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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

9/12/14

Equity indices extended this week's losses with a broad-based retreat. The S&P 500 fell 0.6% to end the week lower by 1.1%, while the Russell 2000 (-1.1%) finished with a 0.9% decline since last Friday.

Staying true to the theme observed throughout the week, the energy sector (-1.5%) tumbled out of the gate, thus dragging the broader market down with it. Once again, dollar strength and crude oil weakness contributed to sector's underperformance, but the growth-sensitive group did not see any respite in the afternoon when the Dollar Index (-0.1%) edged lower, while oil made a short-lived appearance in the green. Late-afternoon weakness sent crude oil (-0.6%; $92.26/bbl) to its lowest level in almost a year, while the energy sector widened its September loss to 5.2%.

Meanwhile, the remaining sectors opened closer to their respective flat lines, but could not climb off those levels as the underperformance of small caps and the big loss in the energy sector kept dip-buyers sidelined. Furthermore, the recognition that next week will include an avalanche of global macro data and the latest FOMC policy decision also factored into the cautious approach.

Interestingly, the energy sector was the only cyclical group that ended behind the broader market. The top-weighted sectortechnologyshed 0.4% with the relative strength of Apple (AAPL 101.66, +0.23) masking the losses among high-beta chipmaker stocks. The PHLX Semiconductor Index lost 1.3%.

Elsewhere, the financial sector (-0.1%) lurked near its flat line throughout the session with Dow component Goldman Sachs (GS 183.17, +2.17) contributing to the relative strength. The stock added 1.2%, while the sector ended the week lower by 0.4%.

Things did not look much better on the countercyclical side where all four sectors settled behind the broader market. Consumer staples (-0.7%) and health care (-0.7%) registered comparable losses with the health care sector pressured by biotechnology. The iShares Nasdaq Biotechnology ETF (IBB 269.57, -3.78) lost 1.4%.

The other twotelecom services (-1.2%) and utilities (-1.8%)were hampered by higher interest rates. Staying on that point, the 10-yr note retreated throughout the session to register a half-point loss. The benchmark yield rose six basis points to 2.61% after starting the week at 2.46%.

Also of note, the U.S. Treasury has announced a new set of sanctions on Russian banks, energy, and defense companies. The move followed a similar announcement from the European Union.

Today's session saw relatively strong participation with more than 675 million shares changing hands at the NYSE floor.

Economic data included Retail Sales, Import/Export Prices, Michigan Sentiment Survey, and Business Inventories:

Retail sales increased 0.6% in August following an upwardly revised 0.3% (from 0.0%), which matched the Briefing.com consensus
After missing expectations last month, sales rebounded in August and upward revisions were reported for the prior month (to 0.3% from 0.0%); concerns that consumption could weigh down GDP growth were somewhat alleviated.
Excluding motor vehicles, retail sales increased a respectable 0.3% for a second consecutive month and met the consensus expectations
Export prices, excluding agriculture, decreased 0.3% in August after increasing 0.3% in the prior reading
Excluding oil, import prices ticked up 0.1%, which followed last month's unchanged reading
The University of Michigan Consumer Sentiment Index increased to 84.6 in the preliminary September reading from 82.5 in August, while the Briefing.com consensus expected the index to increase to 83.5
That was the highest reading in the Sentiment Index since July 2013
The Present Conditions Index deteriorated in September, dropping from 99.8 in August to 98.5
The Expectations Index rose to 75.6 in September from 71.3 in August
Business inventories increased an in-line 0.4% in July after increasing by the same amount in June
Inventories for manufacturers (0.1%) and merchant wholesalers (0.1%) were known prior to the release. The only bit of new information was that retailer inventories increased 1.0% in July after increasing 0.7% in June
On Monday, the Empire Manufacturing Index for September will be released at 8:30 ET, while August Industrial Production and Capacity Utilization will be reported at 9:15 ET.

Nasdaq Composite +9.4% YTD
S&P 500 +7.4% YTD
Dow Jones Industrial Average +2.5% YTD
Russell 2000 -0.1% YTD
Week in Review: Backtracking From Record Highs

The stock market started the first full week of September on a cautious note. The S&P 500 lost 0.3%, but the relative strength of small-cap stocks helped the Russell 2000 (+0.2%) and Nasdaq Composite (+0.2%) finish ahead of the benchmark index. Equity indices struggled from the get-go with the overall risk sentiment dampened by continued dollar strength that sent the US Dollar Index (+0.54, 84.28) near its best level of the year. The greenback surged on the back of yen weakness following a downward revision to Japan's Q2 GDP (to -7.1% from -6.8%), while also drawing strength from weakness in the British pound. The pound fell to 1.6110 from 1.6330 against the greenback after a weekend YouGov poll revealed majority support for Scottish independence with the referendum coming up on September 18. Conversely, the dollar strength weighed on commodities.

Equities ended the Tuesday session on their lows with the S&P 500 sliding 0.7%. After outperforming on Monday, the Russell 2000 erased that uptick with a 1.2% decline the following day. Indices spent the entire session in the red with the early pressure coming from the financial sector (-1.0%). The second-largest group by market cap slumped out of the gate amid broad weakness in top-weighted components. Meanwhile, the consumer discretionary space (-1.0%) also weighed with the quick-service restaurant space adding pressure. McDonald's (MCD) fell 1.5% after reporting a 3.7% decline in comparable store sales during August, which was paced by a 14.5% slump in Asia following the recent food safety scandal.

The stock market ended the midweek session on an upbeat note with the Nasdaq Composite providing leadership. The tech-heavy index advanced 0.8%, while the S&P 500 added 0.4% with seven sectors posting gains. Equities were driven into the red shortly after the open due to notable weakness in the energy sector. The growth-sensitive group was down in excess of 1.0% during the first hour of action, but narrowed its loss to 0.3% by the close. For its part, crude oil fell 1.1% to $91.71/bbl, ending the pit session at its lowest level since early January. The Dollar Index (84.22, -0.06) climbed to its best level in 14 months before slipping in the early afternoon. The greenback retreated against the British pound after latest poll results from Scotland indicated majority support for staying in the UK (weekend YouGov poll gave a slight edge to the pro-independence movement). The pound/dollar pair climbed to 1.6210 after trading at 1.6070 in the early morning.

The Dow Jones Industrial Average (-0.1%), Nasdaq (+0.1%), and S&P 500 (+0.1%) ended the Thursday affair on a flat note, while the relative strength among small caps sent the Russell 2000 higher by 0.7%. The trading day began on a cautious note following Wednesday's remarks from President Obama who announced increased support for Syrian rebels and a U.S.-led coalition effort targeting ISIS militants in Syria and Iraq. The address led to some risk aversion overnight, but that sentiment faded during the day. Treasuries climbed overnight, but wiped out all of their gains over the course of the session. The 10-yr yield ended at 2.55% after marking a low at 2.51% shortly before the opening bell.