The Week In Review


February 1, 2013
Stocks saw broad gains during today's session and the S&P 500 ended higher by 1.0%. Meanwhile, the Dow climbed 1.1% and settled above 14,000 for the first time since October 2007. The day was busy with economic data, most of which surprised to the upside. Overseas, China's HSBC manufacturing PMI signaled continued expansion while readings in Europe were better-than-feared. Domestically, investors received a full slate of data with the headline report coming in the form of January nonfarm payrolls. During the first month of 2013, the economy added 157,000 nonfarm jobs, which fell short of the 180,000 expected by the consensus. In addition, the unemployment rate ticked up to 7.9%. The immediate reaction sent equity futures higher as the rise in unemployment signals the Federal Reserve will not be removing its support from the markets in the near future. The morning sentiment was aided by a strong January ISM index, upbeat December construction spending, as well as the positive revision to the final January Michigan Consumer Sentiment Survey. All ten S&P 500 sectors ended in the black and five added at least 1.0%. Financials rallied broadly and the SPDR Financial Select Sector ETF (XLF 17.61, +0.23) notched a fresh 52-week high. Bank of America (BAC 11.71, +0.39) and Morgan Stanley (MS 23.51, +0.71) outperformed their peers and settled with respective gains of 3.5% and 3.1%. Elsewhere, the materials sector rallied on the strength of steel producers. The industry tends to show elevated sensitivity to Chinese economic data, and today's manufacturing PMI beat suggested Chinese steel demand will remain strong. The Market Vectors Steel ETF (SLX 49.61, +0.77) advanced 1.6%. The tech sector underperformed earlier in the week, but did its best to catch up to the broader market today. Interestingly, technology stocks rallied without the participation of Apple (AAPL 453.62, -1.87). However, microprocessor manufacturers picked up the slack and the PHLX Semiconductor Index gained 1.9%. The CBOE Volatility Index (VIX 12.92, -1.36) fell almost 10.0%, and ended near its 52-week low of 12.29. Today's volume was strong with more than 750 million shares changing hands on the floor of the New York Stock Exchange. Next week shapes up to be pretty light in terms of economic data. On Monday, December factory orders will be reported at 10:00 ET. Week in Review: Equities Book Solid January Gains

January 31, 2013
The major averages saw little change during the last session of the month. The S&P 500 shed 0.2%, while Nasdaq outperformed and ended flat. Mixed trade unfolded amid economic data which was largely in-line with expectations. Weekly initial claims were reported at 368,000 ( consensus 345,000), which supports the notion that the lower readings over the prior two weeks were primarily the result of seasonal adjustment problems. Today's number drives initial claims right back to the 350,000-400,000 range where they have been bounded for most of the last year. Elsewhere, the personal income report stood out as the December increase of 2.6% was well ahead of the 0.7% rise expected by the consensus. However, the notable rise in personal income was due to a surge in personal income on assets as investors chose to lock in a lower capital gains tax rate ahead of the New Year. The fourth quarter Employment Cost Index increased by 0.5%, in-line with the consensus. The day's final economic report saw the January Chicago PMI climb to 55.6. The reading surprised to the upside as economists surveyed by had generally expected the index to come in at 50.5. In addition to economic data, investors received several notable earnings reports. Ryder System (R 56.78, +2.52), MasterCard (MA 518.40, +2.40), and Qualcomm (QCOM 66.02, +2.49) gained between 0.5% and 4.6% after beating on earnings. On the downside, ConocoPhillips (COP 58.00, -3.09), Dow Chemical (DOW 32.20, -2.41), and UPS (UPS 79.29, -1.94) fell short of expectations. With January now in the books, we would like to recap the first month of 2013.

January 30, 2013
Equities began the day on a mixed note, but the slightly bearish bias which persisted throughout the day caused the major averages to end near their lows. The S&P 500 slipped 0.4%, and was the weakest performing index. Shortly before the open, the Bureau of Economic Analysis said fourth quarter GDP contracted by 0.1%. This fell short of the 1.0% growth forecast by the consensus. While the number was a disappointment on the surface, a 22.2% decline in government defense spending contributed to the miss. Meanwhile, personal consumption expenditures, which account for more than 70% of GDP, rose 2.2%. This was the largest quarterly uptick since a 2.4% increase in consumption was reported during the first quarter of 2012. Additionally, the rise in spending was slightly above its eight-month average rate of change. Morning trade proved to be largely uneventful as investors anticipated the afternoon policy statement from the Federal Open Market Committee. The pronouncements on the economy, inflation, and inflation expectations were little changed. It was said that growth in economic activity "has paused in recent months," but there didn't appear to be any undue concern about an extended downturn as the "pause" was attributed largely to weather and other transitory factors. The asset purchase program is expected to remain in place until unemployment slips below 6.5% or inflation projections take a turn for the worse. While the FOMC statement and the GDP reading were in focus today, the market also received earnings from two notable names. (AMZN 272.76, +12.41) jumped 4.8% after the online merchant reported its operating income well ahead of analyst expectations. The strength in Amazon helped the Nasdaq outperform for the bulk of the day, but the index succumbed to broader market weakness in afternoon trade. Also of note, Boeing (BA 74.59, +0.94) gained 1.3% after its top and bottom lines came in ahead of the Capital IQ consensus estimates. However, the defense contractor guided its full-year 2013 earnings and revenue below consensus. Though Boeing outperformed, the industrial space lost 0.9%, and was the worst performing S&P 500 sector. Elsewhere, the Dow Jones Transportation Average lost 1.5%, and was a notable laggard. The bellwether sector lagged considerably as 17 of its 20 components settled with losses. The four railroads which comprise the transportation average were all down in excess of 1.0% with Union Pacific (UNP 131.17, -3.59) sagging 2.7%. In addition, trucking stocks were broadly weaker. Con-way (CNW 31.56, -1.06) fell 3.3% while CH Robinson (CHRW 67.14, -0.78), JB Hunt (JBHT 67.19, -0.90), and Landstar (LSTR 58.36, -0.85) lost near 1.5% each. Note that today's underperformance from transportation stocks came after the average rallied more than 8.0% since the start of 2013. As mentioned earlier, the S&P 500 was pressured by industrials (-0.9%). In addition, energy (-0.7%), materials (-0.6%), and financials (-0.5%) weighed. On the upside, utilities (UNCH) outperformed, and the sector was followed by discretionary (-0.2%) and consumer staples (-0.2%). The CBOE Volatility Index (VIX 14.27, +0.96) added more than 7.0%, and settled at its highest level since January 7. Looking at the term structure of VIX futures, the front-month contracts received the most notable interest during today's session. In addition, October VIX futures have crept up to 20.00. Today's floor volume at the New York Stock Exchange was in-line with its 50-day average as just over 700 million shares changed hands. Looking back at the day's economic data, the weekly MBA Mortgage Index declined by 8.1% to follow last week's uptick of 7.0%. According to today's ADP National Employment Report, employment in the nonfarm private business sector rose by 192K in January. This was above the 175K increase expected by the consensus. The prior month's reading was revised down to 185K from 215K.Tomorrow, investors will receive a full slate of economic releases. At 7:30 ET, January Challenger Job Cuts will be announced. At 8:30, weekly initial and continuing claims, December personal income, personal spending, core PCE prices, and fourth quarter employment cost index will all be reported. Finally, the January Chicago PMI will cross the wires at 9:45 ET. In earnings of note, Dow Chemical (DOW 34.61, -0.12) and UPS (UPS 81.23, -0.98) will announce their quarterly results ahead of the open.

January 29, 2013
Equities finished today's session on a mixed note. The Dow and S&P 500 gained 0.5% each, while the Nasdaq underperformed, and ended flat. However, looking below the surface revealed the sector rotation which took place today. The energy space paced today's advance thanks in part to strong earnings from Valero (VLO 43.77, +4.96). In addition, the 1.1% advance in crude oil also contributed to the sector's strength. After energy, health care, telecoms, and utilities were among the day's top performers as investors rotated into defensive-oriented stocks. In the health care space, Eli Lilly (LLY 54.32, +1.68) and Pfizer (PFE 27.70, +0.86) both gained 3.2% after reporting upbeat earnings. Today's performance of telecoms expands on the theme of sector rotation. AT&T (T 34.68, +0.55), Sprint Nextel (S 5.64, +0.08), and Verizon Communications (VZ 43.50, +0.73) all gained near 1.5%. While defensive sectors led the way, the discretionary space underperformed as the SPDR Consumer Discretionary Select Sector ETF (XLY 50.46, -0.20) slipped 0.4%. Ford Motor (F 13.14, -0.64) was a notable laggard after the carmaker shed 4.6% despite an earnings beat. While the company expressed concerns about its European sales, the remarks were in-line with comments made during past earnings calls. The discretionary sector avoided wider losses thanks to the relative strength observed in homebuilders. This morning, DR Horton (DHI 23.82, +2.51) beat on both earnings and revenue. The strong report was welcomed by investors and shares of DR Horton spiked 11.8%. Meanwhile, the broader SPDR S&P Homebuilders ETF (XHB 29.10, +0.29) gained 1.0%. Although the technology sector ended with gains, its true performance was masked by the relative strength of Apple (AAPL 458.27, +8.44), which gained 1.9% after announcing a 128GB version of its fourth generation iPad device. Tech stocks saw broad weakness and VMware (VMW 77.14, -21.18) was a notable laggard. The company, which specializes in technology infrastructure, plunged 21.5% after issuing cautious guidance. In addition, VMware announced plans to cut about 7.0% of its workforce. Elsewhere in tech earnings, Seagate (STX 33.91, -3.50) fell 9.4% after it too issued guidance which disappointed investors. Note that today's selling came after Seagate rallied nearly 50.0% in the eight weeks leading into yesterday's report. Volume was slightly above its 50-day average as more than 700 million shares changed hands on the floor of the New York Stock Exchange. The CBOE Volatility Index (VIX 13.33, -0.24) ended lower by 1.8% after the past two session saw the near-term volatility measure settle in the black. The market received just two economic data points today. The November Case-Shiller 20-city Home Price Index rose by 5.5%, while a 5.2% increase had been expected by the consensus. This follows the previous month's increase of 4.3%. Meanwhile, the January consumer confidence reading of 58.6 fell short of the 65.1 expected by the consensus. Though equities slipped immediately after the report hit the wires, the weakness proved to be short-lived. Tomorrow, the weekly MBA Mortgage Index will be released at 7:00 ET. At 8:15 ET, the January ADP Employment Change will be reported. Fourth quarter advanced GDP growth will hit the wires at 8:30 ET, and the Federal Reserve will top off the busy day of economic releases with its rate decision and policy statement scheduled for 14:15 ET. Among earnings of note, Boeing (BA 73.65, -0.35) will announce its quarterly results prior to the open.

January 28, 2013
The major averages ended today's session largely where they began. The S&P 500 and Dow registered modest losses, while the Nasdaq added 0.2%, seeing relative outperformance from Apple (AAPL 449.83, +9.95). The largest tech stock ended higher by 2.3% after disappointing earnings caused it to lose nearly 13.0% last week. While Apple contributed to the relative strength of tech stocks, the remainder of the sector traded in mixed fashion. A notable sector component, Seagate (STX 37.41, +0.16), gained 0.4% ahead of its earnings report scheduled for an after-hours release. An upbeat report has been largely priced-in as Seagate has soared nearly 50.0% in the eight weeks leading into this evening's report. The Capital IQ consensus expects the hard drive manufacturer to report earnings of $1.27 on $3.57 billion in revenue. As tech stocks registered gains, the materials sector was the weakest performer. The observed weakness resulted from a Goldman Sachs downgrade of the U.S. steel sector. Following the downgrade, steel stocks saw broad selling and the Market Vectors Steel ETF (SLX 48.26, -0.70) shed 1.4%. While materials lagged notably, the discretionary sector also exerted some downside pressure on equity indices. One pocket of weakness was among homebuilders, which slipped to their respective lows after the December pending home sales report pointed to a 4.3% month-over-month decline. Among individual builders, PulteGroup (PHM 20.96, -0.71) lost 3.3% and Lennar (LEN 41.91, -1.16) shed 2.7%. Meanwhile, the broader SPDR S&P Homebuilders ETF (XHB 28.81, -0.30) slipped 1.0%. Elsewhere in the discretionary space, Jos. A. Bank (JOSB 39.28, -6.99) plunged 15.1% after the company said it expects its full-year 2012 net income to come in roughly 20.0% below its 2011 level. The cautious guidance spilled over to other apparel producers, which traded with a bearish bias. On the earnings front, the market received just one notable report ahead of today's open. Caterpillar (CAT 97.45, +1.87) ended higher by 2.0% after the industrial heavyweight reported mixed results. Though the company beat the Capital IQ earnings estimate, its bottom line suffered a year-over-year decline of 17.7%. Crude oil climbed steadily during afternoon trade and ended higher by 0.7%. The energy component settled at $96.51 after trading in a relatively narrow range. Although the key indices ending mixed, the CBOE Volatility Index (VIX 13.63, +0.74) added 5.7%. This move suggested that near-term downside protection continued receiving interest. Trading volume was below average as just under 650 million shares changed hands on the floor of the New York Stock Exchange. Looking at the S&P 500 sectors, technology (+0.3%) led the way while telecoms (+0.2%), and consumer staples (+0.1%) followed closely. On the downside, materials (-1.0%), consumer discretionary (-0.5%), and financials (-0.5%) lagged. Besides the previously mentioned December pending home sales report, the market received news of December durable goods orders. The Census Bureau reported that December durable goods orders rose by 4.6%. This was well ahead of the 1.6% increase which had been forecast by the consensus. As expected, aircraft orders were a primary factor for the surge in orders. Nondefense aircraft orders increased 10.1% while defense aircraft orders rose 56.4%. Excluding transportation related items, durable goods orders increased by 1.3%, which was better than the unchanged reading that had been broadly anticipated. The increase in ex-transportation orders was at odds with the contractions reported by many of the regional manufacturing surveys. Surprisingly, the gains in orders outside of transportation were due to strong demand for primary metals (3.6%) and fabricated metals (1.2%). This could suggest that manufacturers of finished goods are demanding more raw materials because they expect demand to rise in the near future. In tomorrow's economic data, the November Case-Shiller 20-city Index will be reported at 9:00 ET. In addition, January consumer confidence will cross the wires at 10:00 ET. In notable earnings, Ford Motor (F 13.78, +0.20) will report its fourth quarter results ahead of the open.