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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

4/29-5/3

5/3/13
The major averages registered strong gains as the April jobs report boosted stocks at the open. The S&P 500 jumped 1.0% and notched a fresh record close at 1,614.40 while the Dow added 0.9% after peeking above 15,000 in morning action.
On the surface, the employment report for April looked good. Payroll growth surprised to the upside, increasing by 165,000. That was 10,000 more than the 155,000 expected by the Briefing.com consensus. Revisions in March, to 138,000 from 88,000, and February, to 332,000 from 268,000, were strongly positive.
Yet, the underlying details point toward weaker consumption levels as the average workweek dropped to 34.4 hours in April from 34.6 and average hourly earnings increased 0.2%.
The decline in workweek more than offset the increase in payrolls and earnings. Altogether, aggregate wages declined 0.3% in April. That would be the first decline in wages since January.
Cyclical sectors led stocks higher and two recent underperformers, industrials and materials, finished atop the leaderboard.
The industrial space displayed all-around strength, but transportation-related stocks outperformed notably. The Dow Jones Transportation Average ended higher by 2.1% as 18 of 20 components registered gains. Although the index traded ahead of the broader market, it remains 1.0% away from its all-time best.
Elsewhere, the materials sector benefitted from a notable rise in basic metals. Copper made its biggest advance in more than a year by surging 6.5% to $3.306. Steelmakers also contributed to the outperformance of the growth-sensitive sector as the Market Vectors Steel ETF (SLX 42.59, +1.19) gained 2.9%. Meanwhile, the SPDR Materials Select Sector ETF (XLB 39.82, +0.69) ended higher by 1.8%.
The energy space also outperformed as crude oil extended its recent strength and rose 1.6% to $95.47. Since April 17, the energy component has added almost $10.
While most cyclical groups registered gains in excess of 1.0%, the financial sector underperformed. JPMorgan Chase (JPM 47.57, -0.51) slipped 1.1% after the New York Times gained access to confidential government documents alleging the bank engaged in 'manipulative schemes' in the energy market and that its executives gave 'misleading statements' while testifying under oath.
In notable sector earnings, American International Group (AIG 44.52, +2.39) added 5.7% after reporting a bottom-line beat.
Although the April jobs report received most of today's attention, some noteworthy quarterly reports crossed the wires as well. LinkedIn (LNKD 175.59, -26.08) slumped 12.9% after its better-than-expected earnings report included cautious full-year revenue guidance.
On the downside, the defensively-geared telecom and utilities sectors ended with respective losses of 0.2% and 0.4%.
Reviewing today's remaining data, the ISM Non-manufacturing Index declined from 54.4 in March to 53.1 in April. The Briefing.com consensus expected the index to fall to 54.0.
Total factory orders fell 4.0% in March after increasing a downwardly revised 1.9% (from 3.0%) in February. The Briefing.com consensus expected factory orders to fall 2.5%.
Durable goods orders fell 5.8% (from a previously released -5.7%) after increasing 4.3% in March.
There is no notable economic news set to be released on Monday. On Tuesday, March consumer credit will be announced at 15:00 ET.

5/2/13
Stocks surged as the S&P 500 erased all of yesterday's losses. The benchmark average rose 0.9% while the Nasdaq outperformed with a gain of 1.3%.
In addition to earnings reaction, investors welcomed further easing from the European Central Bank as the ECB cut its key interest rate by 25 basis points to a record low of 0.50%.
The Nasdaq paced today's gains as major components displayed broad strength. Electronic payment processor Visa (V 175.40, +9.38) jumped 5.7% after beating on earnings and revenue.
In addition, social media stocks displayed significant strength after Facebook (FB 28.97, +1.54) and Yelp (YELP 32.22, +6.92) reported above-consensus top-line results.
Tech shares have spent the entire week trading ahead of the broader market. As a result, the sector has added 3.5% since Monday.
Meanwhile, the second best sector of the week, energy, finished the session right behind technology with a significant rebound in crude oil contributing to today's gains. After falling 2.7% yesterday, crude jumped 3.3% to $93.98 per barrel.
The Dow Jones Transportation Average also tried to erase its losses from yesterday's 2.3% slump. However, even as 18 of 20 components advanced, the index was limited to a gain of 1.0%.
Elsewhere, homebuilders piggybacked strong earnings from MDC Holdings (MDC 38.40, +1.43) as the SPDR S&P Homebuilders ETF (XHB 30.48, +0.65) rose 2.2%.
In the Treasury market, the 10-yr note ended little changed with its yield steady at 1.627%.
With equities finishing broadly higher, the CBOE Volatility Index (VIX 13.61, -0.88) returned to last week's lows.
Today's advance occurred on below-average volume as only 677 million shares changed hands on the floor of the New York Stock Exchange.
In today's economic data, the initial claims level dropped from an upwardly revised 342,000 (from 339,000) for the week ending April 20 to 324,000 for the week ending April 27. That was the lowest initial claims reading since January 2008. The Briefing.com consensus expected the initial claims level to increase to 346,000.
The U.S. trade deficit narrowed in March, falling from an upwardly revised $43.6 billion (from $43.0 billion) to $38.8 billion. The Briefing.com consensus pegged the deficit at $43.0 billion.
Export levels fell $1.7 billion in March to $184.3 billion as large declines in foods (-$1.0 billion) and petroleum-based products (-$1.1 billion) outweighed gains in aircraft parts ($0.8 billion) and nonmonetary gold ($0.5 billion).
Meanwhile, imports declined by $6.5 billion to $223.1 billion with most of the drop occurring due to weaker demand for consumer goods (-$3.4 billion).
Also of note, nonfarm business labor productivity increased 0.7% in the preliminary first quarter reading after falling 1.7% (revised from -1.9%) during the fourth quarter. The Briefing.com consensus expected productivity to increase 1.2%. Output levels increased 2.5%, up from a 0.7% fourth quarter gain.
Tomorrow's economic data will focus on jobs as April nonfarm payrolls, nonfarm private payrolls, the unemployment rate, hourly earnings, and average workweek will all be reported at 8:30 ET. In addition, March factory orders and April ISM Services Index will be released at 10:00 ET.

5/1/13
Equities ended today's session on their lows as global growth concerns reemerged. The three major indices all lost 0.9%, but the underperformance of small cap stocks was notable as the Russell 2000 slid 2.5%.

Although most markets across the globe were closed in observance of Labor Day, some countries continued reporting their economic data.

China reminded investors of its importance to the global economy as the decline in the country's Manufacturing PMI (50.6 actual, 50.9 prior, 51.0 consensus) along with a disappointing U.S. ISM Index (50.7 actual, 51.3 prior, 51.0 consensus) pressured commodities and commodity-related sectors.

As a result, energy and materials both ended with losses near 1.7%. Crude oil settled lower by 2.7% at $90.95 after today's inventory report revealed that crude stockpiles climbed to 6.696 million barrels, a record high dating back to 1982 when the Energy Information Administration began tracking the data.

Meanwhile, the materials sector declined throughout the day as related metals sold off. Gold futures fell 1.1% to $1455.90 per troy ounce after being down as much as 2.1% intraday. Meanwhile, copper was unable to bounce off its lows as the red metal declined 3.8% to $3.068 per pound.

The relative weakness of gold pressured miners as the Market Vectors Gold Miners ETF (GDX 29.65, -0.71) settled lower by 2.3%. Steelmakers also displayed weakness throughout the day, and the Market Vectors Steel ETF (SLX 41.56, -0.87) slumped 1.9%. Disappointing manufacturing data from China and the U.S. weighed on the group, and Alcoa's (AA 8.43, -0.07) announcement of a possible curtailment of its smelting capacity reflected the sluggish global growth.

Concerns regarding economic health also pressured industrial shares, and specifically, the Dow Jones Transportation Average. The bellwether complex was one of the leaders of the first-quarter market rally. However, the sector underperformed last month, ending April with a loss of 1.2%.

The 20-stock complex kicked off the month on a cautious note as 18 components ended with losses of at least 1.0% while the Transportation Average slid 2.3%.

Stocks saw a brief afternoon bounce when the Federal Open Market Committee released its latest policy statement, which did not contain any groundbreaking news.

As expected, the FOMC maintained its purchasing program at $85 billion per month, and kept its target Federal Funds Rate steady at 0-0.25%. The central bank also reiterated its goal of staying true to the current policy course until the unemployment rate declines to 6.5%.

Today's statement did contain an explicit mention of a possible increase or decrease to the purchase program. However, this wasn't "new" as prior statements from the Fed have already allowed for the possibility of modifications to the program.

Looking back at the day's remaining economic data, total construction spending fell 1.7% in March after increasing an upwardly revised 1.5% (from 1.2%) in February. The Briefing.com consensus expected construction spending to increase 0.5%.

Most of the decline was the result of weaker public construction spending. That sector declined 4.1% in March after increasing 1.5% in February. This drop helps explain why government spending fell substantially in the first quarter GDP report.

Investors will receive a full slate of economic data tomorrow with the April Challenger Job Cuts Report set to kick things off at 7:30 ET. Weekly initial claims, preliminary first quarter productivity, first quarter unit labor costs, and the March trade balance will all be released at 8:30 ET.

Also of note, the European Central Bank will release its latest interest rate decision with many expecting a 25 basis point rate cut from 0.75% to 0.50%.

4/30/13
Equities ended today's session on a modestly higher note as the Nasdaq rose 0.7% and the S&P 500 added 0.3%. The Dow Jones Industrial Average, for its part, tacked on 0.1%.

The major averages spent the day climbing off their lows after it was revealed that manufacturing activity in the Chicago region in April contracted for the first time since September 2009, falling from 52.4 in March to 49.0. The Briefing.com consensus expected the Chicago PMI to decline to 52.0.

After hitting a relative peak of 60.9 in January, production levels have dropped swiftly over the past few months, breaking through the contraction threshold in April. The production index dropped to 49.9 from 51.8 in March.

Technology stocks paced the late-morning rebound as the sector displayed strength amid reports indicating Apple's (AAPL 442.78, +12.66) $17 billion debt offering received significant investor interest. The largest tech company advanced 2.8% on the news, and its gains helped the Nasdaq outperform the other indices.

Although the tech sector finished higher by 1.2%, other cyclical groups did not register comparable gains. Further, today's second-best performer was the defensively-oriented telecom space as rumors regarding Verizon Communications' (VZ 53.91, +0.45) attempt to acquire Vodafone's (VOD 30.59, 0.00) stake in Verizon Wireless returned to the forefront.

On the downside, the health care sector was the weakest performer after Dow component Pfizer (PFE 29.07, -1.36) fell 4.5% after missing on earnings and revenue.

Homebuilders were also among today's notable laggards. DR Horton (DHI 26.08, -0.44) and PulteGroup (PHM 20.99, -0.22) both lost near 1.5% while the broader iShares Dow Jones US Home Construction ETF (ITB 24.26, -0.17) shed 0.7%. In addition, a JPMorgan Chase downgrade of PulteGroup contributed to the underperformance of the homebuilder.

Looking back at the day's remaining economic data, the Conference Board's Consumer Confidence Index increased from 59.7 in March to 68.1 in April. That move recovered the entire loss that occurred in March. The Briefing.com consensus expected the index to increase to 61.0.

The sudden surge in confidence was primarily driven by solid increases in the stock market and slightly lower gasoline prices. Minor improvements in employment levels also likely contributed positively to confidence.

The Employment Cost Index increased 0.3% in the first quarter of 2013, down from a downwardly revised 0.4% (from 0.5%) in the final quarter of 2012. The Briefing.com consensus expected employment costs to increase 0.5%.

A busy day of economic reporting is in store for tomorrow with the weekly MBA Mortgage Index set to be released at 7:00 ET. April ADP Employment Change will be reported at 8:15 ET while March construction spending and April ISM Index will both be announced at 10:00 ET. Finally, the Federal Reserve Open Market Committee will announce its interest rate decision and release its policy statement at 14:15 ET.

4/29/13
Today proved to be a one-sided affair as equities climbed throughout the session. As a result, the S&P 500 settled higher by 0.7% to notch a fresh record close while the Nasdaq rose 0.9%.

The Nasdaq displayed relative strength from the onset as technology stocks paced today's advance. Major sector components Apple (AAPL 430.12, +12.92), Google (GOOG 819.06, +17.64), and Microsoft (MSFT 32.61, +0.82) all settled with gains of at least 2.5%.

Chipmakers also displayed broad strength as the PHLX Semiconductor Index ended higher by 1.3%.

Although the tech sector was able to register a firm gain, the group was unable to overcome its month-to-date losses as it still holds a loss of 0.3%.

Meanwhile, strength in basic materials producers helped the sector erase its April losses. Steelmakers saw gains across the board and the Market Vectors Steel ETF (SLX 41.96, +0.61) ended higher by 1.5%. Metal prices also provided support as gold rose 1.2% to $1470.70 per troy ounce while copper added 0.7% to $3.211 per pound.

Gains in commodities also helped the energy sector as crude oil rose 1.4% to end at $94.32 per barrel.

Even though three cyclical sectors ended atop today's leaderboard, other growth-oriented groups trailed behind the broader market.

The discretionary sector underperformed as homebuilders and retailers weighed. The SPDR S&P Retail ETF (XRT 73.02, 0.00) ended flat even as J.C. Penney (JCP 17.19, +0.19) advanced 1.1% as reports indicated two hedge funds bought shares of the retailer.

With all ten sectors registering gains, defensively-geared consumer staples and telecom were the weakest performers as both settled higher by 0.3%.

Today's volume was well below average as 598 million shares changed hands on the floor of the New York Stock Exchange.

In the Treasury market, the 10-yr note ended flat with its yield at 1.670% after bouncing around a two point range for the duration of the day.

Looking back on today's economic data, personal income and spending both rose 0.2% in March. The Briefing.com consensus expected income to increase 0.3% and spending to rise 0.1%. The March income and spending data were already incorporated in the first quarter GDP report that was released last Friday. The only new information was that January income growth was revised up to -3.6% from -3.7% and that January spending growth was revised down to 0.3% from 0.4%. The February growth rates were unrevised.

In addition, pending home sales for March rose 1.5%, which was better than the 0.1% increase forecast by the Briefing.com consensus. Today's reading follows last month's decline of 0.4%.

Tomorrow, the first quarter employment cost index will be reported at 8:30 ET while February Case-Shiller 20-city Index and April Chicago PMI will be released at 9:00 ET and 9:45 ET, respectively. The day's economic data will be topped off with the 10:00 ET release of April consumer confidence. On the earnings front, Marathon Petroleum (MPC 82.41, +1.06) and Pfizer (PFE 30.43, +0.34) will report their quarterly results prior to the opening bell.