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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

12/30/16

 The stock market spent the final session of the year in a steady retreat. The S&P 500 lost 0.5%, narrowing its 2016 gain to 9.5%. The Nasdaq (-0.9%) underperformed, trimming this year's advance to 7.5%.

The bulk of the day saw below-average trading volume, but there was a surge of activity into the close, likely associated with end-of-month and end-of-quarter flows from large investors. As a result, more than a billion shares changed hands at the NYSE floor.

Today's pullback brought the S&P 500 back into the middle of its post-election range with nine out of eleven sectors finishing in the red. Heavily-weighted technology (-1.0%) and consumer discretionary (-0.9%) spent the day at the bottom of the leaderboard, dragging most other sectors down.

In the technology sector, Apple (AAPL 115.85, -0.88) started on a soft note, extending its loss to 0.8% after Nikkei Asian Review reported that the company's first-quarter iPhone production will be 10.0% down year-over-year, according to data from suppliers. Accordingly, Apple suppliers like Cirrus Logic (CRUS 56.54, -1.47), Skyworks (SWKS 74.66, -1.90), Qualcomm (QCOM 65.20, -0.84), and Qorvo (QRVO 52.73, -0.88) lost between 1.6% and 2.5%, while the PHLX Semiconductor Index fell 1.6%, narrowing its 2016 gain to 36.6%.

The consumer discretionary sector (-0.9%) spent the day alongside technology due to broad-based weakness. Homebuilders retreated, sending the iShares Dow Jones US Home Construction ETF (ITB 27.48, -0.25) lower by 0.9%, while automakers Ford (F 12.13, -0.10) and General Motors (GM 34.84, -0.30) saw comparable losses. As for retailers, the SPDR S&P Retail ETF (XRT 44.07, -0.18) lost 0.4%.

Elsewhere on the cyclical side, materials (-0.7%) also finished behind the broader market while other decliners saw slimmer losses. On the upside, real estate (+0.9%) and financials (+0.2%) resisted the overall pressure with the financial sector edging up to end the year higher by 20.1%. Thanks to today's effort, the real estate sector ended the year just above its flat line (+0.01%)

Only one group—health care (-0.4%)—finished the year in negative territory, losing 4.4%. Biotechnology contributed to the decline as the iShares Nasdaq Biotechnology ETF (IBB 265.38, -1.73) surrendered 0.7% on Friday, ending the year lower by 21.6%.

Treasuries ended the abbreviated session on a higher note. The 10-yr yield slipped three basis points to 2.44%, ending 20 basis points below its mid-December high.

The U.S. Dollar Index (102.28, -0.38) shed 0.4% to lock in its second consecutive decline, but still ended the year just below a 14-year high. It is possible that market participants got an early taste of the strong dollar's impact on the manufacturing sector as the December Chicago PMI declined to 54.6 from 57.6 in November. The drop was paced by New Orders, which fell to 56.5 from 63.2 in November. To be fair, the overall index pulled back from levels not seen since January 2015 and over half of the respondents to a special question pertaining to the 2017 outlook said they expected their business to prosper, aided by tax reforms and deregulation.

Bond and equity markets will be closed on Monday and Tuesday's economic data will be limited to the 10:00 ET release of November Construction Spending (Briefing.com consensus 0.5%) and December ISM Index (Briefing.com consensus 53.6).

Happy New Year!

 

Russell 2000 +19.5% YTD

Dow Jones Industrial Average +13.4% YTD

S&P 500 +9.5% YTD

Nasdaq Composite +7.5% YTD

Week in Review: Quiet Pre-Holiday Week Followed by Quieter Post-Holiday Week

The post-holiday week saw a wider trading range than the pre-holiday stretch, but fewer investors took part in last week's action, making it easier to push the market around. The S&P 500 lost 1.1% after spending the week in a 40-point range (vs 17 points in the prior week) while average daily NYSE floor volume was just 758 million shares vs 853 million two weeks ago. The benchmark index finished ahead of the Nasdaq Composite (-1.5%), but behind the Dow Jones Industrial Average (-0.9%) and the Russell 2000 (-1.0%).

The abbreviated week started on an unassuming note with the S&P 500 rising 0.3% while the Nasdaq (+0.5%) outperformed. The Tuesday session saw the lowest volume of the week and almost everyone's attention was on the technology sector (+0.6%) where NVIDIA (NVDA) surged 6.9%. The move was not owed to any particular news item, but it called attention to the stock's meteoric rise in 2016. Tuesday's surge extended NVIDIA's 2016 gain to 256.0%.

With a dearth of overnight news, NVIDIA was back in focus on Wednesday. This time around the stock plummeted 6.9% after Citron Research pointed out that the company may find increased competition from AMD (AMD) and Intel (INTC) in 2017. The PHLX Semiconductor Index (-1.9%) gave up its entire gain from Tuesday, leading the technology sector (-0.9%) lower. Wednesday's weakness in the technology sector caused the Nasdaq to settle behind the S&P 500, which is how the tech-heavy index continued into the weekend.

Thursday ended on a flat note while Friday's session was highlighted by a decline in Apple (AAPL) after Nikkei Asian Review reported that supplier data suggests the company will be reducing iPhone production by 10.0% during the first quarter of 2017. Apple wasn't the only weak spot as most heavily-weighted components registered comparable losses while chipmakers also struggled.