Day Traders Diary

10/23/15

The stock market ended the week on an upbeat note thanks to an opening spike that was extended during afternoon action. The S&P 500 jumped 1.1%, extending its weekly gain to 2.1%, while the Nasdaq surged 2.3% to end the week higher by 3.0%.

Quarterly earnings released last evening ensured a higher start for the major averages while a surprise rate cut from the People's Bank of China supercharged the opening move higher. Specifically, the central bank lowered its one-year lending rate by 25 basis points to 4.35% and cut its reserve requirement ratio by 50 basis points for qualifying institutions, representing the sixth rate cut since November. With most of the action taking place before the opening bell, stocks drifted near their highs into the afternoon, building on their gains during the final hour of action.

Last evening, Alphabet (GOOGL 719.33, +38.19), Amazon (AMZN 599.03, +35.12), and Microsoft (MSFT 53.03, +5.00) delivered better than expected quarterly earnings, setting the stage for today's rally.

Alphabet and Microsoft helped the technology sector (+3.1%) spend the day well ahead of its peers while Amazon's strength helped the discretionary sector (+0.4%) end the day in positive territory even as apparel retailers struggled across the board. Retailers slumped in sympathy with Skechers (SKX 31.65, -14.54) and V.F. Corp (VFC 63.75, -9.46) after both companies reported disappointing results. The two names posted respective losses of 31.5% and 12.9% while SPDR S&P Retail ETF (XRT 44.99, -0.63) fell 1.4%.

Similar to the discretionary sector, seven other groups ended the day behind the broader market while health care (+2.0%) outperformed thanks to a rebound in biotechnology as the iShares Nasdaq Biotechnology ETF (IBB 316.28, +10.17) spiked 3.3%.

Although the market ended well above its flat line, it is worth noting that only 59.0% of NYSE-listed issues posted gains, suggesting the presence of some softness beneath a seemingly strong surface. To that point, investors used today's strength to increase their hedges, evidenced by the CBOE Volatility Index (VIX 14.40, -0.05), which essentially held its ground.

On the downside, the energy sector (-0.2%) struggled as crude oil lost 1.8%, falling to $44.59/bbl. For the week, the energy sector surrendered 1.0% while WTI crude fell 5.7%.

Elsewhere, the utilities sector (-1.8%) ended at the bottom of the leaderboard as higher Treasury yields reduced the relative attractiveness of high-yielding utility names.

Speaking of Treasuries, the 10-yr note notched its low during morning action and hovered near its low into the close with the 10-yr yield rising six basis points to 2.09%.

On a related note, the Dollar Index (97.18, +0.80) spiked in reaction to the news from China, extending its advance into the close to end higher by 0.8%.

Investors did not receive any economic data today while Monday's data will be limited to the 10:00 ET release of the September New Home Sales report (Briefing.com consensus 550K).

Nasdaq Composite +6.3% YTD

S&P 500 +0.8% YTD

Dow Jones Industrial Average -1.0% YTD

Russell 2000 -3.2% YTD