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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

7/15-7/19/13

Today's session featured disappointing earnings from technology heavyweights, Google (GOOG 896.60, -14.08) and Microsoft (MSFT 31.40, -4.04), but that could have gone unnoticed if someone were to only focus on the performance of the S&P 500, which ended with a slim gain of 0.2%, notching a new record high.

Meanwhile, the Nasdaq settled lower by 0.7% as earnings and revenue misses from the two major components weighed on the tech-heavy index. For its part, the S&P technology sector fell 2.0%.

While technology shares displayed weakness across the board, the broader market was kept afloat by the outperformance of heavily-weighted energy, health care, and industrial sectors. The three groups added between 1.2% and 1.4% with health care ending in the lead.

The health care sector spent the entire session in a steady climb as biotechnology provided significant support. The iShares Nasdaq Biotechnology ETF (IBB 195.00, +3.06) advanced 1.6% after marking a fresh all-time high.

Elsewhere, the industrial sector was underpinned by Dow component General Electric (GE 24.72, +1.09), which jumped 4.6% after its slim earnings beat overshadowed a 3.5% year-over-year decline in revenue. Another Dow member, Boeing (BA 106.96, -0.67), kept industrials from logging further gains after two more jets produced by the company were forced to return to their home ports following in-flight technical issues.

Also of note, the energy sector advanced 1.4% on the back of better-than-expected earnings from Schlumberger (SLB 82.74, +4.33). On a related note, crude oil added 0.3% to $108.15.

Another commodity-related sector, materials, rose 0.5% as chemical producers and gold miners displayed strength. The Market Vectors Gold Miners ETF (GDX 25.86, +1.08) jumped 4.4%. Gold futures displayed strength as well, climbing 0.8% to $1294.30 per troy ounce.

The CBOE Volatility Index (VIX 12.54, -1.23) spent the entire session in a steady decline, dropping to its lowest level since May 17. After notching its 2013 high of 21.91% on June 24, the near-term volatility measure has logged three consecutive weekly losses as the S&P 500 climbed to fresh all-time highs.

Participation was relatively limited and NYSE trading volume of 872 million shares was light when taking today's options expiration into account.

On Monday, June existing home sales will be reported at 10:00 ET.

Week in Review: Another Week, Another Record for the S&P 500

On Monday, the S&P 500 settled higher by 0.1% to mark its eight consecutive advance. The utilities sector ended atop the leaderboard with a gain of 1.6%, but the relative strength of three influential sectors (financials, industrials, and technology) helped the S&P end less than five points away from its May 22 all-time intraday high of 1687.18. Notably, the session was one of the quietest of the year in terms of participation as only 567 million shares changed hands on the floor of the New York Stock Exchange. Financials provided the broader market with an opening boost after Citigroup (C 52.35, -0.34) reported better-than-expected earnings on above-consensus revenue. Citigroup rose 2.0% while the broader sector added 0.4%.

Tuesday's session saw the S&P 500 end lower by 0.4% to snap its streak of eight consecutive gains. The decline marked only the third time this month where the S&P registered a loss, and first with a drop larger than one point. Heavily-weighted sectors, including financials and health care, pressured the broader market despite better-than-expected quarterly results from Goldman Sachs (GS 164.36, +0.30) and Johnson & Johnson (JNJ 92.23, +2.06). In addition, market participants appeared cautious ahead of the Wednesday testimony by Fed Chairman Ben Bernanke in front of the House Financial Services Committee. Also of note, Coca-Cola (KO 41.09, +0.28) shed 1.9% after missing on revenue.

Equities began Wednesday's session in the black and the S&P 500 added 0.3% after the prepared remarks from Ben Bernanke's testimony in front of the House Financial Services Committee provided an opening boost. Mr. Bernanke's comments were in-line with previous statements, indicating the Federal Reserve plans to base its decisions on the incoming data. The Fed Chairman expounded on this by saying asset purchases could be scaled back if economic conditions improve faster than expected, and inflation rises towards the Fed's objective. However, if financial conditions were to tighten, the current pace of purchases could be maintained or increased. In that vein, housing data released concurrently with Chairman Bernanke's comments spoke in favor of leaving asset purchases unchanged after June housing starts hit an annualized rate of 836,000 units (958,000 Briefing.com consensus). The large miss was mostly due to 26.2% decline in multi-family units while single-family starts declined by 0.8%. Separately, the weekly MBA Mortgage Index decreased 2.6% to mark its fifth negative reading in a row and the ninth decline out of the past ten weeks. Homebuilders received the news in stride, and the iShares Dow Jones US Home Construction ETF (ITB 23.23, +0.16) advanced 1.3%.

On Thursday, the S&P 500 settled with a gain of 0.5% after notching a fresh intraday record high of 1693.13. Meanwhile, the tech-heavy Nasdaq underperformed, ending unchanged. Stocks climbed at the open and received an additional boost after the July Philadelphia Fed Index spiked to 19.8 from 12.5. That was well ahead of the Briefing.com consensus estimate of 5.3 and marked the highest reading for the index since March 2011. The S&P was able to register to a new record high as heavily-weighted energy, financial, and industrial sectors all logged gains of at least 0.9%.