Day Traders Diary
10/9/14
The stock market followed Wednesday's sharp rally with an even sharper slide that clipped all ten sectors. The S&P 500 lost 2.1% and slid back below its 100-day moving average (1962.28) while the Russell 2000 tumbled 2.7%.Equities began the trading day with modest losses, but the energy sector (-3.7%) was a notable laggard from the start once again. That prevented the broader market from turning positive while the relative weakness among most of the remaining cyclical sectors allowed for the selling to feed on itself.
The energy sector registered its largest one-day loss since surrendering 4.0% in April 2013 with crude oil contributing to the weakness. West Texas Intermediate crude plunged 2.4% to $85.22/bbl while Brent crude slipped below the $90.00/bbl level for the first time in more than two years. Following today's slide, WTI crude is down 6.8% since the start of October.
Macroeconomic concerns aside, crude prices were also pressured by the dollar rebounding from three days of losses. The Dollar Index (85.55, +0.25) traded lower overnight but erased that decline in the morning. Strikingly, greenback strength has had little effect on precious metals with gold futures climbing 1.5% to $1224.20/ozt.
The sell-off caused a scramble in search of volatility protection. The CBOE Volatility Index (VIX 18.96, +3.85) surged more than 25.0% to its highest level since early February. Treasuries, however, surrendered their overnight gains in the early morning before spending the session near their flat lines. The 10-yr note shed four ticks with its yield rising one basis point to 2.33%.
As mentioned earlier, most cyclical sectors underperformed the broader market, which prevented a sustained rebound from taking hold. The growth concerns weighed on economically-sensitive sectors like consumer discretionary (-2.3%), industrials (-2.3%), and materials (-2.5%), while financials (-2.1%) ended in-line with the S&P 500.
The widespread losses masked an 12.5% dive in the shares of Gap (GPS 36.67, -5.23) after the company reported below-consensus comparable store sales for September and announced the resignation of Chief Executive Officer Glenn Murphy.
Elsewhere, the technology sector (-1.7%) ended ahead of the other cyclical groups. Shares of Apple (AAPL 101.02, +0.22) contributed to the outperformance after activist investor Carl Icahn argued for a larger repurchase program in a letter sent to Chief Executive Officer Tim Cook.
Meanwhile, the four countercyclical sectors displayed some intraday strength, but the consumer staples sector (-0.9%) was the only group to register a loss smaller than 1.6%.
Today's participation was stronger than average with 874 million shares changing hands at the NYSE floor.
Economic data was limited to Initial Claims and Wholesale Inventories:
Weekly initial claims ticked down to 287,000 from a downwardly revised rate of 288,000 (from 287,000), while the Briefing.com consensus expected a reading of 295,000
Once again, the Department of Labor said there were no special factors affecting the reading, suggesting an improvement in labor market conditions
The four-week moving average of 287,750 for initial claims is at its lowest level since February 4, 2006
Wholesale inventories increased 0.7% in August after increasing an upwardly revised 0.3% (from 0.1%) in July, while the Briefing.com consensus expected an increase of 0.3%
Tomorrow, Import/Export Prices for September will be announced at 8:30 ET while the September Treasury Budget (Briefing.com consensus $106 billion) will be released at 14:00 ET.
Nasdaq Composite +4.8% YTD
S&P 500 +4.3% YTD
Dow Jones Industrial Average +0.5% YTD
Russell 2000 -8.3% YTD
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