Day Traders Diary


The stock market stumbled on Wednesday with small caps leading the fall as the Russell 2000 (-1.6%) registered its second consecutive decline that placed it back below its 200-day moving average. For its part, the S&P 500 lost 0.5% with five sectors finishing in the red.
Equity indices began the midweek session below their flat lines, but outside of the Russell 2000, their losses were held in check for the bulk of the day. The S&P 500 hovered roughly four points below its flat line for the better part of the trading day until diving to a fresh low during the last 90 minutes of action.
Meanwhile, the Russell 2000 lagged from the open, and its underperformance likely contributed to the overall sense of caution. Furthermore, the relative weakness among the top-weighted sectors prevented sustained rallies from taking shape.
Out of the five largest sectors that represent more than 70.0% of the S&P 500, consumer discretionary (-1.1%), financials (-0.8%), technology (-0.6%), and industrials (-0.8%) lagged throughout the session, while health care (unch) displayed relative strength thanks to modest gains in biotech. The iShares Nasdaq Biotechnology ETF (IBB 231.41, +0.90) advanced 0.4%.
The weakest sector of the dayconsumer discretionarysuffered from noteworthy losses among apparel retailers. Shares of Fossil (FOSL 100.00, -11.45) tumbled 10.3% after the company's cautious guidance overshadowed its earnings beat. Also of note, Macy's (M 57.83, -0.01) reported a one-cent beat on below-consensus revenue, but could not rally even though shareholders were treated to a 25.0% dividend hike and an increase to the share repurchase program. As a result of the decline, the worst-performing sector of the year widened its year-to-date loss to 4.7%.
Although most cyclical sectors were unable to keep pace with the broader market, energy (+0.04%) and materials (+0.1%) outperformed amid strength in the underlying commodities. Crude oil rose 0.6% to $102.34, while metals displayed strength as well. Copper futures advanced 0.7% and gold futures rose 0.9% to their respective $3.16/lb and $1306.10/ozt.
On the countercyclical side, consumer staples (-0.6%) lagged, while rate-sensitive telecom services (+0.5%) and utilities (+0.4%) finished in the lead. Both sectors likely benefitted from today's session-long retreat in yields. The 10-yr note advanced 18 ticks, pressuring its yield seven basis points to 2.54%. The benchmark yield settled at its lowest level since late October 2013.
Participation was well below average, which has been the case for the past week. In fact, daily NYSE volume has been trending lower all week with today's tally (607 million) representing the second-lowest total of the week.
Economic data was limited to the April PPI report and the weekly MBA Mortgage Index:
Producer prices increased 0.6% in April, up from a 0.5% increase in March. The consensus expected producer prices to increase 0.2%. The economic consensus is once again having difficulties estimating producer inflation using the new methodologies. Final demand for services, which increased by its largest amount (0.7%) in March since January 2010, was anticipated to fall back in April. That did not happen. Services prices rose another 0.6% in April, which was one of the largest two-month gains in the history of the index. Final demand for goods increased 0.6% in April, up from being flat in March. Food prices, which jumped 1.1% in March, increased 2.7% in April. Energy costs, which were expected to be a primary factor for April inflation gains, increased a minute 0.1% in April after falling 1.2% in March. Excluding food and energy, core PPI increased 0.5% in April, down from a 0.6% increase in March. The consensus expected these prices to increase 0.2%.
The weekly MBA Mortgage Index rose 3.6% to follow last week's increase of 5.3%.
Tomorrow, weekly initial claims ( consensus 325,000), April CPI (consensus 0.3%), and the Empire Manufacturing survey for May (consensus 4.8) will all be released at 8:30 ET, while March Net Long-Term TIC Flows will be announced at 9:00 ET. April Industrial Production (consensus 0.0%) and Capacity Utilization (consensus 79.2%) will be announced at 9:15 ET, while the Philadelphia Fed survey for May (consensus 9.1) and the May NAHB Housing Market Index (consensus 48) will cross the wires at 10:00 ET.

S&P 500 +2.2% YTD
Dow Jones Industrial Average +0.2% YTD
Nasdaq Composite -1.8% YTD
Russell 2000 -5.0% YTD

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