Day Traders Diary


The major averages ended the midweek session with slim gains after showing some intraday volatility in reaction to the release of the latest policy directive from the Federal Open Market Committee. The S&P 500 added 0.1%, while the relative strength among small caps sent the Russell 2000 higher by 0.3%.

Equities spent the first half of the session near their flat lines as participants stuck to the sidelines ahead of the FOMC statement, which conveyed no changes to the Fed's current policy course. The indices surged after the statement crossed the wires, but returned near their flat lines by the close.

As expected, the Fed reduced the monthly pace of its asset purchases by $10 billion to $15 billion, setting expectations for the program to be wound down at the next meeting. Furthermore, the Fed maintained the "considerable time" language in its forward guidance, suggesting the first rate hike remains somewhat distant. On that note, the economic projections that were also released indicated the Fed sees the fed funds rate at 1.375% at the end of 2015.

The policy statement weighed on Treasuries (10-yr yield +3 bps to 2.62%), while giving a boost to the greenback. The Dollar Index (+0.6%) climbed to its best level since last June at the expense of other major currencies. Notably, the dollar/yen pair soared from the 107.15 area to 108.30.

Seven of ten sectors posted gains with materials (+0.6%) ending in the lead. The growth-sensitive sector was underpinned by steelmakers after U.S. Steel (X 45.61, +4.20) boosted its guidance. The Market Vectors Steel ETF (SLX 49.20, +0.43) advanced 0.9%.

Meanwhile, the other commodity-linked sectorenergy (-0.5%)ended at the bottom of the leaderboard following its recent outperformance. The sector narrowed its week-to-date gain to 1.4% and was pressured by a 0.6% decline in the price of crude oil ($94.33/bbl).

Elsewhere, the remaining cyclical sectors ended on a mixed note. Financials (+0.4%), industrials (+0.4%), and technology (+0.2%) displayed relative strength, while consumer discretionary (unch) ended a bit behind the broader market.

The industrial sector outperformed from the start with better than expected earnings from FedEx (FDX 159.71, +5.05) providing support. Shares of FDX jumped 3.3%, while the broader Dow Jones Transportation Average gained 1.0%. Airlines bucked the trend, which was a bit surprising considering the decline in the price of crude. Delta Air Lines (DAL 38.94, -0.58) and JetBlue Airways (JBLU 11.20, -0.21) lost 1.5% and 1.9%, respectively.

Also of note, the discretionary sector finished just behind the market, but that masked the strength among homebuilders. The industry group rallied in reaction to better than expected results from Lennar (LEN 41.40, +2.27). The stock surged 5.8%, while the iShares Dow Jones US Home Construction ETF (ITB 24.13, +0.54) settled higher by 2.3%.

Today's participation was ahead of recent averages with more than 650 million shares changing hands at the NYSE.

Economic data included CPI, NAHB Housing Market Index, Q2 Current Account Balance, and the weekly MBA Mortgage Index:

The CPI report for August revealed a 0.2% decline, while the consensus expected an unchanged reading
This was the first decline in total CPI since April 2013, driven by a 2.6% decline in the energy index
Core CPI, meanwhile, was flat against a 0.2% uptick expected by the consensus
The NAHB Housing Market Index for September rose to 59 from 55, while the consensus expected an increase to 56
The current account deficit for the second quarter totaled $98.50 billion while the consensus expected the deficit to hit $114.50 billion
The first quarter deficit was revised to $102.10 billion from $111.20 billion
The weekly MBA Mortgage Index jumped 7.9% to follow last week's 7.2% drop
Tomorrow, weekly Initial Claims ( consensus 305K) and August Housing Starts (consensus 1045K)/Building Permits (expected 1054K) will be released at 8:30 ET, while the Philadelphia Fed survey for September (consensus 23.5) will cross the wires at 10:00 ET.

Nasdaq Composite +9.2% YTD
S&P 500 +8.3% YTD
Dow Jones Industrial Average +3.5% YTD
Russell 2000 -0.8% YTD

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