Day Traders Diary

7/2/14

The stock market spent the Wednesday session in a narrow range, which resulted in the S&P 500 posting a slim gain of less than two points (0.1%) with six sectors ending in the green. The Dow Jones Industrial Average (+0.1%) outperformed slightly, while the Russell 2000 (-0.4%) lagged.
The major averages climbed out of the gate, but the early strength was short-lived as only a handful of sectors were able to distance themselves from their flat lines. The lack of concerted sector leadership caused the key indices to return to their flat lines, where they remained into the close.
One sector that displayed notable strength throughout the session was yesterday's leaderhealth care. The countercyclical group added 0.7% with biotechnology underpinning the advance. The iShares Nasdaq Biotechnology ETF (IBB 264.55, +1.43) tacked on 0.5%.
The relative strength of biotechnology was unable to boost the Nasdaq Composite (unch), which suffered from relative weakness among high-growth names. For instance Facebook (FB 66.45, -1.61), Netflix (NFLX 466.74, -6.36), Priceline.com (PCLN 1237.84, -8.93), and Tesla (TSLA 229.42, -10.29) lost between 0.7% and 4.3%. Meanwhile, the consumer discretionary (+0.2%) and technology (unch) sectors ended little changed.
'Little changed' is how the entire cyclical side ended the trading day. The materials sector (+0.2%) posted a slim gain, while energy (-0.1%), financials (unch), and industrials (-0.1%) settled in the red.
Notably, the industrial sector was pressured by transport stocks, and specifically, airlines. Delta Air Lines (DAL 38.24, -2.07) and United Continental (UAL 39.27, -2.99) registered respective losses of 5.1% and 7.1% after Delta reported disappointing monthly passenger unit revenue, while the broader Dow Jones Transportation Average shed 0.4%.
Returning to countercyclical sectors for a second, two other defensively-oriented groupsconsumer staples (+0.2%) and telecom services (+0.5%)posted gains, while the utilities sector (-2.0%) finished at the bottom of the leaderboard for the second day in a row.
The magnitude of the loss in the rate-sensitive sector was likely assisted by today's increase in Treasury yields. Treasuries tumbled to lows following today's ADP Employment report and continued drifting lower throughout the trading day. The 10-yr note lost half a point, sending its yield higher by six basis points to 2.62%.
Participation was well below average with less than 585 million shares changing hands at the NYSE.
Economic data included May Factory Orders, June ADP Employment, and the weekly MBA Mortgage Index:
Factory orders declined 0.5% in May after increasing an upwardly revised 0.8% (from 0.7%) in April. The Briefing.com consensus expected a decline of 0.4%
The revisions to the May durable goods data were extremely minor. Total orders were revised up from the advance (-1.0%), but still fell 0.9%. These orders increased 0.9% in May
Transportation orders, which were originally down 3.0%, were revised to -2.9%
Excluding transportation, durable goods orders were flat in May after originally reporting a small 0.1% decline
According to the ADP National Employment Report, employment in the nonfarm private business sector rose by 281K in June. That was well above the increase of 200K expected by the Briefing.com consensus
The May reading was left unrevised at 179,000
The weekly MBA Mortgage Index slipped 0.2% to follow last week's 1.0% decline
Tomorrow, the Challenger Job Cuts report for June will be released at 7:30 ET, while weekly initial claims (Briefing.com consensus 315K), June Nonfarm Payrolls (consensus 210K), and May Trade Balance (consensus -$45.20 billion) will all be released at 8:30 ET. The day's data will be topped off with the 10:00 ET release of the June ISM Services report (expected 56.5).

S&P 500 +6.8% YTD
Nasdaq Composite +6.7% YTD
Dow Jones Industrial Average +2.4% YTD
Russell 2000 +3.1% YTD

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