Day Traders Diary


The stock market registered modest gains on Wednesday as participants looked past a pair of disappointing economic reports. The S&P 500 rose 0.5% with nine sectors ending higher, while the Nasdaq Composite (+0.7%) outperformed.

Prior to the open, the S&P 500 appeared to be on track for its third consecutive decline after first quarter GDP was revised down to -2.9% from -1.0% ( consensus -1.8%). In addition, a more recent report-May Durable Orders-also surprised to the downside. Despite starting on a lower note, the major averages were able to rebound swiftly with the move likely supported by some short covering.

The health care sector (+1.1%) ended in the lead after showing relative strength throughout the session. The third-largest group was underpinned by solid gains in the shares of AbbVie (ABBV 54.97, +1.38) and Shire (SHPG 231.14, +7.87) amid reports AbbVie may submit an improved takeover proposal to Shire. However, Shire commented intraday, saying no changes have been made to the offer from May 30.

Even though the health care sector ended in the lead, biotechnology could not keep up. The iShares Nasdaq Biotechnology ETF (IBB 255.88, +0.79) added 0.3%.

Elsewhere, the consumer discretionary sector (+0.8%) lagged in the early going, but elbowed its way to the top of the leaderboard with help from media names after the Supreme Court ruled that start-up streaming service Aereo violated broadcaster copyright laws. CBS (CBS 62.48, +3.64) surged 6.2%, while Comcast (CMCSA 53.21, +0.57) and Disney (DIS 83.90, +1.22) advanced 1.1% and 1.5%, respectively.

Similar to the two top-weighted groups, the largest S&P 500 sector-technology (+0.6%)-also finished among the leaders. Google (GOOGL 585.93, +13.39) played a big part in the outperformance, rallying 2.3% as the company held its developers conference in San Francisco. Chipmakers, meanwhile, settled a bit behind the broader market (PHLX Semiconductor Index +0.4%).

One influential sector that could not finish among the other outperformers was the financial space (+0.1%). The sector underperformed for the second session in a row, but managed to narrow its week-to-date loss to 0.3%.

On the downside, the consumer staples sector spent the entire session climbing off lows, but still ended in the red (-0.1%) as General Mills (GIS 51.76, -1.94) weighed after reporting disappointing earnings.

Treasuries surged in reaction to this morning's data before erasing some of their gains in the afternoon. The 10-yr note added five ticks with its yield slipping two basis points to 2.56%.

Participation remained in line with recent averages as less than 650 million shares changed hands at the NYSE floor.

Economic data included Q1 GDP, May Durable Orders, and the weekly MBA Mortgage Index:
First quarter GDP growth was revised down from -1.0% in the second estimate to -2.9% in the third estimate. GDP increased 2.6% in Q4 2013. The consensus expected GDP to be revised down to -1.8%.
In all likelihood that economic activity weakened because it was never on that strong of a footing to begin with. We've seen this play out over the past few years where growth in the first half of the year is much slower than expected.
Real final sales were revised down to -1.3% from 0.6%. That was the first decline in real final sales since Q1 2011.
Durable goods orders declined 1.0% in May after increasing an upwardly revised 0.8% (from 0.6%) in April. The consensus expected durable goods orders to increase 0.4%.
Transportation orders fell 3.0% in May as orders of nondefense aircraft and parts fell 4.0%. The drop was unusual and can be blamed on seasonal adjustments. Boeing (BA 127.06, -2.09), which is heavily represented in the transportation data, reported solid gains in orders for May.
Excluding transportation, durable goods orders declined 0.1% in May following a 0.4% increase in April, while the consensus expected these orders to increase 0.4%.
The weekly MBA Mortgage Index fell 1.0% to follow last week's 9.2% decline.
Tomorrow, weekly initial claims ( consensus 310K), May Personal Income (consensus 0.4%), Personal Spending (consensus 0.4%), and Core PCE Prices (consensus 0.2%) will all be announced at 8:30 ET.

S&P 500 +6.0% YTD
Nasdaq Composite +4.9% YTD
Dow Jones Industrial Average +1.8% YTD
Russell 2000 +1.7% YTD

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