Day Traders Diary

5/7/15

The major averages hover near their highs at midday with the Dow Jones Industrial Average (+0.7%) and Nasdaq Composite (+0.7%) trading ahead of the S&P 500 (+0.5%).

The current standing represents a drastic shift from the dynamic that was on display during the overnight session when Treasuries and index futures faced selling pressure. The 10-yr note sold off in the early morning hours with its yield hitting a high near 2.30%; however, that move was followed by a rally into positive territory while equity futures cut their losses by the cash open.

Nine of ten sectors hold midday gains with the S&P 500 trading just above its 50-day moving average (2,090), which has served as resistance since Tuesday's closing bell. Heavily-weighted sectors have underpinned the first-half rally with technology (+1.0%), financials (+0.8%), and health care (+0.6%) showing relative strength.

Furthermore, several high-beta groups have fared even better with chipmakers showing broad gains after Atmel (ATML 8.05, +0.51) reported a bottom line beat and issued cautious guidance. Shares of ATML have jumped 6.8% while the PHLX Semiconductor Index trades higher by 1.1%. Conversely, chipmakers have contributed to the strength of the tech sector, but large cap names like Apple (AAPL 125.71, +1.22), Google (GOOGL 543.57, +8.49), and Microsoft (MSFT 47.00, +0.72) have held their own.

Elsewhere, the health care sector has received a boost from biotechnology with the iShares Nasdaq Biotechnology ETF (IBB 344.00, +3.28) trading higher by 1.0%. Similarly, another high-beta group—Dow Jones Transportation Average (+1.4%)—has helped the industrial sector (+0.7%) stay ahead of the broader market.

On the downside, the energy sector is lower by 0.9% amid a 2.3% decline in crude oil. WTI crude currently hovers near $59.50/bbl with dollar strength likely contributing to the pressure (Dollar Index +0.6% at 94.64).

Economic data released this morning was limited to Initial Claims and Challenger Job Cuts:

The initial claims level increased to 265,000 for the week ending May 2 from an unrevised 262,000 for the week ending April 25 while the Briefing.com consensus expected an increase to 280,000 

There is no doubt that businesses have actively cut down on their layoff activity. The four-week moving average for initial claims declined to 279,500 from 283,750. For comparison, it was only a little more than a month ago in March wherein the four-week moving average was stable over 300,000.

In the entire history of the data set, the four-week moving average has been below 280,000 only a handful of times. The last time was in May 2000.

The April Challenger Job Cuts report indicated that planned layoffs increased 52.8% year-over-year to follow the prior 6.4% increase

The Consumer Credit report for March (consensus $16.00 billion) will be released at 15:00 ET.