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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

11/21/14

The major averages ended an upbeat week with modest gains despite pulling back from their early highs. The S&P 500 gained 0.5% while the Nasdaq Composite (+0.2%) underperformed.

The stock marketand specifically equity futuresdonned their party hats in the early morning hours after two major central banks spiked the punchbowl. Most notably, the People's Bank of China announced its first rate cut in two years, lowering its deposit rate 25 basis points to 2.75% and trimming its one-year lending rate 40 basis points to 5.60%. The news boosted U.S. futures and European equities, while comments made by European Central Bank President Mario Draghi also contributed to increased risk tolerance.

Mr. Draghi served up another reminder that low eurozone inflation has become increasingly challenging and the central bank is ready to act fast if current trends continue. The euro (1.2390) responded by returning near its early November low, while the resulting greenback strength sent the Dollar Index (88.29, +0.70) to a fresh four-year high.

The Dollar Index finished near its best level of the day while equities endured a bit of a hangover following the early morning extravaganza. Despite the pullback, all ten sectors ended in the green with telecom services (+0.1%) bringing up the rear.

Cyclical sectors fared better than their defensively-oriented counterparts with commodity-linked groups posting solid gains. The strength in these areas could be traced back to the news of the rate cut in China that underpinned miners and steelmakers. Rio Tinto (RIO 47.51, +2.20) surged 4.9% while the broader materials sector (+1.3%) settled in the lead. As for steelmakers, the Market Vectors Steel ETF (SLX 41.08, +1.54) soared 3.9%.

Manufacturers of heavy machinery also rallied with Caterpillar (CAT 106.45, +4.36) jumping 4.3%. The Dow component gave a boost to the industrial sector (+1.0%), which ended among the leaders.

Also of note, the energy sector (+1.2%) rallied with help from crude oil, which rose 1.1% to $76.53/bbl. However, crude ended well below its early high in the neighborhood of $77.75/bbl.

Elsewhere, the consumer discretionary sector (+0.2%) could not hold its early gain amid weakness in select retailers. GameStop (GME 37.86, -5.67) fell 13.0% after missing earnings/revenue expectations and guiding lower while Gap (GPS 38.46, -1.68) lost 4.2% after reporting in-line with its warning from November 6 and lowering its earnings guidance for fiscal year 2015. High-beta sector components also lagged with Expedia (EXPE 84.69, -1.39) and Netflix (NFLX 360.28, -7.86) ending lower by 1.6% and 2.1%, respectively.

Similarly, technology (+0.2%) could only hold a slim portion of its opening advance with Apple (AAPL 116.35, +0.04), Intel (INTC 35.60, -0.35), and Microsoft (MSFT 47.96, -0.73) pressuring the top-weighted sector from its early high.

Interestingly, Treasuries spent the day in a steady advance from their morning lows. The 10-yr note ended at its best level of the day with the benchmark yield down three basis points at 2.31%.

Today's participation was ahead of recent averages with roughly a billion shares changing hands at the NYSE floor.

Monday's session will be free of notable economic data.
"Nasdaq Composite +12.8% YTD
"S&P 500 +11.6% YTD
"Dow Jones Industrial Average +7.4% YTD
"Russell 2000 +0.7% YTD
Week in Review: S&P 500 Posts Fifth Consecutive Weekly Advance

The stock market began the week on an unassuming note. The S&P 500 (+0.1%) added just over a point while the Nasdaq (-0.4%) and Russell 2000 (-0.8%) underperformed throughout the session. The benchmark index started under modest pressure, but was able to finish near its best level of day with help from countercyclical sectors. News from overseas contributed to the early weakness as Japan's preliminary GDP report for Q3 revealed the second consecutive decline (-0.4%; expected 0.5%), meaning the country is now in recession. The news gave an overnight boost to the yen, but the currency was back to unchanged against the dollar (116.20) by the start of the U.S. session. The yen weakened a bit during the session, sending the dollar/yen pair to 116.50.

The major averages ended Tuesday near their highs with the S&P 500 (+0.5%) registering its fifth consecutive advance. The benchmark index settled at a fresh record high while the Nasdaq Composite (+0.7%) outperformed after struggling on Monday. The Tuesday session began on a flat note, but the health care sector (+1.6%) quickly pulled away from its unchanged level thanks to significant strength in biotechnology. The iShares Nasdaq Biotechnology ETF (IBB) jumped 2.2% and contributed to the relative strength of the Nasdaq. In addition to drawing support from biotech, the Nasdaq received a solid boost from chipmakers after SunEdison (SUNE) agreed to acquire First Wind for $2.40 billion as part of a joint venture with TerraForm Power (TERP). Shares of SUNE soared 29.4% while the broader PHLX Semiconductor Index spiked 1.9% with all but two components registering gains.

Equities ended the midweek session on a lower note with Tuesday's leaderRussell 2000pacing the retreat. The small cap index lost 1.1% while the S&P 500 surrendered 0.2% with seven sectors finishing in the red. The benchmark index slumped at the start due to notable losses among several heavily-weighted sectors. However, the S&P 500 was able to pull away from its late-morning low thanks to relative strength in consumer discretionary (+0.5%), consumer staples (+0.4%), and energy (+0.6%). Although the trio helped the S&P 500 recover from its low, the index could not complete its comeback as industrials (-0.3%), technology (-0.6%), and health care (-0.5%) weighed.

Thursday ended on a modestly higher note despite a cautious start. The S&P 500 added 0.2% while the Nasdaq Composite (+0.6%) and Russell 2000 (+1.1%) outperformed. Equities faced some pressure at the start after disappointing data from overseas led to profit taking in Europe. Specifically, China's HSBC Manufacturing PMI came in at 50.0, which represents the difference between expansion and contraction, while Japan reported a slim downtick to 52.1 from 52.4. As for the eurozone, Manufacturing PMI slipped to 50.4 from 50.6 and Services PMI fell to 51.3 from 52.3. The key indices began inching away from their lows right after the open and the cautious sentiment evaporated in a hurry after better than expected Existing Home Sales (5.26 million; Briefing.com consensus 5.17 million), Leading Indicators (0.9%; consensus 0.6%), and Philadelphia Fed Survey (40.8; expected 18.3) crossed the wires at 10:00 ET.