Day Traders Diary

10/2/15

 The stock market ended the week on an upbeat note despite stumbling at the start. The S&P 500 turned a 30-point loss into a 28-point gain to end higher by 1.4% while the Nasdaq Composite (+1.7%) outperformed. For the week, the S&P 500 jumped 1.0% while the Nasdaq added 0.5%.

The opening dive occurred after the release of the Nonfarm Payrolls report for September, which disappointed on all fronts. According to the report, only 142,000 jobs were added, which was a far cry from the Briefing.com consensus, which expected a reading of 205,000. Adding insult to injury, the prior month's job growth was revised down to 136,000 from 173,000 and hourly earnings showed no growth.

In sum, the weak nature of the report caused the market to reconsider its rate-hike expectations. Bond traders were quick to show their doubt about the likelihood of a rate hike before 2016, evidenced by a surge in Treasuries. The 10-yr note jumped more than a point immediately after the report, narrowing its gain to 16 ticks by the close with the 10-yr yield falling five basis points to 1.98%.

Elsewhere, the Dollar Index (95.93, -0.25) dropped to late September levels in the morning, but erased more than half of its decline by the close, ending lower by 0.3%. Most notably, the dollar/yen pair dove below the 119.00 mark in the morning, but returned above 119.00 around 10:30 ET and continued climbing into the afternoon. The pair ticked above 120.00 during the final hour of action, which is a level that has been in focus throughout the week. The 120.00 level will deserve attention going into next week considering dips below that mark have been congruent with a risk-off attitude while rallies north of 120.00 have coincided with strength in equities.

Nine of ten sectors ended in the green with energy (+4.0%) finishing well ahead of other groups. The sector received a boost from crude oil, which climbed 1.8% to $45.55/bbl. Thanks to today's spike, the energy sector gained 2.8% for the week while only two other groups—health care and materials—added more than 2.0% since last Friday.

Although the energy sector was a clear standout, the outperformance in the health care sector (+2.1%) was more notable since biotechnology powered that move. The iShares Nasdaq Biotechnology ETF (IBB 315.40, +10.44) spiked 3.4%, ending the week higher by 1.7% after being down almost 8.0% at its lowest point on Monday.

Biotechnology's outperformance helped the Nasdaq finish in the lead while large cap technology listings like Apple (AAPL 110.38, +0.80), Google (GOOGL 656.99, +14.99) also contributed to the Nasdaq's strength. For its part, the technology sector gained 1.5%.

On the downside, the financial sector narrowed its loss to 0.1% after showing a 2.0%+ decline in the early going in response to the disappointing jobs report.

Today's participation was well above average with more than a billion shares changing hands at the NYSE floor.

Economic data included Nonfarm Payrolls and Factory Orders:

Nonfarm payrolls increased by 142,000 while the Briefing.com consensus expected a reading of 205,000

August nonfarm payrolls revised to 136,000 from 173,000

July nonfarm payrolls revised to 223,000 from 245,000

Private sector payrolls increased by 118,000 (Briefing.com consensus 200,000)

August private sector payrolls revised to 100,000 from 140,000

July private sector payrolls revised to 195,000 from 224,000

Unemployment rate held at 5.1%, which is what the consensus expected

The U6 unemployment rate, which accounts for the total unemployed plus persons marginally attached to the labor force and the underemployed, slipped to 10.0% from 10.3% in August

Average hourly earnings were unchanged (Briefing.com consensus 0.2%) after an upwardly revised 0.4% increase (from 0.3%) in August

The labor force participation rate ticked down to 62.4% from 62.6%

Factory orders declined 1.7% in August after increasing a downwardly revised 0.2% (from 0.4%) while the Briefing.com consensus expected a 1.0% drop

That was the largest decline since a 3.7% drop was registered in December 2014

The weakness in the manufacturing sector comes as a strong dollar has curtailed export demand and low oil prices have reduced demand for drilling equipment

Monday's data will be limited to the 10:00 ET release of the ISM Services report for September.

Nasdaq Composite -0.6% YTD

S&P 500 -5.2% YTD

Dow Jones Industrial Average -7.6% YTD

Russell 2000 -7.5% YTD