Day Traders Diary


The stock market raced higher on Tuesday with the Dow Jones Industrial Average (+1.4%) pacing the advance while the S&P 500 (+1.3%) followed not far behind. Thanks to the broad-based rally, the S&P 500 erased all of its decline from Monday and then some, settling at its best level since August 28.


Although the Tuesday tone differed greatly from Monday, it is worth noting that trading volume remained relatively light with 760 million shares changing hands at the NYSE floor. That total falls short of yesterday's tally (765 million), representing a notable decline from the 20-day average of more than a billion shares. All things considered, the dynamic is not that surprising as some investors continue sticking to the sidelines ahead of Thursday's policy statement from the Fed and a potential fed funds rate hike.


Economic data released today is unlikely to affect the Fed's decision, but it is worth noting that today's rally began in the futures market shortly after the release of the Retail Sales report for August, which came in just below expectations (+0.2%; consensus +0.3%); however, core sales increased 0.5%, suggesting the presence of some underlying consumption strength.


Stocks followed the report's release with a rally while Treasuries began a daylong retreat. The 10-yr note settled on its low with its yield higher by nine basis points at 2.28%.


All ten sectors posted gains with eight groups adding 1.1% or more. The energy sector (+1.1%) grabbed the lead early on with strength in crude oil futures (+1.2% to $44.65/bbl) supporting the move. The commodity-sensitive sector held a solid gain into the close, but was leapfrogged by several groups in afternoon action.


Most notably, the industrial sector (+1.7%) settled in the lead with transport stocks powering the outperformance. The Dow Jones Transportation Average spiked 1.9% with UPS (UPS 100.52, +3.51) surging 3.6% after announcing plans to hire between 90,000 and 95,000 seasonal employees to support the expected volume increase ahead of the holidays. Another DJTA component, FedEx (FDX 154.00, +3.77) climbed 2.5%.


The industrial sector ended well ahead of the broader market, but other influential groups also held their own. To that point, health care (+1.4%), technology (+1.3%), and financials (+1.4%) spent the bulk of the session ahead of the S&P 500.


With stocks on the rise, investors lifted some of their hedges, sending the CBOE Volatility Index (VIX 22.56, -1.69) lower by nearly two points. That being said, the near-term volatility measure remains elevated by recent standards.


Economic data included Retail Sales, Empire Manufacturing, Industrial Production, and Business Inventories:


Retail sales increased 0.2% in August after increasing an upwardly revised 0.7% (from 0.6%) in July while the consensus expected an increase of 0.3% in August

The headline 0.2% gain was well below the 0.7% increase in aggregate income that was highlighted in the August employment report, meaning another month of falling gasoline prices has translated into higher savings instead of spending

Excluding autos, retail sales increased 0.1% in August after increasing an upwardly revised 0.6% (from 0.4%) in July while the consensus expected an increase of 0.2%

The Empire Manufacturing Survey for September registered a reading of -14.7, which was above the prior month's reading of -14.9, but below the consensus estimate, which was pegged at 0.5

Industrial Production decreased 0.4% in August, which was worse than the 0.2% decrease expected by the consensus

The pullback in industrial production resulted from motor vehicle assemblies returning to more normal trends. Excluding motor vehicles, industrial production was flat in August after increasing 0.3% in July

Capacity utilization hit 77.6% while the consensus expected a reading of 77.8%

Business Inventories rose 0.1% in July, which is what the consensus expected. This followed the prior month's revised increase of 0.7% (from 0.8%).

Manufacturers (-0.1%) and merchant wholesalers (-0.1%) already reported their July results. The only new information was that retailer inventories increased 0.6% in July after increasing 1.0% in June

Tomorrow, the weekly MBA Mortgage Index will be released at 7:00 ET, August CPI ( consensus -0.1%) will be reported at 8:30 ET, and the September NAHB Housing Market Index (consensus 61) will cross the wires at 10:00 ET.


Nasdaq Composite +2.6% YTD

Russell 2000 -3.1% YTD

S&P 500 -3.9% YTD

Dow Jones Industrial Average -6.9% YTD

All comments contained herein are for informational purposes only, and should not be considered as a solicitation to buy or sell any security. The firm does not guarantee the accuracy or completeness of the information or make any warranties regarding results from it's usage.