Day Traders Diary

8/22/14

The major averages punctuated a solid week with a subdued Friday session. The S&P 500 shed 0.2% to narrow its weekly gain to 1.7%, while the Nasdaq Composite (+0.1%) displayed relative strength. The tech-heavy index finished the week in line with the benchmark average.

Market participants went into today's session expecting to hear some new insight from Fed Chair Janet Yellen, who delivered the keynote address at this year's Jackson Hole Symposium. Unfortunately, the speech was a disappointment to those who looked for clues about the Fed's policy course in the near term.

Ms. Yellen said the FOMC sees significant underutilization of labor resources and that the labor market has not fully recovered even when taking into account the recent gains. She also indicated that faster progress on goals could lead to a quicker rate hike, but this approach should be expected from a data-dependent central bank.

The remarks were met with a brief retreat among Treasuries, but the 10-yr note returned to its flat line in short order and remained near that level into the close. The benchmark instrument added two ticks, sending its yield lower by one basis point at 2.40%.

Equities, meanwhile, spent the session near their flat lines as participants showed unwillingness to step in ahead of the weekend with geopolitical concerns contributing to the cautious posture. This morning, European markets and U.S. index futures tumbled after a Russian aid convoy crossed Ukraine's border without permission from the government; however, Ukraine said it will allow the convoy to proceed in order to 'avoid provocations.' The initial reports were followed by comments from NATO and the Pentagon with both bodies condemning the crossing into Ukraine.

Only two sectors were able to register gains with the consumer discretionary space (+0.1%) ending in the lead. Retailers contributed to the relative strength after Foot Locker (FL 54.12, +1.55), Gap (GPS 45.43, +2.25), Gamestop (GME 42.90, +2.41), and Ross Stores (ROST 74.37, +5.12) reported better than expected earnings.

Outside of the discretionary sector, most cyclical groups ended in the red, but technology (+0.02%) eked out a miniscule gain. Large cap tech components traded in mixed fashion, but Apple (AAPL 101.32, +0.74) underpinned the sector with a solid gain of 0.7%. On the earnings front, Salesforce.com (CRM 59.80, +4.09) rallied 7.3% in reaction to a one-cent beat.

The relative strength of Apple also put in a floor under the Nasdaq Composite, which drew additional strength from biotechnology. The iShares Nasdaq Biotechnology ETF (IBB 266.43, +1.98) gained 0.8% and helped the health care sector end the day on its flat line.

Meanwhile, the remaining three countercyclical sectors ended in the red. Consumer staples (-0.2%) and utilities (-0.3%) settled near their flat lines, while the telecom services sector lost 0.4%.

Participation was well below average with fewer than 510 million shares changing hands at the NYSE, which made for one of the quietest sessions of the year.

There was no economic data reported today and Monday's data will be limited to the New Home Sales report for July (Briefing.com consensus 427,000).
Nasdaq Composite +8.7% YTD
S&P 500 +7.6% YTD
Dow Jones Industrial Average +2.6% YTD
Russell 2000 -0.3% YTD

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