Day Traders Diary

8/27/15

The stock market registered its second consecutive advance on Thursday with the S&P 500 jumping 2.4% while the Nasdaq Composite (+2.5%) outperformed slightly. The market endured a late afternoon swoon, but was able to return to its high by the close.

Equities began the trading day on an upbeat note after the overnight session featured a rally across major global equity markets. China's Shanghai Composite took part in that move, soaring 5.3%, but the spike was reportedly aided by an intervention from the People's Bank of China.

Once the U.S. session got going, stocks followed the lead from Asia, rallying across the board with the energy sector pacing the advance. The growth-sensitive sector surged 5.0% while crude oil settled on its high, spiking 10.3% to $42.53/bbl., which represented the largest gain since 2009.

Similar to energy, the remaining nine sectors posted solid gains. Meanwhile, the S&P 500 surrendered 30 points in just an hour but reclaimed all 30 of those points during the next 30 minutes or so, highlighting the elevated volatility that has been in place as of late. To that point, at their Monday lows hit soon after the open, the Dow, Nasdaq, and S&P 500 were down 6.6%, 8.8%, and 5.3%, respectively. At their highs today, they were up 8.4%, 12.3%, and 6.6% from those lows, respectively.

Generally speaking, the indices have pivoted from being oversold on a short-term basis to being overbought on a short-term basis. The speed at which the sell-off and the rebound occurred has left everyone grappling to explain why it happened, what it means, and what comes next. No explanation is wholly sufficient and often matches the character of the market at the time it is provided.

While there might be reason to feel better about the market after the recent rebound, all this week's action truly succeeded in doing was damage retail investor psychology further and increase the level of uncertainty that was already in the market and had kept the S&P 500 range-bound.

On the corporate front, Avago Technologies (AVGO 126.26, +10.06) surged 8.7% after beating bottom-line estimates while the broader PHLX Semiconductor Index jumped 3.7%. For its part, the technology sector rallied 2.3%, settling not far behind the broader market.

Treasuries held gains during overnight action, but they slumped in the morning, hitting their lows right around 9:30 ET. After spending the morning in the red, the 10-yr note rallied off its low as stocks slid from highs. The benchmark note slipped from its afternoon high just ahead of the close, ending little changed with its yield at 2.18%.

Once again, participation was above average amid the heightened volatility with more than 1.2 billion shares changing hands at the NYSE floor.

Economic data included Initial Claims, Q2 GDP, and Pending Home Sales:

Initial jobless claims for the week ending August 22 declined by 6,000 to 271,000 while the Briefing.com consensus expected a reading of 275,000.

The prior week was left unrevised and there were no special factors affecting the latest claims report

The four-week moving average bumped up by 1,000 to 272,500

As expected, the second estimate for Q2 GDP produced an upward revision, but the surprise is that it was larger than expected

Q2 GDP was revised up to an annual growth rate of 3.7% from the advance estimate of 2.3% while the Briefing.com consensus estimate was looking for a jump to 3.1%

The drivers of the upward revision were personal consumption expenditures, nonresidential fixed investment, and private inventories

Pending home sales for July rose 0.5% while the Briefing.com consensus expected an increase of 1.0%

Tomorrow, July Personal Income (Briefing.com consensus 0.4%), Spending (expected 0.4%), and core PCE Prices (expected 0.1%) will be reported at 8:30 ET while the final reading of the Michigan Sentiment index for August (expected 93.0) will cross the wires at 10:00 ET.