Day Traders Diary

6/3/15

The stock market ended the midweek session on a modestly higher note, but once again, investor participation was on the light side with fewer than 670 million shares changing hands at the NYSE floor. The S&P 500 added 0.2% while the Nasdaq Composite (+0.5%) outperformed.

Equity indices began the day on a modestly higher note and extended their gains in the early going; however, a return to their opening levels followed once selling pressure appeared in the neighborhood of this week's highs.

Meanwhile, another day went by without an agreement between Greece and its creditors. Earlier, the spokesman for Greece's Syriza party said Greece will not make the June 5 debt payment to the International Monetary Fund if there is no prospect of a deal within the next few days, according to Kathimerini. The lack of progress did not stop the euro from rallying 1.1% against the dollar to 1.1270. To be fair, today's euro strength followed a set of better than expected Services PMI readings with the Eurozone Services PMI climbing to 53.8 from 53.3 (expected 53.3). Also of note, the European Central Bank made no changes to its policy stance, but ECB President Mario Draghi warned that low rates invite high volatility.

Fittingly, Germany's 10-yr bund continued this week's plunge, sending its yield higher by 17 basis points to 0.89%. This week alone, the bund yield has soared 40 basis points. Similarly, U.S. Treasuries also sold off with the 10-yr yield rising 11 basis points to 2.37%.

Six of ten sectors registered gains with a few cyclical groups holding the lead throughout the day. Specifically, consumer discretionary (+0.7%), financials (+0.7%), and industrials (+0.5%) kept the market afloat with the industrial sector receiving support from transport stocks.

The Dow Jones Transportation Average gained 1.2%, extending its June advance to 2.5% after falling 3.4% in May. The bellwether complex enjoyed gains among 15 of its 20 components with CH Robinson (CHRW 64.62, +3.36) spiking 5.5% to lead the group higher.

Elsewhere, the financial sector rallied in response to the steepening yield curve while the discretionary space received broad support. For its part, the top-weighted technology sector (+0.2%) finished just behind the broader market as chipmakers lagged. The PHLX Semiconductor Index lost 0.6%, narrowing its Q2 gain to 5.4%.

Five of six cyclical groups ended the day in the green while energy (-0.7%) struggled throughout the session as crude oil dropped 2.6% to $59.69/bbl. The energy component got no respite from the second consecutive decline in the greenback that sent the Dollar Index (95.33, -0.51) lower by 0.5%.

Moving to the countercyclical side, consumer staples (-0.1%) and utilities (-1.4%) ended in the red with the utilities sector responding to an increase in Treasury yields. On the flip side, telecom services (+0.8%) and health care (+0.1%) ended higher.

Economic data included ADP Employment Change, Trade Balance, ISM Services, and the MBA Mortgage Index:

The ADP National Employment Report revealed that employment in the nonfarm private business sector rose by 201K in May while the Briefing.com consensus expected an increase of 200K 

The April reading was revised down to 165,000 from 169,000

The trade deficit fell to $40.90 billion in April from a downwardly revised $50.60 billion (from $51.40 billion) while the Briefing.com consensus expected a decline to $44.00 billion 

The large March trade deficit largely resulted from the end of the port strike on the west coast. As dockworkers returned, they were able to offload the backlog of containerships

The ISM Non-manufacturing Index fell to 55.7 in May from 57.8 in April while the Briefing.com consensus expected a drop to 57.1 

Despite the decline, most of the underlying indices still showed strong growth trends

The Production Index fell from 61.6 in April to a still healthy 59.5 in May. New orders softened as the related index declined to 57.9 in May from 59.2 in April

The weekly MBA Mortgage Index fell 7.6% to follow last week's 1.6% decline

Tomorrow, the Challenger Job Cuts report for May will be released at 7:30 ET while weekly Initial Claims (Briefing.com consensus 280K) and Q1 Productivity/Unit Labor Cost data will cross the wires at 8:30 ET.

Nasdaq Composite +7.7% YTD

Russell 2000 +5.1% YTD

S&P 500 +2.7% YTD

Dow Jones Industrial Average +1.4% YTD