Daily Market Recap

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The S&P 500 declined 0.85% and the Dow was lower by 0.90%. Trading remained very quiet until the final hour of trading.

Volatility measures have picked up and are approaching the levels reached during the June peaks brought on by tapering fears.

The latest talk is of a White House now being comfortable with a short-term debt ceiling increase after being opposed to that strategy for several weeks.

Stocks closed near intraday lows. Traditional safe havens like telecom, utilities, and staples outperformed cyclical sectors like banks, airlines, builders, and transports. Higher dividend yielding telecom stocks were in favor today. Staples rallied behind Kraft and Altria Group.

European stocks were weak for most of the day before a late day rally left them only marginally lower. Cyclically oriented names were decisively weak for most of the day before buyers came in for some aggressive bargain hunting in the final hour of trading.

Commodities were mostly higher, with precious metals, copper, grains, and natural gas trading ahead of the tape. Gold was strong all day and closed higher by 0.90%. Silver was a standout gaining 2.7%. Natural gas roared higher by 3.7% after warmer weather predictions pointed to increasing power demand.

Financials were weak ahead of earnings all day and slumped into the close. The bank index was lower by 1.8%. Weeks ago, the financials rallied ahead of the Fed announcement in anticipation that the Fed would taper. In an increasing rate environment the yield curve steepens and the net interest margin for banks increases. Since the latest FOMC announcement financials have been searching for their next potential catalyst.

Apple rallied all day after Jefferies made positive comments about the tech giant. Tech was outperforming for most of the day and declined into the close to finish in line with the broad market averages. Applied Materials continues to rally and provide leadership for the semiconductor space.

Industrials were mixed. They actually outperformed the broad market averages foe much of the day although there was some negative commentary related to the government shutdown and how it could impact the sector.  Honeywell stood out today as it traded higher by more than 1% for much of the day in response to positive analyst commentary. Aerospace and defense names were in favor today as many speculated the area would see a quick pop higher in the event that there is a positive announcement related to the shutdown.

Materials were decidedly mixed. While there was little news associated with the steel group those names were in favor all day. Base metals were weak all day ahead of Alcoa’s earnings release tomorrow after the close.

Internet stocks were weak. Social media stocks were lower all day as the risk on trade was out of favor. The pullback in this area appears to just be profit taking after sharp advances in recent weeks.

Gaming stocks were strong all day after “Golden Week” in Macau got off to a strong start. Regional gaming names were strong on a positive article in Barron’s.

Source: PFS Group

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