Day Traders Diary

9/19/14

The stock market finished an upbeat week on a mixed note. The S&P 500 shed less than a point, ending the week higher by 1.3%, while the Dow Jones Industrial Average (+0.1%) cemented a 1.7% advance for the week. High-beta names underperformed, which weighed on the Nasdaq Composite (-0.3%) and the Russell 2000 (-1.3%).

Equity indices displayed strength in the early going with the S&P 500 tagging the 2,019 level during the opening 30 minutes of the action. However, that represented the high watermark for the benchmark index, which returned to its flat line by the close.

The early advance followed the failed independence referendum in Scotland, which averted a potential storm in the financial markets. Once the uncertainty was cast aside, participants directed their focus to the Alibaba Group (BABA 93.89, +25.89) IPO, which represented the largest public debut to date. Shares of Alibaba opened at $92.70 after pricing at $68/share, but could not settle above the opening print.

Alibaba followed a similar pattern as the broader market with the latter being weighed down by influential sectors like financials (-0.3%), technology (-0.4%), and industrials (-0.1%).

Despite today's underperformance, the financial sector finished the week among the leaders with a solid gain of 1.5% since last Friday. Meanwhile, technology lagged since the open following disappointing quarterly results from Oracle (ORCL 39.80, -1.75). The stock tumbled 4.2% in reaction to below-consensus earnings/revenue and news that CEO Larry Ellison will step down from his post.

Also of note, Oracle's peer, SAP (SAP 74.00, -3.35), lost 4.3% after announcing the acquisition of Concur Technologies (CNQR 126.82, +19.02) for $129 per share. High-beta chipmakers were unable to fill the void left by the two software giants as evidenced by a 1.2% decline in the PHLX Semiconductor Index. Despite today's slide, the index still finished the week with a strong gain of 1.5%.

For its part, the industrial sector lagged amid weakness in machinery stocks after Caterpillar (CAT 102.47, -1.87) provided a disappointing update regarding its sales over the past three months. The Dow component lost 1.8%, while peer Joy Global (JOY 58.02, -1.20) fell 2.0%.

Caterpillar was the weakest performer in the Dow and the only stock that fell more than 1.0%. On the upside, 22 index components posted gains with Coca-Cola (KO 42.05, +0.26) leading the pack. The stock climbed 0.6%, contributing to the relative strength of the consumer staples sector (+0.2%).

Similar to consumer staples, the remaining three countercyclical groups settled ahead of the broader market. Telecom services and utilities both jumped near 1.0%, while health care (+0.1%) ended among the leaders despite volatile action in the biotech space. The iShares Nasdaq Biotechnology ETF (IBB 275.23, +0.16) tacked on 0.1%.

Treasuries spent the session in a steady climb, pressuring the 10-yr yield to 2.58%. Participation was well ahead of average thanks to the Alibaba IPO and quadruple witching. More than 1.8 billion shares changed hands at the NYSE floor.

Economic data was limited to the Leading Indicators report for August, which showed an increase of 0.2% on top of an upwardly revised 1.1% (from 0.9%) reading for July. The Briefing.com consensus estimate called for an increase of 0.4%. The difference between what was expected and what was reported can be traced directly to the building permits contribution, which subtracted 0.18 percentage points in August. Consensus estimates could not be updated in a timely manner to reflect the impact of the weaker than expected building permits report, which was released yesterday.

On Monday, the Existing Home Sales report for August will be released at 10:00 ET.

Nasdaq Composite +9.7% YTD
S&P 500 +8.8% YTD
Dow Jones Industrial Average +4.2% YTD
Russell 2000 -1.6% YTD

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