Day Traders Diary

11/12/14

The stock market ended the midweek session on a mixed note. The Nasdaq (+0.3%) and Russell 2000 (+0.5%) registered modest gains while the S&P 500 (-0.1%) settled just below its flat line.

Equity indices began the day in negative territory, but the broad weakness was not brought upon by macroeconomic developments. Instead, the benchmark index took a step back after soaring 12.0% off its mid-October low. However, the index could not be held down for long, charging back to its unchanged level before noon ET.

Heavily-weighted financials (-0.3%) and energy (-0.9%) were largely responsible for the opening weakness as the pair accounts for nearly 30.0% of the entire market. The energy sector continued retreating throughout the day while crude oil fell 1.0% to $77.11/bbl. For its part, the financial sector was able to cut its loss in half, but the group kept the benchmark index under pressure into the afternoon. Large banks were the source of the weakness after Bank of America (BAC 17.28, -0.04), Citigroup (C 53.42, -0.39), JPMorgan Chase (JPM 60.56, -0.81), Royal Bank of Scotland (RBS 11.82, -0.22), HSBC (HSBC 50.22, -0.35), and UBS (UBS 17.38, +0.05) were hit with a collective fine of $4.30 billion that was imposed by regulators from the U.S., U.K., and Switzerland. The fine marks the first action taken in a currency-rigging probe that began last year.

The daylong weakness in the two groups prevented the S&P 500 turning positive, but the benchmark index did not go down without a fight. The top-weighted sectortechnologyregistered a modest gain of 0.2% with help from Apple (AAPL 111.25, +1.55), while consumer discretionary (+0.5%) and industrials (+0.1%) also settled in the green.

Discretionary shares were underpinned by apparel names after Fossil (FOSL 112.48, +8.73) and Macy's (M 61.57, +2.98) reported better than expected results. However, both lowered their guidance and Fossil announced a $1 billion buyback. Retail names in general had a strong showing with the SPDR S&P Retail ETF (XRT 91.54, +1.67), which contains a selection of staple stocks, spiking 1.9%.

Elsewhere, the industrial sector rallied behind transport stocks. The Dow Jones Transportation Average added 0.4% with shipper Matson (MATX 35.21, +5.98) surging 20.5% after agreeing to acquire Horizon Lines (HRZL 0.65, +0.28) for $0.72 per share and the repayment of debt.

Treasuries notched their highs shortly before the start of the session, but retreated throughout the day. The 10-yr yield ended unchanged at 2.36%.

Participation was in-line with long-term averages but below recent trends with 702 million shares changing hands at the NYSE floor.

Economic data was limited to Wholesale Inventories and the MBA Mortgage Index:
Wholesale inventories increased 0.3% in September after increasing a downwardly revised 0.6% (from 0.7%) in August, while the Briefing.com consensus expected an uptick of 0.2%
The BEA assumed that wholesale inventories declined 0.1% in the advance estimate for Q3 GDP, but inventory growth greatly exceeded the estimate, which should result in a positive revision to third quarter growth
The weekly MBA Mortgage Index slipped 0.9% to follow last week's decline of 2.6%
Tomorrow, weekly Initial Claims (Briefing.com consensus 280K) will be released at 8:30 ET while the Job Openings and Labor Turnover Survey will be reported at 10:00 ET. The day's data will be topped off with the 14:00 ET release of the Treasury Budget for October.
Nasdaq Composite +11.9% YTD
S&P 500 +10.3% YTD
Dow Jones Industrial Average +6.3% YTD
Russell 2000 +1.9% YTD

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