The Week In Review


The stock market finished an upbeat week on a cautious note as the major averages settled near their flat lines. The S&P 500 (-0.1%) shed less than three points, while the Russell 2000 (+0.1%) outperformed slightly. Interestingly, the bulk of today's trading activity took place before 11:00 ET, while the key indices spent the afternoon within a striking distance of their unchanged levels.
One hour ahead of the opening bell, the April Nonfarm Payrolls report pointed to the addition of 288,000 jobs ( consensus 210,000), but the release was a bit mystifying as a sharp drop in the labor force pressured the unemployment rate to 6.3% from 6.7%.
On one hand, the surprise jump in payrolls suggests a release of pent-up demand following weather-related delays; however, there was nothing in the job creation data that pointed toward a weather-delayed shock. Sectors that were most affected by the weather, such as construction and mining, saw solid growth but nothing different than what was reported during the worst of the weather problems in February. On the other hand, the unemployment rate plunged from 6.7% to 6.3%, which resulted entirely from an 806,000 drop in the civilian labor force. Had the labor force stayed constant, the unemployment rate would have increased to 6.8%.
The enigmatic report was met with an initial spike in index futures and the Dollar Index, while gold and Treasuries slumped; however, those moves were short-lived as futures returned to unchanged by the opening bell, while the dollar, gold, and Treasuries also reversed their post-data moves. As a result, Treasuries settled near their highs, with the benchmark 10-yr yield down three basis points at 2.59%. Also of note, the 30-yr bond posted its third consecutive gain, pressuring its yield to 3.37%, a level that was last seen in June of last year.
With regard to gold futures, the yellow metal rose 1.1% to $1297.60/ozt. This put in a floor under miners (GDX +2.2%), which in turn gave support to the materials (+0.5%) sector.
The materials space ended in the lead and was followed closely by the energy sector (+0.3%), which was able to overcome a disappointing quarterly report from Chevron (CVX 124.72, -0.22). Crude oil, meanwhile, added 0.4% to $99.80/bbl.
Outside of the two commodity-linked sectors, the discretionary space (+0.3%) was the only other advancer. Homebuilders took part in the move higher as the iShares Dow Jones US Home Construction ETF (ITB 23.95, +0.34) gained 1.4%.
On the flip side, seven sectors registered losses, with utilities (-2.0%) leading the retreat, which was a bit peculiar considering the rate-sensitive sector tends to benefit from lower Treasury yields. To be fair, the selling may have been a function of some profit taking inside of a sector that remains well ahead of the other groups so far in 2014. Today's loss narrowed the sector's year-to-date gain to 11.7%, while the second-best performer of the yearenergyended the session with a 5.3% advance so far this year.
Trading volume was below average as less than 685 million shares changed hands at the NYSE. This was likely a result of unwillingness among some participants to step in ahead of the weekend as the next couple days could change the state of affairs in Ukraine. Earlier today, Ukraine's military stormed the town of Slavyansk in an attempt to recapture a city that has been described as a stronghold for pro-Russian separatists. In response to the developments, Russia has called an emergency meeting of the United Nations Security Council.

Reviewing today's remaining data:

Factory orders increased 1.1% in March after increasing a downwardly revised 1.5% (from 1.6%) in February. The consensus expected factory orders to increase 1.6%. Durable goods orders were revised up, increasing 2.9% from an originally reported 2.6%. Orders increased 2.3% in February. Excluding transportation, durable goods orders increased 2.4%, up from an originally reported 2.0%.
On Monday, the ISM Services report for April will be released at 10:00 ET ( consensus 54.0).

S&P 500 +1.8% YTD
Dow Jones Industrial Average -0.4% YTD
Nasdaq Composite -1.3% YTD
Russell 2000 -2.9% YTD
Week in Review: Large Caps Outperform

The stock market began the new week on a mixed note despite showing early strength. Weakness among small-cap names resulted in the underperformance of the Russell 2000 (-0.6%) and the Nasdaq Composite (-0.03%), while the S&P 500 settled higher by 0.3%. Equity indices climbed out of the gate, emboldened by M&A activity in the heavily-weighted health care sector (+0.6%). The third-largest group served as an early leader with help from Pfizer, which jumped 4.2% after confirming its interest in AstraZeneca. Also of note, Forest Laboratories agreed to acquire Furiex Pharmaceuticals for $1.1 billion. Even though the health care sector rallied at the open, the broader market was unable to build on the strength as weakness in momentum namesincluding biotechnologyoutweighed the early optimism. The iShares Nasdaq Biotechnology ETF spent the entire session between its 20- and 200-day moving averages before settling just above the 200-day average.

On Tuesday, equity indices rallied, with the S&P 500 (+0.5%) posting its second consecutive gain as eight sectors ended in the green. Momentum names, meanwhile, rebounded from Monday's relative weakness, which allowed the Nasdaq Composite (+0.7%) to finish ahead of the benchmark index. Stock indices began the session on an upbeat note, slowly building on their early gains throughout the afternoon. The energy sector (+0.4%) powered the opening advance thanks to better than expected earnings from BP and Valero Energy. BP surged 2.6%, while Valero displayed early strength, but spent the session in a steady retreat from its opening high, which mirrored the price action of the entire sector.

The major averages spent some time on either side of their respective flat lines on Wednesday, but when the dust settled, they ended with modest gains. The Dow Jones Industrial Average, S&P 500, and Nasdaq all added 0.3%, with the Dow registering its first green close for the year. The session featured another heavy dose of earnings and a full slate of economic data. Prior to the open, index futures jumped in reaction to a better-than-expected ADP Employment report, but promptly surrendered those gains when it was reported that GDP increased a puny 0.1% in the first quarter ( consensus 1.0%). The disappointing report ensured a lower start for the major averages, but they only took one more step down before forging a rebound on the back of the industrial sector (+0.5%), which drew strength from transports. The Dow Jones Transportation Average jumped 0.7%, bolstered by above-consensus earnings reported by C.H. Robinson.

The stock market ended on a cautious note after enduring a sloppy session that lacked concerted sector leadership. The S&P 500 settled right below its flat line, while the Russell 2000 lost 0.5% after displaying intraday volatility. Equities began the first session of May near their flat lines amid the lack of leadership from overseas as most global markets were closed for Labor Day. Despite the quiet open, small caps were active from the get-go as the Russell 2000 retreated as much as 1.1% during the first hour of action. The index halted its slide at the 200-day moving average (1113.73), which has been acting as an area of support since mid-April. Meanwhile, the S&P 500 spent the bulk of the afternoon within four points of its flat line as individual sectors traded in mixed fashion. Most notably, consumer discretionary (+0.4%) and utilities (+0.3%) outperformed throughout the session, with the utilities sector extending its 2014 advance to 14.0%.