for April, and March Business Inventories:
Retail sales increased 0.1% in April after increasing an upwardly revised 1.5% (from 1.2%) in March. The consensus expected retail sales to increase 0.3%. Expectations of strong GDP growth in the second quarter were predicated on the unleashing of pent-up demand from weather-related delays. So far, that has not happened. Instead, sales growth trended in-line with income gains. The April Employment report showcased a 0.2% increase in aggregate earnings, which translated into a 0.1% increase in retail sales. Excluding transportation, retail sales were flat after increasing an upwardly revised 1.0% (from 0.7%) in March. The consensus expected these sales to increase 0.6%.
Export prices, excluding agriculture, fell 1.2% in March after increasing 0.8% in the prior reading. Excluding oil, import prices were unchanged, which followed last month's uptick of 0.3%.
Business inventories increased 0.4% in March after increasing an upwardly revised 0.5% (from 0.4%) in February. The consensus expected business inventories to increase 0.4%. Total inventories consist of manufacturer, merchant wholesaler, and retailers. Both manufacturers (0.1%) and wholesalers (1.1%) were known prior to the release. Only retailer inventories, which were flat after falling 0.1% in February, were unknown.
Tomorrow, the weekly MBA Mortgage Index will be released at 7:00 ET, while April PPI and Core PPI will be reported at 8:30 ET.

S&P 500 +2.7% YTD
Dow Jones Industrial Average +0.8% YTD
Nasdaq Composite -1.1% YTD
Russell 2000 -3.4% YTD

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