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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

5/25-5/29/15

The major averages registered their second consecutive decline on Friday, but they managed to end May in the green. The S&P 500 lost 0.6% today, but added 1.1% for the month while the Nasdaq Composite (-0.6%) ended in-line with the S&P 500 on Friday, but gained 2.6% in May.

Equity indices spent the duration of the session in negative territory with heavily-weighted sectors like consumer discretionary (-0.7%), financials (-0.9%), industrials (-1.0%), and technology (-0.8%) exerting pressure on the market. Furthermore, uninspiring economic data and the lack of tangible progress between Greece and its creditors weighed on the overall sentiment.

To be sure, stocks climbed off their late-morning lows after Greece's Economy Minister Giorgos Stathakis said his country will make its next debt payment to the International Monetary Fund. According to Mr. Stathakis, the country will pay EUR304 million next Friday. That headline was viewed as a positive sign considering deposit outflows in Greece have accelerated, dropping overall balances to levels not seen in more than ten years, according to reports.

The late-morning boost helped the S&P 500 reclaim more than 2/3 of its decline, but the index revisited its session low during afternoon action amid persistent weakness in some of the most influential sectors. Eight sectors ended the day in negative territory with industrials (-1.0%) spending the day behind its peers.

Once again, transport stocks struggled, evidenced by a 0.8% decline in the Dow Jones Transportation Average. The bellwether complex lost 2.2% for the week and surrendered 3.4% in May. Con-way (CNW 40.47, -1.42) was the weakest performer of the bunch, falling 3.4% after Bank of America/Merrill Lynch downgraded the stock to Underperform.'

Elsewhere, the technology sector (-0.8%) slipped behind the broader market during afternoon action, but chipmakers showed relative strength. The PHLX Semiconductor Index added 0.3% with Altera (ALTR 48.85, +1.88) spiking 4.0% amid renewed speculation the company may be acquired by Intel (INTC 34.51, +0.50). For the month, the PHLX Semiconductor Index soared 8.6% while the tech sector added 2.1%.

All ten sectors registered losses with energy (-0.1%) ending just below its flat line even as crude oil jumped 4.5% to $60.26/bbl. Over on the countercyclical side, health care (-0.2%) and utilities (-0.2%) outperformed while consumer staples (-0.7%), and telecom services (-0.5%) ended near the broader market.

Treasuries climbed into the afternoon, ending on their highs with the 10-yr yield down three basis points at 2.10%.

Today's participation was above-average with month-end flows contributing to the increased activity as more than a billion shares changed hands at the NYSE floor.

Economic data included Q1 GDP, Chicago PMI, and Michigan Sentiment Index:

First quarter GDP was revised down to -0.7% in the second estimate from an originally reported +0.2% in the advance release, which is what the Briefing.com consensus expected 

That was the first contraction in GDP growth since Q1 2014

The real final sales component, which strips out volatile inventories, declined 1.1%. That topped the 1.0% decline from Q1 2014 and was the biggest real final sales drop since a 3.3% decline in Q1 2009, suggesting that economic growth trends in Q1 2015 were some of the worst seen since the Great Recession

The Chicago PMI declined to 46.2 in May from 52.3 in April while the Briefing.com consensus expected an increase to 53.0 

That was the third time the Chicago PMI has fallen below 50, the expansion/contraction threshold, in the last four months

With the exception of the Prices Paid Index (51.2 from 43.1), all of the sub-indexes declined and also contracted in May

The University of Michigan Consumer Sentiment Index was revised up to 90.7 in the May final reading from 88.6 in the preliminary reading while the Briefing.com consensus expected an increase to 89.0 

The month-over-month decline in sentiment generally reflects higher gasoline prices while other factors that influence sentiment trends, like equity movements and labor market conditions, were largely flat in May

On Monday, Personal Income/Spending data for April and Core PCE Prices will be released at 8:30 ET while April Construction Spending and the May ISM Index will both be reported at 10:00 ET.

 

Nasdaq Composite +7.1% YTD

Russell 2000 +3.6% YTD

S&P 500 +2.4% YTD

Dow Jones Industrial Average +1.1% YTD

Week in Review: Nasdaq Sets Fresh Record Close

 

Bond and equity markets were closed on Monday for Memorial Day.

 

On Tuesday, each of the major indices fell at least 1.0% as buyers proved to be a reluctant bunch. That reluctance started early and it continued for most of the session, which saw the S&P 500 flirt with testing support at its 50-day simple moving average (2096). The fact that the S&P 500 didn't pierce that level was perhaps the lone bright spot in Tuesday's action, which saw all ten sectors lose ground and all 30 Dow components end with a loss.

The major averages enjoyed a daylong rally on Wednesday that helped the S&P 500 (+0.9%) erase the bulk of its decline from Tuesday. Meanwhile, the Nasdaq Composite (+1.5%) closed at a fresh record high and turned its weekly decline into a 0.3% advance for the week. Equity indices began the session with modest gains and enjoyed an early surge amid reports that Greek officials and Eurogroup members have started crafting a staff-level agreement to secure funds for the country. However, those reports were refuted during the next hour with Bloomberg citing a Eurogroup official as saying the two sides have yet to begin working on a joint statement. Strikingly, the stock market all but ignored the prompt refutation and continued rising into the afternoon with the technology sector (+1.8%) pacing the move. The PHLX Semiconductor Index surged 3.9% after it was reported that Avago Technologies (AVGO 141.49, +10.19) is in advanced talks to acquire Broadcom (BRCM 57.13, +10.21). Shares of AVGO jumped 7.8% while Broadcom soared 21.8%.

The stock market spun its wheels throughout the Thursday session, ending on a modestly lower note. The S&P 500 shed 0.1% after spending the entire day in negative territory amid light volume. Equity indices began the day in the red with some residual damage to risk tolerance after China's Shanghai Composite tumbled 6.5% in reaction to more equity brokers increasing their margin requirements. Furthermore, repurchase operations conducted by the People's Bank of China stirred concerns that the central bank may be preparing to stop or slow its easing cycle. To be fair, the decline in the Shanghai Composite only caused the index to surrender its week-to-date gain. In either case, things did not get any more cheery by the start of the European session with signals from the G7 meeting in Dresden suggesting that wide-ranging differences remain between Greece and the creditor institutions. The PHLX Semiconductor Index added 0.1% after Wednesday's rumor became Thursday's news and Avago Technologies (AVGO 142.38, +0.89) confirmed its acquisition of Broadcom (BRCM 56.25, -0.91) for $37 billion.