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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

8/18-8/22/14

The major averages punctuated a solid week with a subdued Friday session. The S&P 500 shed 0.2% to narrow its weekly gain to 1.7%, while the Nasdaq Composite (+0.1%) displayed relative strength. The tech-heavy index finished the week in line with the benchmark average.

Market participants went into today's session expecting to hear some new insight from Fed Chair Janet Yellen, who delivered the keynote address at this year's Jackson Hole Symposium. Unfortunately, the speech was a disappointment to those who looked for clues about the Fed's policy course in the near term.

Ms. Yellen said the FOMC sees significant underutilization of labor resources and that the labor market has not fully recovered even when taking into account the recent gains. She also indicated that faster progress on goals could lead to a quicker rate hike, but this approach should be expected from a data-dependent central bank.

The remarks were met with a brief retreat among Treasuries, but the 10-yr note returned to its flat line in short order and remained near that level into the close. The benchmark instrument added two ticks, sending its yield lower by one basis point at 2.40%.

Equities, meanwhile, spent the session near their flat lines as participants showed unwillingness to step in ahead of the weekend with geopolitical concerns contributing to the cautious posture. This morning, European markets and U.S. index futures tumbled after a Russian aid convoy crossed Ukraine's border without permission from the government; however, Ukraine said it will allow the convoy to proceed in order to 'avoid provocations.' The initial reports were followed by comments from NATO and the Pentagon with both bodies condemning the crossing into Ukraine.

Only two sectors were able to register gains with the consumer discretionary space (+0.1%) ending in the lead. Retailers contributed to the relative strength after Foot Locker (FL 54.12, +1.55), Gap (GPS 45.43, +2.25), Gamestop (GME 42.90, +2.41), and Ross Stores (ROST 74.37, +5.12) reported better than expected earnings.

Outside of the discretionary sector, most cyclical groups ended in the red, but technology (+0.02%) eked out a miniscule gain. Large cap tech components traded in mixed fashion, but Apple (AAPL 101.32, +0.74) underpinned the sector with a solid gain of 0.7%. On the earnings front, Salesforce.com (CRM 59.80, +4.09) rallied 7.3% in reaction to a one-cent beat.

The relative strength of Apple also put in a floor under the Nasdaq Composite, which drew additional strength from biotechnology. The iShares Nasdaq Biotechnology ETF (IBB 266.43, +1.98) gained 0.8% and helped the health care sector end the day on its flat line.

Meanwhile, the remaining three countercyclical sectors ended in the red. Consumer staples (-0.2%) and utilities (-0.3%) settled near their flat lines, while the telecom services sector lost 0.4%.

Participation was well below average with fewer than 510 million shares changing hands at the NYSE, which made for one of the quietest sessions of the year.

There was no economic data reported today and Monday's data will be limited to the New Home Sales report for July (Briefing.com consensus 427,000).
Nasdaq Composite +8.7% YTD
S&P 500 +7.6% YTD
Dow Jones Industrial Average +2.6% YTD
Russell 2000 -0.3% YTD
Week in Review: S&P 500 Charges to New Highs

The stock market began the week on an upbeat note with small caps leading the charge. The Russell 2000 gained 1.5%, while the S&P 500 advanced 0.9% with eight sectors posting gains. Equity indices surged out of the gate and spent the entire afternoon in narrow ranges near their highs. Although the Russell 2000 paced the rally, the small-cap index could not climb above its 50-day moving average (1159), which served as resistance. The opening push took place after the reports that weighed on risk sentiment on Friday were refuted over the course of the weekend. To recap, comments made by Ukrainian officials on Friday suggested that a direct confrontation took place between Russian forces and Ukrainian troops, but those accounts were called into question by several parties, including the White House.

Equities continued their strong start to the week with a broad-based Tuesday rally that sent the S&P 500 higher by 0.5%. Nine of ten sectors registered gains while the benchmark index extended its week-to-date advance to 1.4%. Stocks received an opening boost from a pair of economic data points that crossed the wires in the morning. An in-line CPI report suggested inflationary pressures remain contained, while a better than expected Housing Starts report underpinned homebuilders and the discretionary sector (+0.8%).

Wednesday ended on a mixed note as blue chip listings bolstered the Dow Jones Industrial Average (+0.4%) and S&P 500 (+0.3%), while the Russell 2000 (-0.4%) and Nasdaq Composite (-0.02%) underperformed. The key indices were confined to narrow ranges until the minutes from the July FOMC meeting crossed the wires. The minutes revealed that many officials saw recent job gains as a potential reason to bring forward the first fed funds rate hike; however, most officials showed preference for waiting for more evidence before changing their outlook on rates. The minutes were followed by a retreat among equities, but the slide was not sustained. The S&P 500 was trading at a fresh session high within an hour of the release. Treasuries, meanwhile, slumped in reaction to the discussion on rates. The 10-yr note fell seven ticks with its yield climbing three basis points to 2.43%.

On Thursday, the market ended on an upbeat note with blue chips showing relative strength once again. The Dow Jones Industrial Average (+0.4%) and S&P 500 (+0.3%) settled ahead of the Russell 2000 (+0.2%) and the Nasdaq Composite (+0.1%) with the benchmark index registering a new record closing high at 1992.35. Stocks climbed out of the gate thanks to early strength among the four countercyclical sectors. Despite the early outperformance, the defensively-oriented sectors ended below their opening highs, while the six cyclical groups were mixed. Financials (+1.1%) and technology (+0.5%) contributed to the modest advance, while other heavily-weighted groups like consumer discretionary (-0.1%), industrials (unch), and energy (unch) kept the market from going on a bigger run.