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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

6/9-6/13/14

The major averages posted modest Friday gains, but the advance was not strong enough to pull the key indices back into the green for the week. The S&P 500 added 0.3%, narrowing its weekly loss to 0.7%, while the Nasdaq (+0.3%) ended the week lower by 0.3%.

The tech-heavy Nasdaq outperformed in the morning thanks to early strength among chipmakers and high-beta listings. The strength in microchip manufacturers resulted from upbeat sales and gross margin guidance issued by Intel (INTC 29.87, +1.91). The largest chipmaker soared 6.8%, while the 30-stock PHLX Semiconductor Index added 1.0%.

In addition, the index was also boosted by high-growth stocks after Priceline.com (PCLN 1189.30, -36.70) agreed to acquire OpenTable (OPEN 104.48, +34.05) for $103/share, representing a 46.2% premium. The news also stirred takeover speculation around the likes of GrubHub (GRUB 36.00, +2.35) and Yelp (YELP 74.92, +9.08). The two names surged 7.0% and 13.8%, respectively.

Accordingly, the technology sector (+0.7%) finished in a position of relative strength, but the largest S&P 500 group ceded its top spot to the energy space (+1.0%) during afternoon action. Meanwhile, other heavily-weighted sectors like consumer discretionary (unch), financials (unch), and health care (unch) could not keep up.

The energy sector was underpinned by top components Chevron (CVX 127.26, +1.15) and ExxonMobil (XOM 102.65, +0.99), while crude oil added 0.3% ($106.86/bbl). The sector was the only group that ended the week on a higher note (+1.7%) with the advance supported by a 4.1% gain in crude oil amid continued tensions in Iraq.

During the early afternoon, President Obama addressed the volatile situation in Iraq where a breakaway militant group of Al-Qaeda has taken control of parts of the country. Mr. Obama said that he will review his options over the coming days, but any potential U.S. action will have to be supported by the leaders of Iraq.

The sharp rise in oil prices over this week weighed on transport stocks, but the Dow Jones Transportation Average (+0.8%) bounced today after falling nearly 3.0% between Monday's close and today's opening bell. In turn, the strength underpinned the industrial sector (+0.4%).

Like the six cyclical sectors, countercyclical groups ended on a mixed note. Consumer staples (unch) and health care (unch) underperformed, while telecom services (+0.5%) and utilities (+0.7%) posted gains.

Treasuries registered slim losses with the 10-yr yield climbing one basis point to 2.60%.

Light participation continued plaguing the market with just over 560 million shares changing hands at the NYSE.

Economic data was limited to May PPI and the latest Michigan Consumer Sentiment survey:
"The Producer Price Index for May declined 0.2%. That was lower than the Briefing.com consensus estimate, which called for an increase of 0.6%. The downturn in May was attributed to a 0.2% decline in the indexes for final demand services and final demand goods. Excluding food and energy, core PPI declined 0.1%, which was also lower than the 0.1% increase projected by the Briefing.com consensus estimate. Notably, there weren't any strong indications of pipeline pricing pressures. Within intermediate demand, prices for processed goods fell by 0.1%, the index for unprocessed goods was unchanged, and prices for services declined by 0.4%.
"The preliminary reading for the University of Michigan Consumer Sentiment report for June dipped to 81.2 from the final reading of 81.9 for May. The June figure was the lowest reading since March and it fell short of the Briefing.com consensus estimate, which was pegged at 82.9. The shortfall was not a major deviation, yet it still qualifies as a disappointment when taking into account that stock markets were generally behaving well and employment conditions were improving during the survey period.
On Monday, the Empire Manufacturing survey for June (Briefing.com consensus 12.8) will be released at 8:30 ET, while April Net Long-Term TIC Flows will cross the wires at 9:00 ET. In addition, May Industrial Production (consensus 0.5%) and Capacity Utilization (consensus 78.9%) will be announced at 9:15 ET, while the NAHB Housing Market Index for June (consensus 46) will be reported at 10:00 ET.
"S&P 500 +4.8% YTD
"Nasdaq Composite +3.2% YTD
"Dow Jones Industrial Average +1.2% YTD
"Russell 2000 -0.2% YTD
Week in Review: Taking Profits

The stock market finished the Monday session on a modestly higher note, but the S&P 500 (+0.1%) could not keep pace with the Russell 2000 (+0.9%). Similar to the Russell 2000, the Nasdaq (+0.3%) displayed relative strength, while the Dow Jones Industrial Average (+0.1%) settled just ahead of the S&P 500. Equity indices climbed out of the gate with the early sentiment boosted by a set of acquisitions in three influential sectors; however, the intraday strength did not last as participants opted to take some money off the table after the Dow Jones Transportation Average surrendered its morning gain after outpacing the broader market over the past few weeks.

The market ended the Tuesday affair on a mixed note. Small caps underperformed with the Russell 2000 slipping 0.2%, while the S&P 500 shed less than a point with six sectors registering losses. The key indices entered the session after enjoying a big rally that sent the S&P 500 higher by 4.2% over the previous three weeks alone. That advance was predicated on the strength of small caps and transport stocks as the Russell 2000 and the Dow Jones Transportation Average entered the session with respective gains of 7.1% and 4.9% since May 20. Fittingly, with small --cap stocks and transports showing relative weakness, the broader market slumped out of the gate, but spent the remainder of the session in a steady climb back to unchanged. The underperformance of the Dow Jones Transportation Average (-0.1%) caused the industrial sector (-0.2%) to end the session near the bottom of the leaderboard.

On Wednesday, the market ended on a lower note with the Dow Jones Industrial Average (-0.6%) and Russell 2000 (-0.5%) leading the slide. The S&P 500 lost 0.4% with nine sectors in the red. Stocks spent the duration of the session in the red, while the Nasdaq (-0.1%) made a momentary appearance in the green. The tech-heavy index outperformed thanks to relative strength among chipmakers. However, the Nasdaq slumped back towards its low into the close as dip buyers were reluctant to step in and lift the overall market. With the major averages overextended on a short-term basis, the market was ready to take a step back at the sound of the first concerning headline and Wednesday's comments from the World Bank did the trick. Specifically, the World Bank cut its 2014 global growth outlook to 2.8% from 3.2%, while also revising projections for several major economies. For instance, the growth forecast for the U.S. was lowered to 2.1% from 2.8%, while China's GDP expectations were taken down to 7.6% from 7.7%.

Equities ended the Thursday session on a broadly lower note after spending the entire trading day in the red. The S&P 500 fell 0.7% with eight sectors posting losses, while the Nasdaq (-0.8%) underperformed. Stocks slumped out of the gate following some disappointing economic data and reports of skirmishes in northern Iraq. The disappointing economic news pertained to the retail sector as retail sales increased just 0.3% (Briefing.com consensus 0.7%), while core retail sales, which closely match the consumption component of GDP, slipped 0.1% in May. Separately, reports of intensifying battles in northern Iraq led by a breakaway militant group of Al-Qaeda raised concerns about the oil supply. The headlines out of Iraq put a bid in the oil market (+2.1% to $106.54/bbl) while also creating a residual concern that higher energy prices will be an added tax on consumers who, broadly speaking, continue to be pinched by limited wage growth. Fittingly, the worries translated into relative weakness for the consumer discretionary sector (-1.3%), which ended at the bottom of the leaderboard. The Dow Jones Transportation Average was also pressured by the developments, falling 2.0%.