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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

5/23/14

The stock market finished an upbeat weak on a strong note. Small caps paced the Friday rally, which was consistent with the dynamic observed throughout the week. The Russell 2000 advanced 1.1%, extending its weekly gain to 2.1%, while the Nasdaq (+0.8%) followed not far behind, finishing the week higher by 2.3%. Meanwhile, the Dow Jones Industrial Average (+0.4%) and S&P 500 (+0.4%) posted modest gains, ending the week higher by 0.7% and 1.2%, respectively.

Even though high-growth names, which comprise the Russell 2000 and a fair share of the Nasdaq, displayed considerable strength over the course of the week, that outperformance took place against the backdrop of pitiful volume. Entering today, the first four sessions of the week saw an average NYSE floor volume of just 578 million shares (200-day average 702 million), but even that total proved to be insurmountable today as only 543 million shares changed hands. As a result, today's affair saw the second-lowest volume of the year.

The lack of participation was understandable given the upcoming Memorial Day weekend, but the conditions did not stop eight of ten sectors from finishing in the green. Furthermore, the S&P 500 managed to close above the 1,900 level, while the Russell 2000 regained its 200-day moving average.

Overall, cyclical sectors had a better showing than the defensively-oriented groups. Two of the four top-weighted sectorsconsumer discretionary (+0.8%) and technology (+1.0%)spent the session in the lead, which solidified their standing atop this week's leaderboard. The discretionary sector extended its weekly gain to 2.1%, while technology finished the week higher by 2.2%.

Discretionary shares rallied following a set of retail earnings that bucked the recent disappointing trend. Gap (GPS 41.14, +0.28), GameStop (GME 38.43, +1.55), and Foot Locker (FL 48.92, +0.75) posted gains between 0.7% and 4.2% in reaction to bottom-line beats, while Aeropostale (ARO 3.41, -1.11) plunged 24.6% after missing revenue estimates and guiding lower.

Elsewhere, the tech sector received support from social media names and other high-beta components. Facebook (FB 61.35, +0.83) and Yelp (YELP 61.54, +1.04) jumped 1.4% and 1.7%, respectively, while the strength among chipmakers sent the PHLX Semiconductor Index higher by 1.0%. Also of note, Hewlett-Packard (HPQ 33.72, +1.94) surged 6.1%, which likely resulted from a short squeeze after the company's earnings leaked yesterday afternoon, causing the stock to plunge into the close. Today's reversal, however, sent the stock to levels last seen in August 2011.

While most cyclical groups finished ahead of the broader market, the same could not be said about the countercyclical side. Consumer staples (+0.1%), health care (+0.1%), telecom services (+0.2%), and utilities (-0.2%) all ended little changed. Of the four, only the health care sector posted a gain for the week (1.4%), while the other three lost between 0.1% (consumer staples) and 1.2% (telecom services).

Treasuries posted modest gains as the 10-yr note added four ticks, sending its yield lower by two basis points to 2.54%.

Economic data was limited to April new home sales, which increased 6.4% from an upwardly revised 407,000 (from 384,000) in March to 433,000. The Briefing.com consensus expected new home sales to increase to 415,000. The big story in the new homes sales report is that median home prices fell 1.3% year-over-year. That was the second year-over-year decline in three months. Over the past few years, new home price growth has outpaced existing home price gains. That has led to a large increase in the new home price premium.

Keep in mind bond and equity markets will be closed on Monday for Memorial Day. On Tuesday, Durable Orders for April will be reported at 8:30 ET, while March Case-Shiller 20-city Index and March FHFA Housing Price Index will both be announced at 9:00 ET. The day's data will be topped off with the Consumer Confidence report for May, which will cross the wires at 10:00 ET.
"S&P 500 +2.8% YTD
"Dow Jones Industrial Average +0.2% YTD
"Nasdaq Composite +0.2% YTD
"Russell 2000 -3.3% YTD
Week in Review: Stocks Rally Despite Low Volume Tally

The stock market began the week on a modestly higher note with small caps coming out on top. The Russell 2000 advanced 1.1%, while the S&P 500 added 0.4% with seven sectors posting gains. The underperformance of blue chip listings was apparent within the Dow Jones Industrial Average (+0.1%), which spent the entire session near its flat line. Generally speaking, the first session of the week set the tone for an uneventful week with no economic data or noteworthy earnings influencing the sentiment. However, M&A activity was in focus even though it did not lift the underlying stocks. Some recent rumors came to fruition as AT&T (T) agreed to acquire DirecTV (DTV) for $95 per share, which represented a 10.2% premium to Friday's closing price. However, shares of DirecTV did not rally amid concerns about potential regulatory hurdles.

The major averages ended the Tuesday session in the red after surrendering their gains from Monday. In fact, the Russell 2000, which led the way on Monday, paced the retreat after being unable to reclaim its 200-day moving average (1117/1118). The small cap index fell 1.5%, while the S&P 500 lost 0.7% with nine sectors ending in the red. Equity indices began the day with modest losses amid general weakness in most cyclical sectors. Most notably, retailers pressured the discretionary sector (-0.9%) after Dick's Sporting Goods (DKS), Staples (SPLS), TJX (TJX), and Urban Outfitters (URBN) all reported disappointing earnings.

Equity indices rallied on Wednesday, which allowed the Dow (+1.0%), Nasdaq (+0.9%), and S&P 500 (+0.8%) to reclaim Tuesday's losses. For its part, the Russell 2000 advanced 0.5% despite a brief dip into the red that took place in the morning. Even though small caps endured an intraday hiccup, that short-lived weakness had little impact on the S&P 500, which rallied at the open before spending the bulk of the trading day in a six-point range. For the most part, the index was unperturbed by the underperformance of small caps, while also showing little reaction to the FOMC minutes from the April 29-30 meeting. To be fair, the lack of a reaction to the minutes reflected the lack of new information within the minutes. The document revealed a discussion of the expected path to an eventual rate hike, but there was no mention regarding the potential timing.

The major averages registered their second consecutive advance on Thursday with the Russell 2000 ending in the lead. The small cap index advanced 1.0%, while the S&P 500 gained 0.2% with eight sectors finishing in the green. For its part, the Dow Jones Industrial Average (+0.1%) underperformed throughout the session as blue chip listings struggled to stay out of negative territory. Overall, countercyclical sectors fared a bit better than their growth-sensitive peers. Of the four defensively-oriented groups, the consumer staples space (-0.2%) was the lone laggard, while health care (+0.5%), telecom services (+0.5%), and utilities (+0.8%) outperformed.