Day Traders Diary

9/21/15

The stock market began the trading week on a higher note despite seeing some intraday volatility. The S&P 500 gained 0.5% while the Nasdaq Composite underperformed throughout the day, but was able to settle just above its flat line.

Equity indices rallied out of the gate with the advance continuing through the first hour of action. All ten sectors took part in the opening move higher, but health care was quick to surrender its gain. The countercyclical group ended lower by 1.4% while biotechnology struggled mightily, sending the iShares Nasdaq Biotechnology ETF (IBB 340.78, -15.98) lower by 4.5%.

The biotechnology ETF struggled from the get-go, but the group accelerated its decline after presidential candidate Hillary Clinton sent out a tweet saying she is ready to unveil a plan that would target price gouging among specialty drug makers. Today's selling dropped IBB below its 200-day moving average (347.36) to levels last seen at the start of September.

Outside of health care, the remaining sectors posted gains with relative strength in heavily-weighted financials (+1.1%) and technology (+1.0%) keeping the S&P 500 ahead of the Nasdaq Composite. It is worth pointing out that solid gains in large cap tech names like Apple (AAPL 115.21, +1.76), Google (GOOGL 666.98, +6.06), and Microsoft (MSFT 44.11, +0.63) masked the relative weakness in chipmaker names. The PHLX Semiconductor Index shed 0.1% while Atmel (ATML 8.19, +0.92) bucked the trend, surging 12.7% after agreeing to be acquired by Dialog Semiconductor (DLGNF 41.25, -8.00) for $4.60 billion.

Meanwhile, the remaining cyclical sectors also posted gains. The energy space rose 0.6% as crude oil surged 4.5% to $46.68/bbl while the consumer discretionary sector (+0.7%) was underpinned by retailers. The SPDR S&P Retail ETF (XRT 46.40, +0.30) gained 0.7% while homebuilders lagged after a below-consensus August Existing Home Sales report (5.31 million; Briefing.com consensus 5.50 million) overshadowed better than expected earnings from Lennar (LEN 51.58, -0.17).

Strikingly, Treasuries retreated throughout the day, continuing their slide even as stocks retreated from their highs. As a result, the 10-yr note settled on its low with the benchmark yield rising six basis points to 2.21%.

Today's participation was a bit light with fewer than 800 million shares changing hands at the NYSE floor.

Economic data reported today was limited to the Existing Home Sales report for August, which showed a 4.8% decline to an annualized rate of 5.31 million units while the Briefing.com consensus expected a reading of 5.50 million.

The overall story in the housing market remains the same. Tight supplies and relatively high prices have cut into both demand and affordability conditions. Unless price growth softens or an influx of inventories gives buyers more options, sales growth will suffer.

Still, underlying demand trends aren't terrible. Even though sales in August were the lowest since April, the drop came immediately after a month where sales rose to their highest point since February 2007. That suggests the move was likely normal volatility rather than a big shift in trends.

Tomorrow's economic data will be limited to the 10:00 ET release of the FHFA Housing Price Index for July.

Nasdaq Composite +2.0% YTD

Russell 2000 -3.4% YTD

S&P 500 -4.5% YTD

Dow Jones Industrial Average -7.4% YTD