Day Traders Diary

8/1/14

The stock market finished a down week on a cautious note with small caps leading the retreat. The Russell 2000 lost 0.5%, widening its weekly decline to 2.6%, while the S&P 500 shed 0.3%. The benchmark index ended the week lower by 2.7%.

This morning, the market was provided a basis to rebound with the July employment report, which was just right for the policy doves (209K versus Briefing.com consensus 220K). It showed payroll growth that was weaker than expected, average hourly earnings that were flat, and an uptick in the U6 unemployment rate (accounts for underemployed and unemployed workers) to 12.2% from 12.1%.

All of those factors speak in favor of the Federal Reserve not being in a rush to raise the fed funds rate, but the market did not rally on those cues. Instead, the S&P 500 made a brief morning appearance in the green before sliding into negative territory, where it spent the afternoon. The benchmark average was able to climb off its low into the close, but could not return into positive territory.

Three sectors registered gains, while the remaining seven finished lower. In general, countercyclical groups had a decent showing with consumer staples (+0.8%) and utilities (+0.4%) posting gains, while the telecom services sector (-0.9%) ended among the laggards. The largest countercyclical group-health care-settled flat.

Notably, the staples sector finished in the lead thanks to a boost from Procter & Gamble (PG 79.65, +2.33). The Dow component rallied 3.0% after reporting a bottom-line beat on revenue that was a bit below estimates.

Elsewhere, the health care sector received support from large components like Aetna (AET 78.73, +1.20), McKesson (MCK 195.43, +3.57), and WellPoint (WLP 111.00, +1.19). The three gained between 1.1% and 1.9%, while biotechnology lagged. The iShares Nasdaq Biotechnology ETF (IBB 250.28, -0.55) shed 0.2%.

For its part, the utilities sector staged a rebound after losing 6.9% last month.

On the cyclical side, the materials sector (+0.1%) was the lone advancer thanks to relative strength among miners. The Market Vectors Gold Miners ETF (GDX 26.20, +0.29) added 1.1%, while gold futures climbed 0.9% to $1294.60/ozt.

Meanwhile, the daylong weakness among influential sectors like energy (-0.7%), financials (-0.9%), and technology (-0.4%) prevented the market from turning positive. In the financial sector, JPMorgan Chase (JPM 56.48, -1.19) was the worst performer among the majors, falling 2.1%.

Lastly, the tech sector was pressured by top-weighted components like Google (GOOGL 573.60, -5.95), IBM (IBM 189.15, -2.52), and Microsoft (MSFT 42.86, -0.30). Chipmakers, however, held up relatively well. The PHLX Semiconductor Index added 0.4%.

Treasuries rallied through the first half of the session before holding near their highs during the afternoon. The 10-yr note advanced 17 ticks, sending its yield lower by six basis points to 2.50%.

Participation was above average for the second day in a row with nearly 780 million shares changing hands at the NYSE.

Economic data was plentiful with Nonfarm Payrolls, Personal Income/Spending data, Core PCE Prices, the final reading of the Michigan Sentiment survey, ISM Index, and the Construction Spending report:
Nonfarm payrolls added 209,000 jobs in July after adding an upwardly revised 298,000 (from 288,000) in June, while the Briefing.com consensus expected 220,000 new jobs in July
Private payrolls fared worse, adding only 198,000 jobs in July following a 270,000 increase in June
The consensus expected 225,000 new private jobs in July
Even more disappointing, hourly wages were flat after increasing 0.2% in June and the average workweek remained at 34.5 hours
The unemployment rate ticked up to 6.2% from 6.1%
Personal income increased 0.4% in June after rising by the same amount in May, which matched the Briefing.com consensus
Personal spending also matched estimates with a 0.4% increase in June, up from an upwardly revised 0.3% (from 0.2%) gain in May
The University of Michigan Consumer Sentiment Index increased to 81.8 in the final July reading from 81.3 in the preliminary reading, while the Briefing.com consensus expected an increase to 82.0
The Current Conditions Index was revised up to 97.4 from 97.1
The Expectations Index rose to 71.8 in the final reading from 71.1
The ISM Manufacturing Index increased to 57.1 in July from 55.3 in June, representing the strongest reading since April 2011
The Briefing.com consensus expected the index to increase to 55.9
Construction spending fell 1.8% in June after increasing an upwardly revised 0.8% (from 0.1%) in May, while the Briefing.com consensus expected an increase of 0.3%
Private construction fell 1.0% after increasing 0.4% in May
Residential construction declined 0.3% in June
There is no economic data scheduled to be released on Monday.

S&P 500 +4.2% YTD
Nasdaq Composite +4.2% YTD
Dow Jones Industrial Average -0.5% YTD
Russell 2000 -4.1% YTD

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