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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

8/29/14

Equity indices closed out the month of August on a modestly higher note. The Russell 2000 (+0.6%) and Nasdaq Composite (+0.5%) finished ahead of the S&P 500 (+0.3%), which extended its August gain to 3.8%. Blue chips lagged with the Dow Jones Industrial Average (+0.1%) spending the bulk of the session in the red.

The final week of August represented one of the quietest stretches for the stock market so far this year. The first four sessions of the week produced the four lowest volume days of the year (4-day average 487.3 million), but today's final tally of 604 million was a little closer to the 200-day average of 679 million.

The lack of activity during the week was a function of some participants being away on vacation, while many others opted to stick to the sidelines ahead of a three-day weekend in the U.S. that could feature new developments on the geopolitical front. However, the Friday tally benefited from month-end flows.

All ten sectors registered gains with heavily-weighted technology (+0.5%), health care (+0.4%), and financials (+0.5%) doing the bulk of the heavy lifting. The three sectors outperformed throughout the session, while the energy sector (+0.5%) joined the leaders during the late afternoon.

The tech sector rallied out of the gate with chipmakers setting the pace after Avago Technologies (AVGO 82.09, +5.73) delivered a solid quarterly report. Shares of AVGO soared 7.5%, while the PHLX Semiconductor Index gained 0.7% to end the month higher by 6.2%. The month-long strength contributed to the outperformance of the Nasdaq, which added 4.8% in August.

Furthermore, the tech-heavy index received another measure of support from biotechnology. The iShares Nasdaq Biotechnology ETF (IBB 276.55, +2.43) gained 0.9% today to bring its August advance to 10.3%. Fittingly, the health care sector ended the month ahead of the other nine groups with a gain of 4.5%.

On the flip side, consumer discretionary (unch), consumer staples (+0.1%), and industrials (unch) lagged throughout the session. The industrial sector was the only group that was unable to finish the week in the green. The cyclical sector shed 0.3% for the week, but rallied 3.9% in August.

Treasuries held slim gains for the bulk of the session, but slid to lows into the close. The 10-yr yield climbed one basis point to 2.35%.

Economic data included personal income/spending data, Chicago PMI, and the Michigan Sentiment survey:

Personal income increased 0.2% in July following an upwardly revised 0.5% (from 0.4%) gain in June, while the Briefing.com consensus expected an increase of 0.3%
The increase in July income was in-line with the reported 0.2% increase in aggregate earnings from the previously released employment data
Personal spending fell 0.1% in July after increasing 0.4% in June, while the consensus expected an increase of 0.1%
Even though household debt ratios have normalized to pre-recession levels and consumer confidence levels have fully recovered, consumers are continuing to delay consumption growth in order to increase their savings
Core PCE prices increased 0.1% and are up 1.5% year-over-year, which is still well below the FOMC target rate
The Chicago PMI for August rose to 55.6 from 52.6, while the Briefing.com consensus expected an increase to 54.8
The University of Michigan Consumer Sentiment report for August was revised up to 82.5 from 79.2 in the final reading, while the Briefing.com consensus expected a revision to 80.0
Bond and equity markets will be closed on Monday for Labor Day. On Tuesday, the ISM Index for August and July Construction Spending will both be released at 10:00 ET.

Nasdaq Composite +9.7% YTD
S&P 500 +8.4% YTD
Dow Jones Industrial Average +3.2% YTD
Russell 2000 +0.8% YTD
Week in Review: S&P 500 Hits 2,000

The stock market began the last week of August on an upbeat note with the S&P 500 making its first appearance above the 2,000 level. The benchmark index added 0.5% with all ten sectors ending in the green. Equity indices rallied out of the gate, but the opening push ran out of steam after the S&P 500 notched a session high at 2,001.95. The benchmark index took a couple steps back after reaching that level and held its ground throughout the afternoon. M&A activity in the health care sector (+0.7%) contributed to the opening rally after Swiss drug maker Roche (RHHBY) agreed to acquire InterMune (ITMN) for $74.00 per share, representing a 38.0% premium to Friday's closing price.

Equities ended the Tuesday session on an upbeat note with small-cap stocks pacing the advance. The Russell 2000 jumped 0.9%, while the S&P 500 posted a slim gain of 0.1% with seven sectors ending higher. In some ways, the session resembled Monday's affair as the key indices climbed out of the gate, reached their highs during the first half of action, and spent the remainder of the session in a slow retreat from their best levels of the day. Trading volume was light once again.

The major averages ended the midweek session on a flat note after spending the day inside narrow ranges. The S&P 500 hovered near the 2,000 mark for the majority of the trading day, but slumped to new lows during the last hour of action. The index then returned to its flat line, where it settled for the day. For the third day in a row, participation left a lot to be desired with just 487 million shares changing hands at the NYSE.

The stock market ended the Thursday session on a modestly lower note, but a late-morning rebound lifted the indices off their lows. The S&P 500 shed 0.2% with seven sectors ending in the red. European equities and U.S. futures slumped around 6:00 ET after Ukraine's President Petro Poroshenko was quoted as saying Russian forces have invaded an area southeast of Donetsk. The news pressured the markets, but a brief uptick took place after a correction to reports indicated Ukraine's President did not use the word "invade," but rather said Russian troops "entered" Ukraine. The change in wording did not change the fact that Russian troops are reportedly on Ukraine's soil, which caused a flight to safety. As a result, Germany's 10-yr Bunds rallied, dropping the yield to a new record low of 0.87% before a slight rebound to 0.89%. Gold futures were also in demand with the metal climbing 0.7% to $1291.70/ozt. Once again, participation in today's affair was well below average with just 479 million shares changing hands at the NYSE floor, which undercut Monday's total for the lowest tally of the year.