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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

11/1/13

The S&P 500 added 0.3% to end the week with a slim advance of 0.1%. Although the broader market ended little changed, small caps were under pressure throughout the session as the Russell 2000 lost 0.4%.
Notably, relative weakness among small caps was a recurring theme throughout the week, causing the Russell to lose 2.0% since Monday.
Outside of the continued underperformance of small caps, the session did not generate too much excitement. The S&P climbed at the open, but slid to lows during the first two hours as the broader market caught down to the Russell's weakness. The S&P was able to battle its way back to the opening high, but could not muster additional gains as energy (-0.3%) and materials (-0.2%) weighed.
The energy sector trailed the broader market throughout the day as Dow component Chevron (CVX 118.01, -1.95) weighed after missing bottom-line estimates by $0.14. Crude oil also pressured the sector, falling 1.8% to $94.61 per barrel.
Elsewhere, materials underperformed as miners displayed broad weakness. The Market Vectors Gold Miners ETF (GDX 24.08, -1.02) tumbled 4.1% while gold futures slid 0.8% to $1313.10 per troy ounce.
On the upside, the relative strength of industrials (+0.8%) and health care (+0.7%) helped the S&P post a modest advance.
Transports paced the gains among industrials as the Dow Jones Transportation Average rallied 1.0%. Meanwhile, the health care sector outperformed with some help from biotechnology. The iShares Nasdaq Biotechnology ETF (IBB 206.06, +0.73) added 0.4%.
Treasuries sold off throughout the session, sending the 10-yr yield higher by six basis points to 2.62%.
Trading volume was a bit above average as just under 810 million shares changed hands on the floor of the New York Stock Exchange.
Although equities endured a relatively quiet session, the same could not be said for the foreign exchange market. The greenback rallied throughout the day, gaining significant strength against the euro and the pound. The Index ended near its high with an advance of 0.7% at 80.72.
The euro was under pressure since yesterday amid rumblings of an ECB rate cut by year-end and continued chatter of negative interest rates. Heavy selling dropped the pair roughly 300 pips off its October highs to 1.3490 against the dollar.
Today's economic data was limited to the October ISM Manufacturing Index, which increased to 56.4 in from 56.2 (Briefing.com consensus 55.0). The common adage throughout the government shutdown was that the manufacturing sector would suffer from lost orders and demand. If the ISM index is an accurate gauge of manufacturing activity in October, then the expected weakness never occurred.
New orders actually strengthened in October. The related index increased to 60.6 in October from 60.5. Meanwhile, order backlogs ended a contraction period and increased to 51.5 from 49.5.
Monday's economic data will be limited to August and September factory orders, which will be released through a single report at 10:00 ET.


Nasdaq +29.9% YTD
Russell 2000 +29.0% YTD
S&P 500 +23.5% YTD
DJIA +19.2% YTD

Week in Review: S&P 500 Holds Ground While Russell Lags

On Monday, the S&P 500 punctuated an uneventful session with a slim advance of 0.1%. Stocks alternated between gains and losses through the first two hours of action before the S&P climbed to a fresh record high of 1764.99. Final-hour selling cut the S&P's gain in half, but the index still finished ahead of the Dow (unch) and the tech-heavy Nasdaq (-0.1%), which was challenged by its flat line throughout the session. The day featured just a handful of notable reports. Health care components caught the eye of some participants with Biogen (BIIB 243.10, -1.09) reporting solid results and Merck (MRK 45.23, +0.14) beating bottom-line estimates on below-consensus revenue. Although Merck weighed, the broader health care sector (+0.3%) drew strength from the 6.7% gain in Bristol-Myers Squibb (BMY 52.48, -0.04) after the company announced positive clinical trial data.

The S&P 500 registered its fourth consecutive advance on Tuesday, climbing 0.6%. The Dow Jones Industrial Average (+0.7%) outperformed the benchmark index while the Nasdaq (+0.3%) lagged after starting the session in-line with the S&P. The tech-heavy Nasdaq posted a modest advance after the exchange experienced an intraday data dissemination issue that prevented index quotes from being sent out for nearly an hour. However, the issue was isolated to the index while individual components traded normally. One of the components that contributed to the Nasdaq's underperformance was Apple (AAPL 520.03, -2.67). The largest tech stock lost 2.5% after its below-consensus gross margin guidance overshadowed its earnings beat on above-consensus revenue.

Wednesday saw the S&P 500 register its first decline in five sessions (-0.5%). Small caps faced additional selling pressure as the Russell 2000 fell 1.4%. Stocks held modest losses into the afternoon, but slid to fresh lows after the Federal Reserve released its latest policy directive, which was little changed from prior statements. Most notably, the directive acknowledged the recent slowdown in the housing sector and noted that fiscal policy is presenting a headwind to growth. In addition, the Committee dropped the reference to "tightening financial conditions" that appeared in the September statement. While the statement did not throw the market any taper-related curveballs, it may have been perceived to be somewhat hawkish as the Committee did not alter its outlook to account for the impact from the partial government shutdown. All ten sectors settled in the red, but their losses were limited to less than 0.8%. Defensive sectors led to the downside, and consumer staples (-0.8%) ended at the bottom of the leaderboard.

On Thursday, the S&P 500 ended with a modest loss of 0.4%, trimming its October gain to 4.5%. Small caps displayed notable weakness during morning trade, but the Russell 2000 ended not far behind the S&P with a loss of 0.5%. Equity indices spent most of the session near their respective flat lines even after more than 250 companies reported their quarterly results since Wednesday's close. Trading volume was subdued until the last 30 minutes of action when a surge in trading activity sent equity indices to lows while pushing the final NYSE volume tally over 900 million shares.