Day Traders Diary

8/18/15

After enjoying a broad-based spike on Monday, the stock market surrendered more than half of that gain on Tuesday. The S&P 500 lost 0.3%, narrowing its weekly advance to 0.3%, while the Nasdaq Composite (-0.6%) underperformed.

Although the Tuesday session produced a different outcome than Monday's affair, investor participation remained below-average with fewer than 700 million shares changing hands at the NYSE floor.

Equities began the day with modest losses after the overnight session featured a resumption of heavy selling in China that sent the Shanghai Composite lower by 6.2%. There was no clear-cut reason for the plunge, but some pointed to a better than feared Housing Starts report, which could keep the People's Bank of China from implementing additional stimulus measures.

The overnight weakness was followed by a shaky session in Europe while U.S. indices made a brief appearance in the green before revisiting their morning lows. The S&P 500 slid below its 100-day moving average (2,098) during midday action and hit its session low just a point below the 50-day average (2,095) before settling just above that level.

Nine of ten sectors ended the day in negative territory with losses ranging from 0.01% (telecom services) and 0.7% (materials). The materials sector underperformed throughout the day with steelmakers showing notable weakness, evidenced by a 1.6% decline in Market Vectors Steel ETF (SLX 26.38, -0.44). Meanwhile, the other commodity-related sector—energy (-0.4%)—ended among the laggards even as crude oil spiked 1.8% to $42.62/bbl.

Elsewhere among cyclical groups, the consumer discretionary sector (+0.1%) stayed ahead of the broader market throughout the trading day thanks to a few pockets of strength. Homebuilders were propelled higher by a better than expected earnings report from Home Depot (HD 122.80, +3.10). The Dow component rallied 2.6% while apparel names were mixed after Urban Outfitters (URBN 31.55, -0.68) and TJX (TJX 76.46, +4.85) reported earnings. Urban Outfitters retreated 2.1% after below-consensus revenue and comparable store sales overshadowed a bottom-line beat while TJX spiked 6.8% after beating earnings estimates.

Staying on the earnings theme, Wal-Mart (WMT 69.48, -2.43) fell 3.4% in reaction to a bottom-line miss and lower earnings guidance for Q3 and fiscal year 2016.

Switching gears, Treasuries climbed during overnight action, but the 10-yr note reversed from its overnight high, falling to lows after the release of today's economic data. The 10-yr note slipped to a new low just ahead of the close, pushing the benchmark yield up three basis points to 2.20%.

Economic data was limited to Housing Starts and Building Permits:

Housing starts in July ran at a seasonally adjusted annual rate of 1.206 million, up 0.2% from an upwardly revised 1.204 million rate (from 1.174 mln) in June 

The July figure was pretty much in-line with the Briefing.com consensus estimate, which stood at 1.200 million

The upshot of this report is that the increase was powered by starts of single-family homes as they jumped 12.8% to 782,000, with increases seen in all regions

Building permits in July were at a seasonally adjusted annual rate of 1.119 million, which was 16.3% below the revised June rate of 1.337 million (from 1.343 mln) and well below the Briefing.com consensus estimate of 1.257 million 

Single-family permits dipped 1.9% to 679,000

Tomorrow, the weekly MBA Mortgage Index will be reported at 7:00 ET while July CPI (Briefing.com consensus 0.2%) will cross the wires at 8:30 ET. The day's data will be topped off with the 14:00 ET release of the FOMC Minutes from the July meeting.

Nasdaq Composite +6.8% YTD

S&P 500 +1.8% YTD

Russell 2000 +1.0% YTD

Dow Jones Industrial Average -1.8% YTD