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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

8/11-8/15/14

The stock market finished an upbeat week on a cautious note after a late-morning headline interrupted an extension of this week's rally. Despite the intraday weakness, the major averages were able to climb off their lows into the close. The S&P 500 settled right below its flat line with six sectors ending in the green. The benchmark index posted a 1.2% gain for the week while the Nasdaq outperformed. The tech-heavy index added 0.3% to extend this week's advance to 2.2%.

Like yesterday, equities climbed out of the gate with biotechnology claiming the lead at the start of the session. However, the advance was halted after the spokesman for Ukraine's National Security and Defense Council said the country's army destroyed a part of an armed convoy from Russia. The news sent U.S. and European equity indices to lows, while boosting German Bunds, U.S. Treasuries, and the yen.

Notably, Germany's Bunds finished on their highs with the 10-yr yield down seven basis points at 0.95%. Similarly, the U.S. 10-yr note rallied in reaction to the news from Ukraine, but surrendered a portion of its gain during afternoon action. The benchmark yield fell six basis points to 2.34% to register its lowest close since mid-June of last year.

One could argue that the market was ripe for some profit taking after a run that saw the S&P 500 log four gains over the past five sessions. Similarly, European equities were forced to give back a portion of their gains from this week.

Six sectors registered losses with telecom services (-0.4%) finishing at the bottom of the leaderboard. Meanwhile, heavily-weighted consumer discretionary (-0.1%), financials (-0.4%), and industrials (-0.3%) also ended among the laggards, which prevented the S&P 500 from returning into the green.

However, the Nasdaq Composite was able to claw its way back into positive territory with help from biotechnology and chipmakers. The iShares Nasdaq Biotechnology ETF (IBB 263.41, +2.21) added 0.9% to end the week higher by 4.7%. Microchip manufacturers also contributed to the outperformance of the Nasdaq with the PHLX Semiconductor Index climbing 1.0%. Applied Materials (AMAT 22.48, +1.33) was a standout, surging 6.3% after reporting a one-cent beat. For its part, the technology sector (+0.1%) ended little changed.

Also of note, the energy space (+0.5%) finished in the lead, rebounding from this week's underperformance. The sector trimmed its weekly loss to 0.5%, while crude oil jumped 1.9% to $97.31/bbl. Despite the advance, the energy component shed 0.3% during the week.

After registering the lowest NYSE floor volume of the year yesterday, today's participation was boosted by options expiration. As a result, more than 740 million shares changed hands at the NYSE.

Economic data included the PPI report, Empire Manufacturing survey, Net Long-Term TIC Flows, Industrial Production, Capacity Utilization, and the preliminary reading of the Michigan Sentiment survey:
Producer prices increased 0.1% in July after increasing 0.4% in June, while the Briefing.com consensus expected an increase of 0.2%
As expected, energy prices declined in July, falling 0.6%
Excluding food and energy, core PPI rose 0.2% for a second consecutive month, as expected by the consensus
The Empire Manufacturing Survey for August registered a reading of 14.7, which was below the prior month's reading of 25.6
The Briefing.com consensus expected a decline to 15.5
The June net long-term TIC flows report showed an $18.70 billion outflow of foreign capital from U.S.-denominated assets to follow last month's inflow of $19.40 billion
Industrial production increased 0.4% in July after an upwardly revised 0.4% (from 0.2%) gain in June, while the Briefing.com consensus expected an increase of 0.3%
Capacity utilization hit 79.2%, as expected by the Briefing.com consensus
The University of Michigan Consumer Sentiment Index fell to 79.2 in the August preliminary reading from 81.8 in July, while the Briefing.com consensus expected an increase to 81.7
On Monday, the NAHB Housing Market Index for August will be released at 10:00 ET.
Nasdaq Composite +6.9% YTD
S&P 500 +5.8% YTD
Dow Jones Industrial Average +0.5% YTD
Russell 2000 -2.0% YTD
Week in Review: Stocks Climb Amid Paltry Volume

The major averages began the new week on a modestly higher note. The S&P 500 settled higher by 0.3% with seven sectors registering gains, while the Russell 2000 (+1.0%) and Nasdaq Composite (+0.7%) outperformed. For its part, the Dow Jones Industrial Average (+0.1%) was limited to a slim gain as blue chip listings had a tough time keeping pace. Equity indices climbed from the opening bell with the early advance supported by upbeat action overseas. Furthermore, a slight improvement on the geopolitical scene was also cited for the improved sentiment. Specifically, a ceasefire was agreed upon in Gaza on Sunday, while pro-Russian separatists in east Ukraine also asked for a pause in fighting.

Equity indices stumbled on Tuesday with the Russell 2000 pacing the slide. The small-cap index lost 0.7%, while the S&P 500 (-0.2%) gave back most of its advance from the previous day. Stocks spent the first hour of action near their flat lines after index futures slumped from their overnight highs shortly ahead of the cash open. The early weakness took place as markets in Europe retreated in reaction to disappointing survey data. Specifically, Eurozone ZEW Economic Sentiment plunged to 23.7 from 48.1 (expected 41.3), while Germany's ZEW Economic Sentiment dropped to 8.6 from 27.1 (consensus 18.2). The news from overseas contributed to the shaky start and so did the underperformance of some closely-watched groups. Most notably, the top-weighted sectortechnology (-0.2%)spent the majority of the trading day in the red amid broad weakness. Chipmakers lagged early, but the PHLX Semiconductor Index was able to narrow its loss to 0.1% by the close.

The stock market finished the midweek session on an upbeat note with the Nasdaq Composite in the lead. The tech-heavy index advanced 1.0%, while the S&P 500 added 0.7% with all ten sectors ending in the green. The key indices registered roughly half of their gains at the open with heavily-weighted health care (+1.2%) and technology (+1.1%) providing support from the start. In fact, only one other sectorindustrials (+0.8%)ended ahead of the broader market.

Stocks posted modest gains on Thursday with the S&P 500 (+0.4%) extending its week-to-date advance to 1.2%. Small caps lagged throughout the session as the Russell 2000 (+0.2%) was unable to reclaim its 200-day moving average (1145). Despite receiving disappointing economic data from overseas (Eurozone GDP 0.0%; expected 0.1%), equity indices climbed out of the gate with Wednesday's leading sectorhealth carepacing the advance once again. The third-largest sector added 1.2% with help from biotechnology. The iShares Nasdaq Biotechnology ETF settled higher by 1.6% to extend its weekly gain to 3.8%. It is worth mentioning that the Thursday rally lacked conviction, generating the lowest NYSE floor volume of the year (506 mln).