Day Traders Diary


The major averages ended Tuesday near their highs with the S&P 500 (+0.5%) registering its fifth consecutive advance. The benchmark index settled at a fresh record at 2,051.80 high while the Nasdaq Composite (+0.7%) outperformed after struggling yesterday.

The Tuesday session began on an unassuming note, but the health care sector (+1.6%) quickly pulled away from its flat line thanks to significant strength in biotechnology. The iShares Nasdaq Biotechnology ETF (IBB 295.25, +6.41) jumped 2.2% and contributed to the relative strength of the Nasdaq.

In addition to drawing support from biotech, the Nasdaq received a solid boost from chipmakers after SunEdison (SUNE 21.50, +4.89) agreed to acquire First Wind for $2.40 billion as part of a joint venture with TerraForm Power (TERP 32.75, +6.91). Shares of SUNE soared 29.4% while the broader PHLX Semiconductor Index spiked 1.9% with all but two components registering gains.

The broad strength among chipmakers was not enough to bring the technology sector (+0.4%) in line with the benchmark index as Google (GOOGL 544.51, -2.13), IBM (IBM 161.89, -2.27), and Microsoft (MSFT 48.74, -0.41) weighed.

Meanwhile, the remaining cyclical sectors registered gains across the board with materials (+1.1%) leading the bunch. Fertilizer stocks like Mosaic (MOS 46.77, +1.50) and Potash (POT 35.41, +1.62) underpinned the sector after world's largest potash miner, Uralkali, suspended operations due to elevated levels of brine.

For its part, the other commodity-related sector, energy, started in the lead, but narrowed its gain to just 0.1% by the close. Crude oil factored into the sector's retreat from highs, falling 1.4% to $74.60/bbl. The energy component finished near its low even as the Dollar Index (87.58, -0.35) lost 0.4%.

Today's dollar weakness was driven by a better than expected ZEW Sentiment Survey in Germany, which gave a boost to the euro and helped the DAX settle higher by 1.6%. The greenback did show some intraday strength against the yen after Nikkei reported Japan's Prime Minister Shinzo Abe plans to cut the corporate tax next year. The report followed an overnight announcement from the premier, who said he will dissolve parliament, call for a snap election, and delay the impending sales tax hike by at least 18 months.

On the downside, the telecom services sector (-0.2%) was the lone decliner while the consumer discretionary sector (+0.1%) climbed out of the red in the early afternoon. Retailers kept the discretionary space under pressure with Home Depot (HD 95.98, -2.05) and Urban Outfitters (URBN 28.79, -2.04) losing 2.1% and 6.6%, respectively. Urban Outfitters missed estimates while Dow component Home Depot beat by a penny.

Interestingly, the advance to a new record did not lure money out of the Treasury market. The 10-yr note registered a modest gain with its yield slipping two basis points to 2.32%.

Participation was in-line with long-term average as roughly 710 million shares changed hands at the NYSE floor.

Economic data was limited to PPI and NAHB Housing Market Index:

Producer prices edged up 0.2% in October after declining 0.1%, while the consensus a decline of 0.2%
The upside surprise in producer price growth was a result of a sharp 0.5% increase in prices of final demand for services, which was the largest increase since a similar 0.5% gain was recorded in July 2013. The services component was added to the PPI when the new methodology was introduced last year and is difficult to estimate.
Final demand of finished goods, which was the headline PPI index under the previous methodology, fell 0.3% in October and was much closer to expectation.
The decline in crude and gasoline prices led to a 3.0% drop in the energy price index, while a 5.3% increase in meat prices led to a 1.0% overall increase in food in October
Excluding food and energy, core prices rose 0.4% in October after reporting no change in September while the consensus expected an increase of 0.1%.
The NAHB Housing Market Index for November jumped to 58 from 54 while the consensus expected an uptick to 55
Tomorrow, the weekly MBA Mortgage Index will be released at 7:00 ET while October Housing Starts ( consensus 1.025 million) and Building Permits (consensus 1.04 million) will be reported at 8:30 ET. The day's data will be topped off with the 14:00 ET release of the FOMC Minutes from the October meeting.

Nasdaq Composite +12.6% YTD
S&P 500 +11.0% YTD
Dow Jones Industrial Average +6.7% YTD
Russell 2000 +0.6% YTD

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