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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

10/17/14

The stock market began the week on a defensive note despite showing some intraday strength. The S&P 500 lost 1.7% with all ten sectors ending in the red while the Russell 2000 (-0.4%) held up a bit better. Equity indices slumped in the early going amid weakness in groups that pressured the market during the prior week. However, the same areas showed some intraday strength, leading to a rebound that placed the S&P 500 back above its 200-day moving average (1905). The slim gains faded in the afternoon, which caused the S&P 500 to slide to a fresh low. All ten sectors ended lower with energy (-2.9%) registering the biggest decline. The growth-sensitive group lagged from the start with crude oil contributing to the weakness.

Equities snapped their three-day skid with small caps pacing the Tuesday rebound. The Russell 2000 jumped 1.2% while the S&P 500 added 0.2% with eight sectors ending in the green. However, the advance masked an afternoon slide from intraday highs that caused the Dow (-0.02%) to end flat. The key indices began the day with slim gains after investors received a trio of quarterly reports from the financial sector (+0.5%). Citigroup (C) was a notable standout, surging 3.2%, in reaction to its better than expected results combined with news indicating the company will exit its consumer business in 11 markets around the world. However, the broader sector could not pull away from the S&P 500 as JPMorgan Chase (JPM) and Wells Fargo (WFC) weighed. Shares of JPM lost 0.3% following a bottom-line miss while Wells Fargo fell 2.7% after reporting in-line results.

The market endured another rough session on Wednesday, but the major averages managed to climb off their worst levels ahead of the close. The S&P 500 lost 0.8% while the Russell 2000 rose 1.0% after showing relative strength throughout the session. Equity indices stumbled out of the gate to continue the weakness that started in the futures market overnight. Also weighing on sentiment was a trio of disappointing economic reports with retail sales, PPI, and the Empire Manufacturing Index all missing expectations. The data was met with dollar weakness while Treasuries soared. The 10-yr note was up more than two points at its best level of the day with the benchmark yield down 34 basis points. That represented the sharpest move since the $1 trillion QE program was unveiled in March 2009. The benchmark yield recovered the bulk of its decline into the close, ending lower by six basis points at 2.13%.

On Thursday, stocks faced another whipsaw session that ended with a flat finish for the S&P 500 while the Russell 2000 (+1.1%) registered its second consecutive advance. The price-weighted Dow was the weakest performer of the day with a loss of 0.2%. Equity indices tumbled out of the gate for the second day in a row amid broad-based selling pressure that also weighed on equities in Europe. The S&P 500 marked a session low near the 1,835 level during the first hour, but spiked more than 20 points following comments from St. Louis Fed President James Bullard. Mr. Bullard appeared on Bloomberg TV and said the Fed should consider delaying the end of its Quantitative Easing program, which is set to wind down at the October FOMC meeting. The market jumped from lows in reaction to the comments, but it is worth noting that Mr. Bullard is not a voting FOMC member this year and only an alternate voter on next year's schedule. The non-voter status did not get in the way of a surge in equities while Minneapolis Fed President (and FOMC voter) Kocherlakota provided a similar view, saying there is more the Fed can do to achieve maximum employment.