Day Traders Diary

4/24/15

The stock market wrapped up a strong week with a record finish even as economic data remained weak. The S&P 500 settled higher by 0.2% and registered a fresh record closing high at 2117.69 while the Nasdaq Composite (+0.7%) outperformed and posted another record close. Tragically, the Dow Jones Industrial Average could only add 0.1%, remaining 1.2% below its nominal record closing high from early March.

The Nasdaq surged out of the gate with several large components registering large gains in reaction to earnings. Amazon.com (AMZN 445.10, +55.11) surpassed revenue estimates and reported better than expected operating income. The retailer's loss of $0.12/share did not deter investors from sending the stock higher by 14.1%. Meanwhile another consumer discretionary component—Starbucks (SBUX 51.84, +2.41)—surged 4.9% after its in-line report overshadowed cautious guidance. Thanks to the two names, the consumer discretionary sector (+1.4%) ended well ahead of other groups.

However, Amazon and Starbucks were just partially responsible for the relative strength in the Nasdaq. Two tech sector (+0.9%) heavyweights—Google (GOOGL 573.66, +16.20) and Microsoft (MSFT 47.87, +4.53)—spiked 2.9% and 10.5%, respectively following earnings. Microsoft soared in reaction to better than expected results, while Google missed on earnings and revenue, which may explain why the stock "only" went up 2.9%.

It is worth noting that the handful of giants overshadowed a weak performance from many other Nasdaq components. For instance, chipmakers retreated across the board. The PHLX Semiconductor Index fell 1.7% with Maxim Integrated (MXIM 32.78, -1.96) leading the group lower. Shares of MXIM fell 5.6% after disappointing revenue overshadowed a bottom-line beat. Meanwhile, KLA-Tencor (KLAC 58.89, -0.96) beat estimates and announced plans to reduce its workforce, but still ended lower by 1.6% amid some concerns about the company's outlook.

Similar to chipmakers, biotech names struggled with iShares Nasdaq Biotechnology ETF (IBB 363.70, -3.98) falling 1.1%. Most notably, Biogen (BIIB 401.71, -28.57) fell 6.6% after missing earnings and revenue estimates even though the company still reported 20.0% year-over-year revenue growth. However, the bar was set even higher for this large component of an industry group that has made a major contribution to the Nasdaq's rally to record highs, today notwithstanding. For its part, the health care sector (-0.3%) spent the day in the red as biotech weighed.

Staying in the health care sector, Mylan (MYL 76.06, +2.37) made an intraday offer to acquire Perrigo (PRGO 192.89, -8.74) for $205/share in cash and stock, but Perrigo was quick to reject that offer. Elsewhere, another potential deal fell through with antitrust concerns likely playing a part as Comcast (CMCSA 59.64, +0.41) terminated its pursuit of Time Warner Cable (TWC 155.26, +6.50). Shares of TWC rallied 4.4% amid speculation the company may now be an attractive target for Charter Communications (CHTR 185.75, +2.17).

As mentioned earlier, consumer discretionary and technology sectors posted solid gains, which kept the S&P 500 in the green. Materials (+0.8%) and utilities (+1.0%) also posted solid gains, but the two groups account for just over 6.0% of the entire market.

Going back to influential sectors, financials (-0.2%), industrials (-0.4%), and energy (-0.6%) spent the entire day in negative territory. The energy sector was pressured by crude oil, which fell 1.0% to $57.18/bbl, while Dow component, ExxonMobil (XOM 86.97, -0.57), kept pace with the sector.

Moving on, the industrial sector was pressured by some of its large components like Dow member, Boeing (BA 148.40, -1.47), which fell 1.0% while transport stocks also lagged following disappointing results and guidance from Landstar (LSTR 64.49, -1.44). The freight carrier lost 2.2% while the Dow Jones Transportation Average shed 0.3%. To be fair, airlines bucked the trend after American Airlines (AAL 52.70, +1.25) beat estimates; however, the stock is not a member of the DJTA so its strength in that arena showed up through peers like Delta Airlines (DAL 46.98, +0.55) and United Continental (UAL 63.51, +0.71).

On the international front, representatives from Greece met with the Eurogroup in Riga today, but once again, the meeting ended without any concrete solutions. The prolonged negotiations appear to be getting more tense with Bloomberg reporting that unnamed euro area finance ministers have called Greek Finance Minister a "time-waster, gambler, and an amateur."

Treasuries posted modest gains with the 10-yr yield falling three basis points to 1.92%. The entire advance occurred in the wake of today's Durable Orders, which seemed ok at first glance:

Durable goods orders increased 4.0% in March after declining an unrevised 1.4% in February while the Briefing.com consensus expected an increase of 0.5% 

The entire March gain resulted from increased transportation demand, specifically from the defense-related aircraft sector 

Defense aircraft orders increased 112.8% in March with total aircraft orders increasing 43.8% after declining 8.3% in February

Motor vehicle and parts orders increased 5.4%

Excluding transportation, durable goods orders declined 0.2% in March after declining a downwardly revised 1.3% (from -0.6%) in February while the consensus expected an increase of 0.4%

After declining 2.2% in February, orders of nondefense capital goods excluding aircraft declined 0.5% in March

Shipments, which factor into first quarter GDP growth, declined 0.4% in March after increasing 0.1% in February

There is no data scheduled for Monday.

Nasdaq Composite +7.0% YTD

Russell 2000 +5.0% YTD

S&P 500 +2.8% YTD

Dow Jones Industrial Average +1.4% YTD