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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

3/28/14

The stock market finished a cautious week on a modestly higher note, but kept only a portion of its opening gain. The S&P 500 added 0.5%, trimming its weekly loss to 0.5%, while the Nasdaq Composite added 0.1%, finishing the week with a 2.8% decline.
Emboldened by stimulus talk during the overnight session, equity indices began the day on a strong note with the Nasdaq leading the way. The tech-heavy index displayed early strength thanks to gains in biotechnology and other recently-battered momentum names. In all likelihood short covering played a part in the early advance that turned many recent laggards into leaders. One such area was the consumer discretionary sector, which added 0.8% for the day, but ended the week behind the remaining nine sectors with a loss of 2.1%.
Although the discretionary space held the bulk of today's gain, that was not the case with biotechnology. The iShares Nasdaq Biotechnology ETF (IBB 229.38, -6.76) surged out of the gate and notched a high 15 minutes into the day before spending the remainder of the session in a steady retreat. Selling pressure intensified in the afternoon as the ETF dropped to yesterday's lows before settling with a loss of 2.9%.
The continued weakness in biotech pressured the health care sector (-0.4%) while other heavily-weighted groups ended mixed with respect to the broader market. Like the aforementioned consumer discretionary space, industrials (+0.7%) outperformed while financials (+0.4%) lagged. For its part, the largest S&P 500 sector, technology, ended in-line with the broader market.
Also of note, the energy sector (+1.2%) outperformed for the second day in a row, bringing its weekly gain to 2.5%. The sector drew strength from Dow component ExxonMobil (XOM 97.70, +1.46), which gained 1.5% while crude oil added 0.4% to $101.67/bbl.
On the countercyclical side, all four sectors ended behind the broader market. The telecom services (-0.1%) sector posted a modest loss while consumer staples (+0.4%) and utilities (+0.2%) registered gains.
Treasuries ended near their lows after retreating throughout the session. The benchmark 10-yr yield rose three basis points to 2.72%.
Trading volume was on the light side with just over 620 million shares changing hands at the NYSE.
Reviewing today's data:

Personal income increased 0.3% for a second consecutive month in February. The Briefing.com consensus expected income to increase 0.2%. As foretold in the employment report, wages and salaries were up 0.2% in February after increasing 0.3% in January. The Medicaid expansion from the implementation of the Affordable Care Act offset declines in unemployment insurance from the expiration of the emergency unemployment benefits. In all, government social benefits increased 0.8%. Personal spending met expectations, increasing 0.3% in February, up from a downwardly revised 0.2% (from 0.4%) in January.
The University of Michigan Consumer Sentiment Index was revised up to 80.0 in the final March reading from 79.9 in the preliminary reading (Briefing.com consensus 80.0). Sentiment is still below the 81.6 final reading from February. There was a divergence between the March Conference Board's Consumer Confidence and the University of Michigan Consumer Sentiment indicators. The Confidence Index jumped to a six year high on stronger future expectations while the respondents in the University of Michigan survey were much more subdued. Competing trends are nothing new, but they do discount the effectiveness of using these data points to predict future consumption growth.
On Monday, the Chicago PMI for March will be reported at 9:45 ET.

S&P 500 +0.5% YTD
Nasdaq Composite -0.5% YTD
Russell 2000 -0.9% YTD
Dow Jones Industrial Average -1.5% YTD
Week in Review: Stocks Slide Amid Volatility in Biotechnology

The stock market kicked off the trading week on a cautious note with the Nasdaq leading the retreat. The tech-heavy index lost 1.2% while the S&P 500 fell 0.5% with eight sectors ending in the red. For its part, the Dow Jones Industrial Average (-0.2%) held up relatively well. Equity indices began the session in the green, but quickly slumped into the red as biotechnology continued its recent woes while other momentum names displayed broad weakness. Late-afternoon buying lifted the key averages off their lows, but the Nasdaq could only reclaim a portion of its loss. The iShares Nasdaq Biotechnology ETF settled lower by 2.8% after testing its 100-day moving average (235.61) for the first time since early November.

The major indices strung together modest gains on Tuesday on the back of some strong showings from blue-chip issues and a volatile rebound effort by the beaten-down biotechnology stocks. The move followed on the heels of a strong outing by major European bourses, which shot up largely in response to some remarks from Bundesbank head, Jens Weidmann, who suggested it was not out of the realm of possibility for the ECB to implement a QE-type program to fight deflation. It would be remiss not to add that ECB President Draghi spoke later in the day and said the ECB is not currently seeing any evidence of deflation.

Equity indices finished the Wednesday session on a cautious note with the S&P 500 falling 0.7%. The Dow Jones Industrial Average (-0.6%) outperformed while small caps bore the brunt of the pressure. The Russell 2000 declined 1.9% while the Nasdaq Composite fell 1.4%. Equity indices began the day on an upbeat note, but the financial sector (-0.9%) served up an early warning by not taking part in the opening rally. One industry group that briefly participated in the early advance was the biotech space. The iShares Nasdaq Biotechnology ETF was up as much as 1.1% during the first hour of action, but faded from the early high, taking the market lower with it. Interestingly, the broader health care sector (+0.1%) finished the day ahead of the remaining nine groups.

On Thursday, the market finished the session on a lower note with the tech-heavy Nasdaq Composite (-0.5%) trailing the other indices once again. The Nasdaq widened its week-to-date loss to 3.6% while the S&P 500 settled lower by 0.2%, extending its weekly decline to 0.9%. Equity indices began the trading day on a cautious note despite two upbeat economic data points crossing ahead of the open. Namely, fourth quarter GDP was revised up to 2.6% from 2.4% while weekly initial claims fell to 311,000 from 320,000. The release of this morning's data coincided with session lows in Treasuries, which rallied into the afternoon. The 10-yr note added four ticks, pressuring its yield down to 2.68% after notching a morning high at 2.71%