Day Traders Diary


The stock market kicked off June on an unassuming note. The S&P 500 added 0.1% after spending the bulk of the day near its flat line, while the Nasdaq Composite (-0.1%) and Russell 2000 (-0.5%) underperformed throughout the session.
Equity indices displayed slim gains at the open, but small-cap stocks struggled from the get go. The major averages then had the rug pulled out from under them after a disappointing ISM Index for May (53.2 versus consensus 55.6) crossed the wires.
Although stocks slumped to lows in reaction to the report, they were able to trim their losses over the next 90 minutes. The Nasdaq and Russell 2000 could not return into positive territory, while the Dow and S&P 500 managed to regain their flat lines.
The recovery in the blue chip indices was assisted by headlines indicating that the original ISM report did not contain the correct seasonal adjustment data. Those headlines were accompanied by reports suggesting 56.0 was the correct reading for May, but when the final release from the ISM crossed the wires, it revealed that the index climbed to 55.4 and not 56.0.
Outside of the confusion created by the data, the first session of the month was rather uneventful. Trading volume remained on the light side as less than 537 million shares changed hands on the NYSE floor.
Similar to volume, another dynamic that carried over from May was the continued strength among transports. The Dow Jones Transportation Average advanced 0.6%, extending its year-to-date gain to 10.1%. The outperformance of transports underpinned the industrial sector (+0.4%), which ended the day just ahead of consumer discretionary (+0.3%) and financials (+0.3%) sectors.
Even though three heavily-weighted groups finished among the leaders, the S&P 500 could not pull away from its flat line as consumer staples (-0.3%), energy (-0.2%), and technology (-0.2%) weighed.
Notably, the tech sector finished near the bottom of the leaderboard due to weakness in two of its largest components. Shares of Apple (AAPL 628.65, -4.35) fell 0.7% after the company announced a set of software updates for its products, while also revealing an iOS-based Health Kit app, the release of which has been rumored in the past. Apple notwithstanding, the tech sector was also pressured by Google (GOOGL 564.34, -7.31), which lost 1.3% after its head of business development left the company.
Chipmakers, however, had a better showing than the overall sector as the PHLX Semiconductor Index advanced 0.5%. Broadcom (BRCM 34.84, +2.97) was a standout, surging 9.3% after announcing plans to explore strategic alternatives for its Cellular Baseband Business.
On the fixed income side, Treasuries spent the session in a steady retreat. The 10-yr note shed 15 ticks, pushing its yield up to 2.53%.
Economic data was limited to April Construction Spending and May ISM:
Construction spending increased 0.2% in April after increasing an upwardly revised 0.6% (from 0.2%) in March. The consensus expected construction spending to increase 0.7%. Total private construction was flat. A 0.1% increase in private residential spending was offset by a 0.1% decline in private nonresidential spending.
After correcting for seasonal adjustment problems, the ISM Manufacturing Index was revised to 55.4 in May from the 53.2 reading that was originally reported. With the correction, the May ISM reading is up from 54.9 in April, but below the consensus which called for the ISM Index to increase to 55.6. The ISM explained that its computers accidentally used the wrong seasonal adjustment factors --which seemed to have been left over from April --when calculating the adjusted indices. After using the correct seasonal adjustments, all of the indices reported stronger activity. More importantly, the newly revised data now confirm the improvements registered by the Federal Reserve regional manufacturing surveys for May.
Tomorrow, the April Factory Orders report ( consensus 0.5%) will be released at 10:00 ET.

S&P 500 +4.1% YTD
Dow Jones Industrial Average +1.0% YTD
Nasdaq Composite +1.5% YTD
Russell 2000 -3.0% YTD

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