Day Traders Diary


The stock market began the last week of October on a cautious note. The S&P 500 slipped below its 100-day moving average (1962) and settled lower by 0.2% while the Dow Jones Industrial Average (+0.1%) outperformed throughout the session.

Equity indices faced selling pressure at the start, but the source of the early weakness was isolated to the two commodity-linked sectors that spent the entire session at the bottom of the leaderboard.

The energy sector (-2.0%) suffered from a Goldman Sachs downgrade of several major industry players, which stemmed from expectations that crude oil would trade between $70-$80/bbl. On that note, the energy component fell below the $80/bbl level in the morning, but narrowed its decline to just 0.1% by the pit close ($80.94/bbl). The rebound was assisted by a modest downtick in the Dollar Index (85.53, -0.20), which slipped 0.2%.

Elsewhere, the materials sector (-2.1%) endured broad pressure. Miners lagged with the Market Vectors Gold Miners ETF (GDX 20.11, -0.36) falling 1.8%, while steelmakers faced more aggressive selling. The Market Vectors Steel ETF (SLX 41.99, -1.15) lost 2.7% with Cliffs Natural Resources (CLF 9.22, -0.41) sliding 4.3% ahead of its earnings report.

Interestingly, the two cyclical sectorsand the telecom services space (+1.0%)were the only groups that didn't settle in the neighborhood of their flat lines. Meanwhile, the remaining seven sectors ended with gains or losses of no more than 0.3%.

Generally speaking, countercyclical sectors held up well with the utilities sector (-0.2%) having the worst showing among the defensively-oriented groups. The rate-sensitive sector ended in-line with the market while the heavily-weighted health care space (+0.1%) registered a slim gain. The advance took place despite weakness in Allergan (AGN 182.33, -1.88) and Merck (MRK 56.45, -1.16), both of which reported earnings this morning. Allergan lost 1.0% despite reporting a bottom-line beat and upbeat Q4 earnings guidance while Merck slumped 2.0% after beating earnings estimates on a 4.3% year-over-year decline in revenue.

Treasuries climbed to highs shortly after the start of the session and spent the day near their best levels of the session. The 10-yr yield ticked down two basis points to 2.26%.

Participation was a bit below recent averages with 741 million shares changing hands at the NYSE floor. The relatively light volume was likely a function of some participants sticking to the sidelines ahead of Wednesday's release of the latest FOMC policy directive.

Economic data was limited to Pending Home Sales for September, which rose 0.3%. This was worse than the 0.5% increase forecast by the consensus, but ahead of last month's unrevised decrease of 1.0%.

Tomorrow, the Durable Orders report for September ( consensus 0.6%) will be released at 8:30 ET while the Case-Shiller 20-city Index for August (consensus 5.5%) will cross the wires at 9:00 ET. The day's data will be topped off with the 10:00 ET release of the October Consumer Confidence report (expected 87.2).

Nasdaq Composite +7.4% YTD
S&P 500 +6.1% YTD
Dow Jones Industrial Average +1.5% YTD
Russell 2000 -3.9% YTD

All comments contained herein are for informational purposes only, and should not be considered as a solicitation to buy or sell any security. The firm does not guarantee the accuracy or completeness of the information or make any warranties regarding results from it's usage.