Day Traders Diary

11/24/14

The major averages kicked off the holiday-shortened week with an advance that was paced by the Russell 2000 (+1.2%). The small-cap index was followed by the Nasdaq Composite (+0.9%) while the Dow (+0.04%) and S&P 500 (+0.3%) ended closer to their flat lines.

Stocks rallied out of the gate with upbeat action overseas contributing to the early strength. Equities in China and Hong Kong spiked in reaction to Friday's PBoC rate cut while European markets were boosted by increased expectations of a forthcoming sovereign QE program from the European Central Bank. To that point, Credit Suisse said it expects the ECB to announce plans for sovereign asset purchases in December.

ECB member and German Bundesbank President Jens Weidmann pushed back against the easing expectations, reminding that monetary policy alone is unable to create growth and requires corresponding measures from the fiscal side.

Despite Mr. Weidmann's comments, the market's expectation for more QE manifested itself through increased demand for Italian and Spanish debt. Italian and Spanish 10-yr yields both fell five basis points to their respective 2.15% and 1.97%.

Unsurprisingly, heightened easing expectations led to strength in European bank shares with Banco Santander (SAN 8.75, +0.25) and Deutsche Bank (DB 31.80, +0.87) spiking 2.9% and 2.8%, respectively. As for the broader financial sector (+0.6%), the cyclical group led at the start, but ceded the top spot to the consumer discretionary sector (+0.9%).

The discretionary space enjoyed broad support from homebuilders, retailers, and media names. The iShares Dow Jones US Home Construction ETF (ITB 26.08, +0.22) gained 0.9% and the SPDR S&P Retail ETF (XRT 93.90, +1.22) advanced 1.3%. Time Warner Cable (TWX 81.43, +1.38) stood out among broadcasters with a 1.7% spike.

Elsewhere among influential sectors, technology (+0.7%) and health care (+0.5%) outperformed, helping the market resist the pressure from energy (-0.7%), materials (-0.5%), and consumer staples (-0.1%).

The tech sector, and Nasdaq Composite, rallied behind the shares of Apple (AAPL 118.62, +2.16), which surged 1.9%. Chipmakers also provided support with the PHLX Semiconductor Index climbing 1.0%. Furthermore, the Nasdaq drew strength from biotechnology as the iShares Nasdaq Biotechnology ETF (IBB 300.15, +5.14) jumped 1.7%.

On the downside, the energy sector spent the day in a steady retreat. Meanwhile, crude oil held an overnight gain, but gave that back and then some to end lower by 1.0% at $75.75/bbl.

Treasuries registered modest gains after erasing their overnight losses. The 10-yr yield slipped one basis point to 2.30%.

Tomorrow, the second estimate of Q3 GDP (Briefing.com consensus 3.2%) will be reported at 8:30 ET while September Case-Shiller 20-city Index (consensus 4.6%) and FHFA Housing Price Index will both be released at 9:00 ET. The day's data will be topped off with the 10:00 ET release of the Consumer Confidence report for November (expected 96.0).

Nasdaq Composite +13.9% YTD
S&P 500 +12.0% YTD
Dow Jones Industrial Average +7.5% YTD
Russell 2000 +1.1% YTD

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