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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

12/13/13

The stock market experienced a flat finish to an otherwise-forgettable week. The S&P 500 shed less than one point, maintaining its December loss of 1.7%. Small-caps outperformed as the Russell 2000 gained 0.4%, but the index remains lower by 3.1% this month.
Equities registered opening gains, but the early strength faded during the first 30 minutes of action, sending the major averages to their lows. The key indices spent the rest of the morning near their flat lines before staging a modest afternoon rally. However, selling pressure returned during the late afternoon, sending the S&P 500 back to unchanged for the day.
Today's rally attempts were fueled by the relative strength of four cyclical sectors as consumer discretionary (+0.3%), financials (+0.1%), industrials (+0.4%), and materials (+0.4%) outperformed throughout the session.
The discretionary sector displayed notable strength from the get go as media names advanced in reaction to news Charter Communications (CHTR 131.54, -0.45) is preparing an open letter to purchase Time Warner Cable (TWC 131.41, +0.35) for no more than $140 per share. However, Time Warner narrowed its gain to just 0.3% after a follow-up report indicated the proposed offer would be below $135 per share.
Elsewhere, the industrial sector advanced with help from defense contractors and transports. The PHLX Defense Index gained 0.6% while the Dow Jones Transportation Average added 0.4%.
Also of note, the materials space ended in the lead as steelmakers and miners outperformed. The Market Vectors Steel ETF (SLX 47.71, +0.30) settled higher by 0.6% while the Market Vectors Gold Miners ETF (GDX 21.11, +0.10) gained 0.5% as gold futures increased 0.8% to $1235.10 per troy ounce.
The other commodity-linked sector, energy (-0.4%), ended at the bottom of the leaderboard as crude oil fell 1.0% to $96.53 per barrel. The sector was also pressured by Anadarko Petroleum (APC 78.30, -5.37), which lost 6.4% after the company was held liable for upwards of $14.50 billion in damages in the Tronox bankruptcy case.
Similar to energy, three of four countercyclical groups ended in the red while health care (+0.04%) outperformed.
Despite today's flat finish, the CBOE Volatility Index (VIX 15.77, +0.23) suggested the presence of some demand for volatility protection. The near-term volatility measure registered its third consecutive gain, ending at its highest level since mid-October.
Treasuries registered slight gains, sending the 10-yr yield lower by one basis point to 2.87%.
Participation was well below average as only 627 million shares changed hands on the floor of the New York Stock Exchange.
Among news of note, the House of Representatives passed the budget deal with a 332-94 vote. The bill will now head to the Senate with a vote expected to take place on Tuesday.
Today's economic data was limited to the November PPI report, which pointed to a downtick of 0.1% while core producer prices rose 0.1%. Both readings matched expectations.
On Monday, the December Empire Manufacturing survey as well as the third quarter productivity and unit labor costs will all be reported at 8:30 ET. The October net long-term TIC flows report will be released at 9:00 ET while November industrial production and capacity utilization will be released at 9:15 ET.

Nasdaq +32.5% YTD
Russell 2000 +30.3% YTD
S&P 500 +24.5% YTD
DJIA +20.2% YTD
Week in Review: Santa Claus Rally on Hold

On Monday, the stock market did not generate too much excitement following a broad-based rally on Friday. The major indices stood their ground (for the most part) amid a lack of conviction from buyers and sellers alike. The day was not a case so much of the stock market going up as it was a case of some influential stocks going up to keep the major indices on a winning path. In fact, decliners were just about even with advancers at the NYSE and led by a 3-to-2 margin on the Nasdaq. Apple (AAPL 554.43, -6.11) and Google (GOOG 1060.79, -9.17) were key drivers of the S&P 500 and Nasdaq Composite while ExxonMobil (XOM 95.31, -0.05), Chevron (CVX 119.90, -1.09), and Goldman Sachs (GS 168.39, +0.06) were key drivers specifically of the price-weighted Dow Jones Industrial Average.

Tuesday's session saw the major averages spend the trading day in a steady downtrend. Despite persistent selling pressure, the losses were limited in scope. The Dow, S&P 500, and Nasdaq shed between 0.2% and 0.3% while the Russell 2000 lagged, falling 0.9%. The underperformance of the Russell 2000 was likely owed in part to tax-loss selling, which tends to pick up this time of year. Small-caps often feel that pinch in a stronger fashion than large-cap issues since individual retail investors factor more prominently in the behavior of small-cap stocks. Countercyclical sectors lagged throughout the day with consumer staples and health care falling 0.9% and 0.4%, respectively.

Wednesday featured a continuation of the selling from the previous day. Similar to Tuesday, small-caps paced the retreat as the Russell 2000 fell 1.6%. The S&P 500 settled lower by 1.1%, widening its month-to-date decline to 1.3%. Seven of ten sectors settled with losses of 1.0% or more while only two groups finished above their respective lows. Top-weighted financial (-1.5%) and health care (-1.6%) sectors trailed throughout the session, which emboldened sellers and prevented dip-buyers from turning the tide. Interestingly, the largest S&P 500 sector, technology, outperformed with a loss of 0.9% even as the tech-heavy Nasdaq (-1.4%) lagged.

The major averages finished the Thursday session on a lower note. The S&P 500 lost 0.4% while the Nasdaq shed 0.1%. The Russell 2000, which paced the retreat on Tuesday and Wednesday, added 0.2%, trimming its December loss to 3.5%. After spending the first half of the session in a steady retreat, the S&P 500 found technical support in the 1772 area. Upon reaching that level, the index reversed sharply, and marched back to its flat line. There was no particular catalyst responsible for the turn, but steady inflows into influential cyclical sectors paved the way for a broad-market rebound. Although the S&P 500 battled back to its flat line, final-hour selling pressured the index to a modest loss.