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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

4/13-4/17/15

The major averages ended Friday with a broad-based retreat that caused the market to turn negative for the week. The S&P 500 lost 1.1%, ending the week lower by 1.0%, while the Russell 2000 (-1.6%) underperformed today, but ended the week in-line with the benchmark index.

For background on today's retreat, we must start with the overnight session when a widespread outage took all Bloomberg terminals offline, which prevented large investors around the globe from communicating with their peers. The outage was followed by a plunge in Hang Seng and China-linked futures after China Regulatory Commission announced plans to ban margin financing for over-the-counter trades while also increasing the number of stocks eligible for short selling to 1,100.

In all likelihood, participants saw the big slide in Asia with little news to account for the move at that time and responded by reducing their risk exposure. Interestingly, S&P futures hit their overnight low around the time when access to Bloomberg terminals was restored and large investors could communicate with others once again.

That being said, the cautious posture persisted through the European session with Greece-related concerns keeping investors on the defensive. To that point, overseas units of Greek banks have been asked to divest their Greek sovereign debt holdings to avoid contagion in the event of a default. The request was reportedly issued by various central banks with backing from the European Central Bank. As a result, investors showed increased demand for German bunds with the 10-yr yield ticking down to 0.08% after dropping as low as 0.05%. 

Meanwhile, U.S. Treasuries endured a volatile session. The 10-yr note rallied overnight, but that was followed by a morning retreat, which was followed by an intraday climb to a fresh high, dropping the benchmark yield three points to 1.86%.

As for stocks, the S&P 500 dropped below its 50-day moving average (2,085) during late-morning action and distanced itself from that level into the afternoon. Taking a look at the bigger picture, this week's retreat placed the benchmark index smack dab in the middle of a range (2,040-2,120) that has held since early February even though earnings estimates for Q1 have been reduced during that stretch.

Speaking of earnings, most of the reports released since yesterday's closing bell surpassed bottom-line estimates, but revenue growth and guidance left a lot to be desired. General Electric (GE 27.25, -0.03) was a good example as the industrial conglomerate reported what has become a customary one-cent beat while revenue fell 3.1% year-over-year. Similarly, Honeywell (HON 101.70, -2.22) reported a bottom-line beat, but lower guidance and below-consensus revenue sent the stock lower by 2.1%.

Moving to other cyclical sectors, financials (-1.3%) finished near the bottom of the barrel with American Express (AXP 77.32, -3.59) contributing to the relative weakness. The Dow component lost 4.4% after its earnings beat was overshadowed by light revenue.

Elsewhere, the consumer discretionary sector (-1.5%) also finished among the laggards with media names extending their losses during the afternoon after Bloomberg reported that federal regulators are leaning in favor of opposing the proposed merger between Time Warner Cable (TWC 149.61, -8.59) and Comcast (CMCSA 58.42, -1.25). The two names ended lower by 5.4% and 2.1%, respectively. On the flip side, toymaker Mattel (MAT 26.74, +1.48) escaped the broad pressure, climbing 5.8% after reporting better than expected results.

All in all, the six cyclical sectors lost between 0.8% and 1.5% while the countercyclical side was treated to a lighter shade of red with the four defensively-oriented groups falling between 0.3% and 0.9%.

Today's trading volume surpassed recent averages thanks to a boost from options expiration with more than 865 million shares changing hands at the NYSE floor.

Economic data included CPI, Leading Indicators, and Michigan Sentiment:
  • Consumer prices increased 0.2% for a second consecutive month in March while the Briefing.com consensus expected an increase of 0.3% 
    • Energy prices rose 1.1% in March after increasing 1.0% in February 
      • Gasoline prices, one of the main drivers of the increase in energy costs, rose 3.9% in March after increasing 2.4% in February 
    • Food prices declined 0.2% in March after increasing 0.2% in February 
    • Excluding food and energy, core CPI increased 0.2% for a third consecutive month in March while the consensus expected an increase of 0.1% 
  • The Conference Board's Leading Economic Index increased 0.2% in March after increasing a downwardly revised 0.1% (from 0.2%) in February while the Briefing.com consensus expected an increase of 0.3%. 
  • The University of Michigan Consumer Sentiment Index increased to 95.9 in the preliminary April reading from 93.0 in March while the Briefing.com consensus expected an increase to 94.0 
    • Consumer sentiment recovered the entire decline from February (95.4) despite relatively higher gasoline costs and a significant weakening in the latest payrolls data. 
    • The Current Conditions Index increased to 108.2 in April from 105.0 in March. The Expectations Index increased to 88.0 from 85.3. 
Monday's session will be free of economic data.
  • Nasdaq Composite +4.1% YTD 
  • Russell 2000 +4.0% YTD 
  • S&P 500 +1.1% YTD 
  • Dow Jones Industrial Average UNCH YTD 
Week in Review: S&P 500 Maintains Narrow Range

The major averages began the week on a lower note. The S&P 500 surrendered 0.5% after spending the day in a steady retreat from its opening high while the Nasdaq Composite shed 0.2% after showing relative strength throughout the day. All in all, the Monday session was very quiet with the S&P 500 spending the day inside a 15-point range. The S&P 500 appeared to be on track for its fourth consecutive advance, but the index hit resistance during the opening hour and retreated into the afternoon. A handful of heavily-weighted sectors displayed early strength, but the financial sector (+0.3%) was the only group left in the green when the session ended.

Equity indices ended Tuesday on a mixed note after spending the day near their flat lines. The S&P 500 added 0.2% while the Nasdaq settled lower by 0.2%. The market slipped during the opening hour after the March Retail Sales report (+0.9%; Briefing.com consensus +1.0%) came in below expectations, but the S&P 500 found support just above its 50-day moving average (2,081) and made a swift return into the green. The index received significant support from the energy sector (+1.8%), which ended well ahead of other groups. Crude oil contributed to the considerable strength, climbing 2.7% to $53.31/bbl.

The stock market ended the midweek session on an upbeat note after climbing throughout the day. The S&P 500 gained 0.5% while the Russell 2000 (+0.7%) spent the day in the lead. The market rallied out of the gate, all but ignoring news that China's GDP growth (+7.0% year-over-year) has slowed to a six-year low. The news was followed by a small uptick in the greenback, but the Dollar Index (98.36, -0.37) surrendered its overnight advance, posting its second consecutive decline. In turn, the dollar weakness provided a measure of support to crude oil, helping the energy component jump 5.6% to $56.25/bbl. Understandably, the big spike in oil boosted the energy sector (+2.3%), placing the cyclical group in the lead. Thanks to the gain, the energy space extended its April gain to 6.8%. Meanwhile, the remaining cyclical groups settled a bit closer to the broader market. Technology (+0.9%) endured a slight struggle early, but the sector ended among the leaders with help from chipmakers after Linear Technology (LLTC) reported better than expected results and Intel (INTC) delivered an in-line report. The two names spiked 1.6% and 4.3%, respectively, while the PHLX Semiconductor Index gained 1.6%.

Thursday ended on a modestly lower note, but the key indices were able to climb off their opening lows. The S&P 500 shed 0.1% after spending the day in a 12-point range. Stocks struggled in the early going after an overnight report from the Financial Times indicated that Greek officials have asked the International Monetary Fund to reschedule debt repayments that will be due in May. The report was denied by Greek Finance Minister Yanis Varoufakis, but European investors displayed caution, which contributed to the lower start in the U.S. However, a batch of better than expected earnings in the U.S. offset the Greece-related news. The S&P 500 ranged near its low during the opening hour and climbed into the afternoon. The index spent about an hour in the green, but slipped back into the red before the close.