Day Traders Diary

5/28/15

The stock market spun its wheels throughout the Thursday session, ending on a modestly lower note. The S&P 500 shed 0.1% after spending the entire day in negative territory amid light volume.

Equity indices began the day in the red with some residual damage to risk tolerance after China's Shanghai Composite tumbled 6.5% in reaction to more equity brokers increasing their margin requirements. Furthermore, repurchase operations conducted by the People's Bank of China stirred concerns that the central bank may be preparing to stop or slow its easing cycle. To be fair, today's decline in the Shanghai Composite only caused the index to surrender its week-to-date gain.

In either case, things did not get any more cheery by the start of the European session with signals from the G7 meeting in Dresden suggesting that wide-ranging differences remain between Greece and the creditor institutions. To that point, yesterday's 'deal—no deal' may have been topped by today's headlines from Frankfurter Allgemeine Zeitung, which quoted International Monetary Fund's Managing Director Christine Lagarde as saying it is possible that Greece will exit the eurozone. Not long after, the IMF sought to clarify the quotes obtained from Ms. Lagarde, claiming they were inaccurate. However, the Fund did not specify what the inaccuracies were. FAZ responded, saying Ms. Lagarde's quotes will be removed. In the midst of all this, Spain's Economy Minister Luis de Guindos reportedly said that a deal between Greece and the institutions remains possible.

All in all, things have not gotten any clearer for quite a while and nothing will be certain until official bridge agreements are signed or the bridge between Greece and Western Europe is burning. The euro handled today's developments well, adding 0.4% against the dollar to 1.0950. Conversely, the Dollar Index shed 0.2% after enjoying a solid spike yesterday.

Similar to the Dollar Index, equities backtracked after yesterday featured a broad advance. Only three sectors registered gains, but losses among the seven decliners were contained to no more than 0.5%.

Industrials and telecom services finished at the bottom of the barrel with the industrial sector enduring continued weakness among transport stocks. The Dow Jones Transportation Average lost 0.9% and widened its 2015 decline to 9.2%. In addition, heavy machinery names like Caterpillar (CAT 86.01, -1.91), Deere (DE 93.50, -0.86), and Joy Global (JOY 39.65, -1.29) underperformed as investors grappled with implications stemming from potential policy changes in China, where each company has a large footprint.

Similar to industrials, the energy sector (-0.4%) struggled throughout the session and finished among the laggards even though crude oil recouped an early loss, adding almost 0.5% for the day to end near $58.00/bbl. However, natural gas fell 4.2% to $2.71/MMBtu.

Elsewhere, the technology sector (-0.2%) was tucked in right behind the broader market, but that masked broad strength among chipmakers. The PHLX Semiconductor Index added 0.1% after yesterday's rumor became today's news and Avago Technologies (AVGO 142.38, +0.89) confirmed its acquisition of Broadcom (BRCM 56.25, -0.91) for $37 billion. Broadcom lost 1.9% today as some traders took quick profits after taking the stock higher by almost 22.0% yesterday.

On the upside, utilities (+0.2%) and materials (+0.3%) outperformed, but had little impact on the overall market. Also of note, the health care sector (+0.1%) ended just above its flat line even though biotechnology struggled with iShares Nasdaq Biotechnology ETF (IBB 364.89, -2.07) falling 0.6%.

Treasuries ranged near their flat lines throughout the day with the 10-yr note ending unchanged and its yield at 2.13%. That being said, there were gains up front (2-yr yield -3 bps to 0.62%) and a downtick at the long end (30-yr +2 bps to 2.89%), making for a slightly steeper curve.

Today's participation was comparable to recent totals with roughly 675 million shares changing hands at the NYSE floor.

Economic data included Initial Claims and Pending Home Sales:

Weekly initial claims increased to 282,000 from an upwardly revised 275,000 (from 274,000) while the Briefing.com consensus expected a reading of 274,000 

The four-week moving average inched up a little higher to 271,500 from 266,500 for the week ending May 16, but despite the increase, initial claims remain near 15-year lows

The continuing claims level increased to 2.222 mln from an unrevised 2.211 mln while the consensus expected an increase to 2.250 mln

Pending home sales for April rose 3.4% while the Briefing.com consensus expected an increase of 1.0%

Tomorrow, the second estimate of Q1 GDP will be released at 8:30 ET (Briefing.com consensus -0.7%) while Chicago PMI for May (consensus 53.0) and the final reading of the Michigan Sentiment Index for May (consensus 89.0) will be reported at 9:45 ET and 10:00 ET, respectively.

Nasdaq Composite +7.1% YTD

Russell 2000 +4.0% YTD

S&P 500 +2.9% YTD

Dow Jones Industrial Average +1.7% YTD