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Leigh Baldwin & Co.

112 Albany Street, Cazenovia, NY 13035 | Phone: (315) 655-2964 Toll Free: 1-800-659-8044

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The Week In Review

3/18-3/22/13

March 22, 2013
Equity indices finished today's session firmly higher and the S&P 500 settled with a gain of 0.7%. Stocks began the final session of the week on a positive note with notable strength in consumer stocks. The consumer discretionary sector paced today's advance from the opening bell after Nike (NKE 59.53, +5.93) and Tiffany (TIF 69.23, +1.32) reported bottom line beats and contributed to the relative strength of retailers. In addition, quick service restaurant operators outperformed after Darden Restaurants (DRI 49.62, +0.66) beat on earnings. The growth-oriented discretionary sector was followed by its defensively-minded cousin, consumer staples. Food and beverage producers saw relative strength after reports indicated investor Nelson Peltz has built stakes in both Mondelez International (MDLZ 29.73, +1.17) and Pepsico (PEP 78.64, +2.49). The two stocks settled with respective gains of 4.1% and 3.3%. The mixed sector leadership reflected a certain degree of uncertainty, which remains in the market. Going into the weekend, the situation in Cyprus remains unresolved with the latest reports indicating the Cypriot parliament has made some headway, but considerable funding needs remain unaddressed. Although equities finished higher and appeared unconcerned by potential negative fallout from the inability to reach agreement, financials did not share that optimism. Bank of America (BAC 12.56, -0.01) and Citigroup (C 45.23, 0.00) ended little changed while the SPDR Financial Select Sector ETF (XLF 18.18, +0.11) underperformed the broader market with a gain of 0.6%. Notably, the financial sector proxy ETF ended the week lower by 1.5% as the possibility of a Cypriot exit from the eurozone weighed. While major financials were tentative in their advance, the growth-oriented materials sector did not participate in the rally at all. After starting the session in line with the broader market, the SPDR Materials Select Sector ETF (XLB 39.07, +0.05) slid back to its unchanged level, and remained there until the close. The lack of a bounce in basic materials was notable as the sector bore the brunt of yesterday's selling. Elsewhere, tech shares also underperformed notably in yesterday's action, but finished today in the middle of sector rankings. Although most tech stocks rebounded, Oracle (ORCL 31.98, -0.32) remained under pressure after reporting below-consensus earnings following Wednesday's close. Trading volume was the lowest of the week as just over 620 million shares changed hands on the floor of the New York Stock Exchange. Reviewing the final sector performance, consumer discretionary (+1.2%), consumer staples (+0.9%), energy (+0.8%), and telecom (+0.7%) finished in the lead. On the downside, materials (+0.1%), utilities (+0.2%), and financials (+0.5%) trailed behind the broader market. There was no economic news released today with Monday's economic calendar also free of scheduled reports.

March 21, 2013
Equity indices finished today's session firmly higher and the S&P 500 settled with a gain of 0.7%. Stocks began the final session of the week on a positive note with notable strength in consumer stocks. The consumer discretionary sector paced today's advance from the opening bell after Nike (NKE 59.53, +5.93) and Tiffany (TIF 69.23, +1.32) reported bottom line beats and contributed to the relative strength of retailers. In addition, quick service restaurant operators outperformed after Darden Restaurants (DRI 49.62, +0.66) beat on earnings. The growth-oriented discretionary sector was followed by its defensively-minded cousin, consumer staples. Food and beverage producers saw relative strength after reports indicated investor Nelson Peltz has built stakes in both Mondelez International (MDLZ 29.73, +1.17) and Pepsico (PEP 78.64, +2.49). The two stocks settled with respective gains of 4.1% and 3.3%. The mixed sector leadership reflected a certain degree of uncertainty, which remains in the market. Going into the weekend, the situation in Cyprus remains unresolved with the latest reports indicating the Cypriot parliament has made some headway, but considerable funding needs remain unaddressed. Although equities finished higher and appeared unconcerned by potential negative fallout from the inability to reach agreement, financials did not share that optimism. Bank of America (BAC 12.56, -0.01) and Citigroup (C 45.23, 0.00) ended little changed while the SPDR Financial Select Sector ETF (XLF 18.18, +0.11) underperformed the broader market with a gain of 0.6%. Notably, the financial sector proxy ETF ended the week lower by 1.5% as the possibility of a Cypriot exit from the eurozone weighed. While major financials were tentative in their advance, the growth-oriented materials sector did not participate in the rally at all. After starting the session in line with the broader market, the SPDR Materials Select Sector ETF (XLB 39.07, +0.05) slid back to its unchanged level, and remained there until the close. The lack of a bounce in basic materials was notable as the sector bore the brunt of yesterday's selling. Elsewhere, tech shares also underperformed notably in yesterday's action, but finished today in the middle of sector rankings. Although most tech stocks rebounded, Oracle (ORCL 31.98, -0.32) remained under pressure after reporting below-consensus earnings following Wednesday's close. Trading volume was the lowest of the week as just over 620 million shares changed hands on the floor of the New York Stock Exchange. Reviewing the final sector performance, consumer discretionary (+1.2%), consumer staples (+0.9%), energy (+0.8%), and telecom (+0.7%) finished in the lead. On the downside, materials (+0.1%), utilities (+0.2%), and financials (+0.5%) trailed behind the broader market. There was no economic news released today with Monday's economic calendar also free of scheduled reports.

March 20, 2013
The S&P 500 settled higher by 0.7% after spending the entire session in positive territory. Equities opened firmly higher amid continued speculation over the future of Cyprus as well as the impact of the parliamentary decision to reject eurozone bailout conditions. Quiet trade continued into the afternoon as the S&P 500 spent the bulk of the day in a three point range. The benchmark index then climbed to fresh highs before sliding back into the day's range. The afternoon spike occurred after the Federal Open Market Committee announced its decision to maintain the Fed Funds rate at 0.25% and continue its asset purchase program. Today's statement from the Federal Reserve was largely in-line with expectations. Regarding economic conditions, the Committee observed a return to "Moderate economic growth following a pause late last year." The Committee did not show increased concern for inflation levels, and said "Inflation has been running somewhat below the Committee's longer-run objective, apart from temporary variations that largely reflect fluctuations in energy prices. Longer-term inflation expectations have remained stable." Coinciding with the move to fresh highs was a report out of Nikkei News, which suggested the incoming Bank of Japan Governor Haruhiko Kuroda will call for "bold easing." Although the central bank's dovish stance has been widely-known, this report comes as Mr. Kuroda is expected to formally assume his new role on Thursday. The reports were met with yen weakness as the USD/JPY pair jumped to session highs near 96.00. Although stocks maintained firm gains throughout the day, sector leadership was mixed. Growth-oriented consumer discretionary shares paced the advance, but defensively-minded consumer staples and health care rounded out the top of the leaderboard. Discretionary shares outperformed amid strength in homebuilders. Lennar (LEN 43.43, +2.01) and Toll Brothers (TOL 36.55, +2.04) both gained over 4.5% while the broader SPDR S&P Homebuilders ETF (XHB 30.52, +0.72) settled higher by 2.4%. Elsewhere, the technology space received some support from chipmakers and software companies. The PHLX Semiconductor Index gained 1.2% while software stocks benefitted from the relative strength of Adobe Systems (ADBE 42.46, +1.71). The software publisher gained 4.2% after beating on earnings and revenue. However, the company's second quarter earnings and revenue guidance was on the low end of expectations. In addition, Adobe said its Chief Technology Officer Kevin Lynch is leaving the company to join Apple (AAPL 452.08, -2.41), which shed 0.5%. On the downside, the industrial sector lagged amid weakness in major sector components. Industrial equipment manufacturers underperformed in the wake of a disappointing global sales report from Caterpillar (CAT 86.94, -1.33) as well as a Wells Fargo downgrade of Deere (DE 87.74, -2.83). Industrial component FedEx (FDX 99.13, -7.33) endured a rough session and fell 6.9% after missing on the bottom line. The company also guided fourth quarter earnings below consensus due to a slowdown in global revenues. Peer United Parcel Service (UPS 84.03, -1.05) lost 1.2% in sympathy, and the Dow Jones Transportation Average shed 0.4%. Note that both FedEx and UPS are part of the bellwether complex. Trading volume was below average and largely in-line with Monday's total as 673 million shares changed hands on the floor of the New York Stock Exchange. Taking a look at the final sector placement, consumer discretionary (+1.2%), consumer staples (+1.0%), and health care (+0.9%) sectors led the broader market while telecom (-0.1%), industrial (+0.1%), and energy (+0.6%) stocks brought up the rear. Today's economic data was limited to weekly MBA Mortgage Applications, which declined 7.1% to follow last week's decrease of 4.7%. In tomorrow's economic news, weekly initial and continuing claims will be reported at 8:30 ET. January FHFA Housing Price Index will be announced at 9:00 ET while February existing home sales, leading indicators, and March Philadelphia Fed Survey will all be released at 10:00 ET.

March 19, 2013
The major averages ended today's session on a mixed note. The Dow registered a slim gain of 3.76 points while S&P 500 shed 0.2%. Stocks began the day with slim gains, but the early strength lacked conviction as uncertainty continued to surround Cyprus and the terms of its proposed bailout. As the morning progressed, the S&P 500 slid to its lows amid multiple reports suggesting the country's parliament is likely to vote down the controversial "stability levy." The late morning selloff was notable as it coincided with strength in the U.S. dollar, the Treasury market, and German bunds. In addition, the CBOE Volatility Index (VIX 14.36, +1.00) ended at its highest level since March 4. Elsewhere, the Dollar Index climbed to its best level since August of last year, and ended just below the key 83.00 area. Meanwhile, a safe haven bid across the Treasury complex pushed the 10-yr yield down five basis points to 1.91%. Overseas, the German 10-yr yield declined seven basis points, and ended at 1.35%. The expectation of a failed vote was confirmed during the afternoon when the Cypriot parliament voted down the deposit tax with 36 'No' votes and 19 abstentions. At this point, it is unknown what the next step for Cyprus will be after its unprecedented rejection of bailout conditions. Following the vote, the European Central Bank said it will provide liquidity to Cyprus within the existing rules. As the Cypriot uncertainty weighed on the market, cyclical sectors underperformed while defensive groups ended in the lead. The energy sector was the biggest laggard with a decline in the price of crude contributing to the weakness. The energy component slid 1.8% to $92.46. Meanwhile, the SPDR Energy Select Sector ETF (XLE 78.09, -0.87) settled lower by 1.1%. In addition to energy stocks, the financial space trailed behind the broader market. Major financials finished lower as banks tend to show most sensitivity when uncertainty strikes. However, Bank of America (BAC 12.71, +0.15) outperformed its peers after Meredith Whitney shared her bullish outlook on the bank. Also of note, the consumer discretionary group ended in the red amid weakness in retail stocks. The SPDR S&P Retail ETF (XRT 69.35, -0.70) fell 1.0%. Although the discretionary sector endured broad weakness, homebuilders resisted the pressure and finished with modest gains after February housing starts were reported ahead of expectations. In February, housing starts increased 0.8% in February to 917,000 after falling 7.3% to 910,000 in January. The Briefing.com consensus expected housing starts to increase to 911,000. The recent volatility in housing starts is the result of normal fluctuations in the multi-family sector. Single-family construction, which tends to grow on a very stable path, increased slightly from 615,000 in January to 618,000 in February. Over the last three months, single-family starts have averaged 617,000. Multi-family starts increased from 295,000 in January to 299,000 in February. Tomorrow, the weekly MBA Mortgage Index will be reported at 7:00 ET. In addition, the Federal Open Market Committee will conclude its two day meeting with its interest rate decision and policy statement scheduled for a 14:00 ET release. The Fed's economic projections will also be released at 14:00 ET and Chairman Ben Bernanke will hold a press conference at 14:30 ET.

March 18, 2013
The major averages settled firmly lower with the S&P 500 down 0.6%. Equities began the session amid broad losses after the conditions of a Cypriot bailout put the package in jeopardy of being voted down in the country's parliament. Per the original agreement, Eurozone rescue funds would provide Cyprus with EUR10 billion in recapitalization with a 'stability levy' imposed on all bank accounts expected to raise an additional EUR5.8 billion. The deposit tax is the main cause for the delay as residents push back against the measure. In addition, global investors viewed this is as a possible precursor to a similar tax being levied on bank accounts elsewhere, should other troubled sovereigns ask for help. The developments weighed on European markets where peripheral indices trailed behind their core counterparts. In addition, a modest safety bid sent the German 10-yr yield lower by five basis points to 1.41%. After opening sharply lower, U.S. equities climbed steadily into the afternoon. However, stocks slipped off their best levels of the day when reports indicated the parliamentary vote scheduled for tomorrow has been postponed indefinitely. The financial sector bore the brunt of today's selling as bank stocks tend to show increased sensitivity in the face of political or economic uncertainty. Morgan Stanley (MS 22.99, -0.60) was the weakest performer among the majors, and the SPDR Financial Select Sector ETF (XLF 18.27, -0.18) lost 1.0%. Notably, European financials saw wider losses than their U.S. counterparts. Barclays (BCS 18.44, -0.79) and Deutsche Bank (DB 43.02, -1.61) settled lower by 4.1% and 3.6%, respectively. In addition to financials, other cyclical sectors trailed behind the broader market. However, the technology space was an exception. The growth-oriented sector finished among session leaders with Apple (AAPL 455.72, +12.06) contributing to the relative strength. The largest tech stock advanced 2.7% amid continued speculation the company may hike its quarterly dividend in the near future. Although a handful of large cap components registered gains, chipmakers ended broadly lower. The PHLX Semiconductor Index, which tracks 30 microchip manufacturers, settled lower by 1.3%. On the upside, the defensively-oriented telecom space spent the bulk of the day in positive territory. Verizon Communications (VZ 48.75, +0.73) added 1.5% after Citigroup upgraded shares of Verizon to 'Buy' from 'Neutral.' The CBOE Volatility Index (VIX 13.60, +2.30) spiked over 20.0%. The near-term volatility measure has returned to levels last seen at the beginning of the month after sliding to multi-year lows in recent days. Interestingly, trading volume finished below average as just over 675 million shares changed hands on the floor of the New York Stock Exchange. In the metals market, gold futures climbed 0.7% to $1603.90 while silver ended little changed at $28.86. Also of note, copper fell 3.0% to its lowest level since November of last year. The weakness was a result of a technical breakdown combined with fears of tighter policy in China after February home sales rose at their fastest pace since December 2011. Today's economic data was limited to the March NAHB Housing Market Index, which registered a reading of 44. This was lower from the prior month's reading of 46, and also short of the Briefing.com consensus which called for a reading of 48. Tomorrow's economic news will focus on housing with February housing starts and building permits scheduled to be reported at 8:30 ET.