Day Traders Diary

10/21/14

The stock market enjoyed another broad-based advance on Tuesday with the S&P 500 (+2.0%) posting its fourth consecutive gain. The benchmark index made its biggest jump in more than a year and recaptured its 200-day moving average (1906.95) while the Nasdaq Composite (+2.4%) outperformed throughout the session.

Equity indices began the trading day on an upbeat note with a set of better than expected results contributing to the early strength. However, the futures market received a separate overnight boost from a Reuters report suggesting the European Central Bank will look to begin buying corporate bonds. That report was followed by headlines from the Financial Times indicating the ECB has no plans to implement the aforementioned buying program at this time. The denial did not stop European equities from ending on their highs while the U.S. market built on its early strength throughout the day.

For the second day in a row, the Dow Jones Industrial Average (+1.3%) could not keep pace with the broader market, which was once again due in part to the relative weakness in the shares of IBM (IBM 163.23, -5.87). The third-largest index component lost 3.5% while only two other Dow members finished in the red. To that point, Coca-Cola (KO 40.68, -2.61) and McDonald's (MCD 91.01, -0.58) registered respective losses of 6.0% and 0.6% in reaction to cautious guidance from both consumer companies.

In turn, Coca-Cola pressured the consumer staples sector (+0.4%), which was the second-weakest group of the day. Similarly, telecom services (+0.7%) and utilities (+0.4%) lagged, while the last countercyclical sectorhealth care (+2.7%)settled among the leaders.

The health care sector drew strength from biotechnology, which also contributed to the outperformance of the Nasdaq. The iShares Nasdaq Biotechnology ETF (IBB 278.27, +8.68) jumped 3.2% to extend its October gain to 1.7%. For its part, the Nasdaq also received significant support from its largest componentApple (AAPL 102.47, +2.71)and chipmakers.

Shares of Apple jumped 2.7% in reaction to better than expected earnings and improved guidance, but the technology sector (+1.8%) could not catch up to the market as IBM weighed. As for chipmakers, the PHLX Semiconductor Index (+3.6%) enjoyed broad strength after Texas Instruments (TXN 46.77, +2.36) reported better than expected earnings. ARM Holdings (ARMH 39.57, -1.99) also surpassed earnings estimates, but could not stay out of the red, falling 4.8%.

Elsewhere among cyclical sectors, energy (+2.9%) finished in the lead even as crude oil slipped from its morning high near $83.20/bbl to settle with a gain of 0.6% at $82.40/bbl.

Treasuries ended on their lows after spending the entire session in the red. The 10-yr yield climbed three basis points to 2.22%.

Participation remained above average with more than 795 million shares changing hands at the NYSE floor.

Economic data was limited to the Existing Home Sales report for September. After declining for the first time since March, existing home sales rebounded, rising 2.4% to 5.17 million SAAR from an unrevised 5.05 million SAAR. The Briefing.com consensus expected an increase to 5.11 million SAAR.
Sales in the Midwest declined 5.6% in September while all of the other regions -- Northeast (1.5%), South (5.0%), and West (7.1%) -- saw increased demand
A portion of the increase in sales resulted from more investor demand with all-cash sales accounting for 24% of all transactions, up from 23% in August.
Individual investor demand grew to 14% from 12%
Tomorrow, the weekly MBA Mortgage Index will be released at 7:00 ET while the CPI report for September (Briefing.com consensus 0.0%) will cross the wires at 8:30 ET.
Nasdaq Composite +5.8% YTD
S&P 500 +5.0% YTD
Dow Jones Industrial Average +0.2% YTD
Russell 2000 -4.3% YTD

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