The Week In Review


The stock market finished an upbeat week on a mixed note. The S&P 500 added just under a point, holding its weekly gain at 1.0% while the Nasdaq lost 0.4%.
The major averages began the day on an upbeat note, but relinquished their opening gains during the first 90 minutes of action. The early sentiment was boosted by a better-than-expected nonfarm payrolls report for February (175K versus consensus 163K), but a closer look into the report suggested that the weather excuse, which has been commonplace for the past several weeks, may have been overused in justifying some of the disappointing economic data received in recent weeks.
Stocks retreated from their opening highs with the Nasdaq pacing the slide. Specifically, biotechnology underperformed for the second day in a row, which fueled much of the Nasdaq weakness. The iShares Nasdaq Biotechnology ETF (IBB 259.40, -1.74) lost 0.7% after being down as much as 2.6% at the start of the session. The biotech ETF posted a 1.9% decline for the week, but remains up 14.2% in 2014.
Although biotechnology was able to climb off its lows, the rebound coincided with selling in the traditional technology sector (-0.3%). As a result, the Nasdaq was pressured throughout the day.
Even though heavily-weighted sectors like technology and health care (-0.2%) weighed on the broader market, the S&P 500 held up relatively well thanks to the relative strength of the financial sector (+0.5%), which continued its recent outperformance. The influential sector finished the week with a gain of 3.0%.
Elsewhere among cyclical groups, energy (+0.4%) and industrials (+0.3%) outperformed while consumer discretionary (-0.1%) and materials (-0.5%) lagged. The energy sector posted a modest gain as crude oil rose 1.0% to $102.54/bbl. Despite today's increase, the energy space remains the weakest cyclical group of the year, down 1.8%.
Industrials, meanwhile, drew strength from transports. The Dow Jones Transportation Average added 0.4% after marking a fresh intraday record high at 7627.44.
Despite the continued uncertainty surrounding the situation in Ukraine, stocks climbed into the close, suggesting participants remained hopeful that a worst case scenario would be avoided. The sentiment was a bit different in Europe where major regional indices finished on their lows after a Gazprom spokesman said the company could stop delivering natural gas to Ukraine since the country is behind on its payments. The news rattled the region considering Gazprom is a major supplier to the entire European continent and supply disruptions could affect other economies.
The Treasury market, however, did not reflect a flight to safety as the 10-yr note finished in the red with its yield up five basis points at 2.79%.
Participation was a bit below average as 710 million shares changed hands at the NYSE.
Taking a look at economic data:
Nonfarm payrolls added 175,000 jobs in February after adding an upwardly revised 129,000 (from 113,000) in January. The consensus expected an increase of 163,000. Private payrolls were a little lighter, up 162,000 in February after adding 145,000 in January. The consensus expected private payrolls to increase by 170,000. Over the last several weeks, economists have pointed toward the winter weather as the reason for the recent economic slowdown. The above consensus result in the February employment report refutes that theory. Sectors that are normally impacted by weather events, such as construction of buildings (+100), reported positive payroll gains. These sectors should have seen a sizable pullback if weather was the root cause of the economic malaise.
The U.S. trade deficit widened in January to $39.10 billion from an upwardly revised $39.00 billion (from $38.7 billion) in December. The consensus expected the trade deficit to fall to $37.30 billion. The goods deficit rose to $59.30 billion from $58.70 billion, a gain of $0.70 billion. The services surplus increased by $0.50 billion in January to $20.20 billion. Exports increased 0.6% in January to $192.50 billion. Almost all of the increase can be attributed to a $1.80 billion increase in exports of nonmonetary gold and a $0.20 billion increase in artwork sales.
Consumer credit increased by $13.70 billion in January after increasing a downwardly revised $15.90 billion (from $18.80 billion) in December. The consensus expected consumer credit to increase by $11.80 billion in January.
There is no economic data on Monday's schedule.

Nasdaq Composite +3.8% YTD
Russell 2000 +3.8% YTD
S&P 500 +1.6% YTD
Dow Jones Industrial Average -0.8% YTD
Week in Review: Stocks Climb Despite Persistent Geopolitical Concerns

The stock market began the trading week on a defensive note after tensions between Russia and Ukraine escalated over the weekend. The Dow Jones Industrial Average (-0.9%) paced the decline while the S&P 500 lost 0.8% with all ten sectors ending in the red. Over the weekend, Russian troops increased their presence around several key strategic points located in the Crimean peninsula in Southern Ukraine. The troop deployment was authorized by the Russian parliament while Ukrainian authorities described the actions as an 'invasion.' With plenty of uncertainty abound, equities sold off broadly while traditional safe-haven assets received a bid. Treasuries settled on their highs with the benchmark 10-yr yield down five basis points at 2.60% while the Dollar Index (80.08, +0.39) gained 0.5%. Commodities saw interest with crude oil climbing 2.4% to $105.00/bbl while gold futures settled higher by 2.2% at $1350.40/ozt. In turn, the strength in gold gave a boost to miners, sending the Market Vectors Gold Miners ETF (GDX 26.18, -0.61) higher by 1.6%.

Equity indices enjoyed a broad-based rally on Tuesday that sent the S&P 500 (+1.5%) and the Russell 2000 (+2.5%) to new record closing highs. Stocks surged out the gate after index futures received a considerable bid around 1:00AM ET. The overnight strength came about after it was reported that Russian President Vladimir Putin called back the troops that were conducting exercises on the country's border with Ukraine. Mr. Putin commented on the tense situation, saying Russia is not aiming to annex the Crimean peninsula and that military force is a choice of last resort. The overnight developments were viewed positively by market participants who rushed into risk while shedding some of the safe-haven assets that were in strong demand on Monday. On that note, Treasuries spent the entire session in a steady retreat with the 10-yr yield ending at its session high (+9 bps at 2.69%); gold futures fell 0.9% to $1337.80/ozt; and crude oil lost 1.6%, ending at $103.34/bbl. The risk rally translated into solid gains for all ten sectors. The three largest S&P 500 groupsfinancials (+2.0%), technology (+1.5%), and health care (+1.9%)paced the advance while most of the remaining groups added at least 1.0% with utilities (+0.8%) as the lone exception.

On Wednesday, the major averages posted modest losses after spending the entire session inside narrow ranges. The Dow Jones Industrial Average slipped 0.2% while the S&P 500 shed less than a point. Individual sectors were split right down the middle for the entire trading day with five groups posting gains while the other five registered losses. The financial sector (+0.7%) took the lead shortly after the open and never relinquished its standing as top components rallied notably.

The stock market ended the Thursday session on a mixed note ahead of Friday's nonfarm payrolls report for February. The Dow Jones Industrial Average (+0.4%) and S&P 500 (+0.2%) posted modest gains while the Nasdaq Composite (-0.1%) lagged throughout the session. Biotech pressured the Nasdaq as the iShares Nasdaq Biotechnology ETF ended near its session low, down 2.7%. Also exerting pressure on the Nasdaq was the technology sector, which ended flat.