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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

3/30-4/2/15

The major averages eked out modest gains on Thursday after spending the day inside narrow ranges. The S&P 500 gained 0.4% while the Nasdaq Composite (+0.1%) underperformed. The market ended the abbreviated week on a mixed note with the S&P 500 adding 0.3% while the Nasdaq shed 0.1% for the week.

Today's session was very quiet with the S&P 500 bouncing between its 100- (2,060) and 50-day moving averages (2,073). The index settled in the top half of its trading range, but it is worth noting that many participants chose to forego the session, evidenced by light trading volume. To that point, fewer than 700 million shares changed hands at the NYSE floor.

Still, nine of ten sectors registered gains with telecom services (+0.9%) spending the day ahead of its peers. Meanwhile, the remaining three countercyclical groups posted slimmer gains. Notably, the health care sector (+0.2%) registered a modest gain despite intraday weakness in biotechnology. The iShares Nasdaq Biotechnology ETF (IBB 339.70, -0.38) shed 0.1%.

The relative weakness in biotechnology kept the Nasdaq Composite behind the S&P 500 while high-beta chipmakers also lagged. Micron (MU 26.72, -0.41) lost 1.5% after reporting a bottom-line beat and issuing below-consensus revenue guidance while the broader PHLX Semiconductor Index slipped 0.3%.

Conversely, chipmakers also pressured the technology sector (-0.1%), which was the only group ending in the red. The modest loss was not entirely due to weakness among microchip names as several large cap components like Google (GOOGL 541.31, -8.18), Microsoft (MSFT 40.29, -0.43), and Qualcomm (QCOM 67.97, -1.46) dropped between 1.1% and 2.1%.

Elsewhere among cyclical groups, the energy sector (+0.2%) settled just above its flat line while crude oil endured a volatile session before ending lower by 1.8% at $49.10/bbl. On a related note, leaders from six countries and Iran agreed on a general framework for a deal that will require Iran to reduce its uranium stockpiles in exchange for the removal of sanctions that are currently in place. The deadline for the final agreement has been pushed back to June 30.

Also of note, the consumer discretionary sector (+0.9%) finished ahead of other cyclical groups thanks to broad strength. Homebuilders rallied with the iShares Dow Jones US Home Construction ETF (ITB 28.61, +0.48) climbing 1.7% while media names like CBS (CBS 61.16, +1.54), Comcast (CMCSA 57.94, +0.88), and Time Warner (TWX 85.00, +2.20) also posted solid gains.

Treasuries spent the day in a steady slide from their early morning highs, sending the 10-yr yield higher by five basis points to 1.91%.

Economic data included ISM Index, Construction Spending, ADP Employment, and MBA Mortgage Index:
  • The ADP National Employment Report revealed that employment in the nonfarm private business sector rose by 189K in March while the Briefing.com consensus expected an increase of 225K 
    • The February reading was revised up to 214,000 from 212,000 
  • The ISM Manufacturing Index declined to 51.5 in March from 52.9 in February while the Briefing.com consensus expected a decrease to 52.5 
    • Nearly all of the regional manufacturing surveys pointed toward a sharp deceleration in the national manufacturing index so the drop in the ISM Index shouldn't have been much of a surprise 
    • Production levels actually improved, albeit by a very small margin, as the related index increased to 53.8 in March from 53.7 in February 
  • Construction spending declined 0.1% in February after declining a downwardly revised 1.7% (from -1.1%) in January while the Briefing.com consensus expected a decline of 0.3% 
    • The unseasonably harsh winter weather conditions, which were blamed for a significant downturn in new housing starts, had little to no effect on overall construction levels 
      • Total private construction increased 0.2% in February after declining 1.1% in January 
  • The weekly MBA Mortgage Index rose 4.6% to follow last week's 9.5% spike
Tomorrow, the Nonfarm Payrolls report for March (Briefing.com consensus 250K) will be released at 8:30 ET even though the stock market will be closed.
  • Nasdaq Composite +3.2% YTD 
  • Russell 2000 +4.1% YTD 
  • S&P 500 +0.4% YTD 
  • Dow Jones Industrial Average -0.3% YTD 
Week in Review: Technical Levels in Focus

The major averages rallied throughout the Monday session with the Dow Jones Industrial Average (+1.5%) ending in the lead while the S&P 500 (+1.2%) and Nasdaq (1.2%) followed not far behind. The key indices began the week on an upbeat note, aided by overnight news indicating China has loosened its lending requirements for purchases of second homes. In addition, Friday's dovish remarks from Fed Chair Janet Yellen, who said the Fed will move cautiously when raising rates, provided another measure of support. All ten sectors ended the day with solid gains while the S&P 500 surged above its 50-day moving average (2,070). Overall, cyclical sectors had the best showing, but countercyclical groups held their own. Health care and telecom services ended at the bottom of the leaderboard, but both groups still gained close to 1.0% apiece.

The stock market extended its March decline on Tuesday, but was able to end the first quarter in the green. The S&P 500 (-0.9%) lost 1.7% for the month, but added 0.4% during the first quarter. The tech-heavy Nasdaq (-0.9%) outperformed, losing 1.3% in March to narrow its Q1 gain to 3.5%. For its part, the Dow Jones Industrial Average (-1.1%) lost 2.0% in March and shed 0.3% in Q1. Equity indices started the day amid broad pressure while the Dollar Index (98.31, +0.33) added to yesterday's gain. The S&P 500 tried climbing off its opening low, but daylong weakness among heavily-weighted sectors like health care (-1.5%), industrials (-1.0%), and energy (-0.9%) prevented the index from turning positive. On the flip side, the consumer discretionary sector (-0.5%) held a modest gain into the afternoon, but slipped into the red during the final hour. Still, the discretionary sector ended ahead of its peers with homebuilders contributing to the relative strength after DR Horton (DHI) was upgraded to 'Positive' from 'Neutral' at Susquehanna. Shares of DHI gained 1.7% while the iShares Dow Jones US Home Construction ETF (ITB) surrendered its gain ahead of the close. As for the broader market, the S&P 500 slipped back below its 50-day moving average (2,071).

The major averages kicked off April with a retreat that sent the S&P 500 lower by 0.4%. The benchmark index settled in-line with the Dow Jones Industrial Average and the Nasdaq Composite, with the latter catching up during the final hour. Equity indices spent the entire day in the red and could not rally following upbeat economic data from overseas. Strangely, S&P 500 futures tumbled nearly 20 points overnight after China reported its first expansionary Manufacturing PMI (50.1; expected 49.7) in three months. Similar to China, most Manufacturing PMI readings from Europe also surpassed estimates with the region-wide reading rising to 52.2 (expected 51.9). Interestingly, S&P 500 futures rallied off their overnight lows, but could not climb above the spot where the overnight selling commenced. Once the cash session began, the S&P 500 quickly returned into the neighborhood of its overnight low and settled on its 100-day moving average (2,060).