The Week In Review


March 8, 2013
The major averages ended the final session of the week with modest gains. The day started on an upbeat note after February nonfarm payrolls were reported well ahead of expectations. However, the opening strength did not hold and the S&P 500 promptly slid back to yesterday's closing level. After returning to its flat line, the benchmark average staged a daylong climb, which ended at fresh session highs. While stocks spent the majority of the session in an upward climb, the dollar held strong throughout the day. Dollar strength manifested itself after today's jobs report revealed a 20 basis point drop in the unemployment rate. With the Federal Reserve indicating accommodative policy will remain in place until the unemployment rate nears 6.5%, a downtick brings the economy closer to that target. The dollar index climbed to 82.90 shortly after the release of the jobs data. The index then retraced a part of its gains, but spiked higher once again after Fitch Ratings downgraded Italy's sovereign debt rating to 'BBB+' from 'A-' and assigned a negative outlook. As equity markets climbed off their morning lows, cyclical sectors paced the advance. The consumer discretionary space was the day's leader as retailers contributed to the outperformance. The SPDR S&P Retail ETF (XRT 69.51, +0.65) advanced 0.9%. Industrials and materials also drove the broader market towards session highs. The industrial sector was buoyed in part by the Dow Jones Transportation Average. The 20-stock complex gained 1.0% after displaying notable weakness over the course of the past two sessions. Today, airlines paced the advance and United Continental (UAL 31.35, +1.74) jumped 5.9%. The financial sector was also in focus today after the Federal Reserve released the first round of results of its CCAR report, better known as the bank stress test. According to the test results, Ally Financial was the only bank which did not meet the required capital ratio under the adverse scenario. Meanwhile, major financials ended the day on a mixed note. Citigroup (C 46.68, +1.68) gained 3.7% while Goldman Sachs (GS 152.98, -3.64) fell 2.3%. Looking back at the final sector performance, consumer discretionary (+1.1%), industrials (+0.9%), materials (+0.9%), and telecom (+0.7%) outperformed the broader market. On the downside, technology (+0.1%), consumer staples (+0.2%), utilities (+0.2%), and health care (+0.3%) lagged. Trading volume was well below its 50-day average as 691 million shares changed hands on the floor of the New York Stock Exchange. Reviewing today's economic data, the employment situation improved in February as nonfarm payrolls added 236,000 to follow a downwardly revised 119,000 (from 157,000) in January. Today's reading was reported well above the consensus expectation of a 165,000 job gain. The average weekly hours worked increased from 34.4 in January to 34.5 in February. Hourly earnings rose 0.2% after increasing only 0.1% in January. Impressively, the increase in hours, earnings, and payrolls caused aggregate wages to increase 0.7%. That gain is more than enough to keep consumption growth steady and help replenish lost savings after the January tax increases. Strangely, even though the labor sector has shown strong stability and gradual improvement over the past few months, the labor force fell by 130,000 and the participation rate declined from 63.6% in January to 63.5%. If the labor force participation rate had remained at its previous level, the unemployment rate would have held steady at 7.9%. Wholesale inventories increased 1.2% in January after rising an upwardly revised 0.1% (from -0.1%) in December. The consensus expected wholesale inventories to increase 0.2%. Unfortunately, most of the gain was the result of a sharp drop in wholesale sales which led to more goods being left on the shelves. Wholesale sales fell 0.8% after holding flat in December. There is no economic news scheduled for a Monday release. On Tuesday, the United States Treasury will report its February budget at 14:00 ET.

March 7, 2013
The major averages ended today's session on a positive note. After spending the day in a narrow range, the Nasdaq settled as the top performing index with a gain of 0.3%. In many ways, today's session mimicked yesterday's range bound affair with financials and materials settling in the lead. Major financials outperformed even as the market awaited the Federal Reserve's CCAR report, scheduled for after the close. This is more commonly known as a bank stress test, and should provide some insight on the health of the banking sector. Bank of America (BAC 12.26, +0.34) was the top performer among the majors while the broader SPDR Financial Select Sector ETF (XLF 18.19, +0.13) gained 0.7%. Today's outperformance of the materials sector was aided by steelmakers. This was the second consecutive session where steel producers acted in support of the sector. The Market Vectors Steel ETF (SLX 45.75, +0.20) added 0.4%. The technology sector also displayed relative strength as its largest component, Apple (AAPL 430.58, +4.92), settled higher by 1.2%. Several networking-related names outperformed after Ciena (CIEN 17.53, +2.59) reported first quarter earnings well ahead of its Capital IQ consensus estimate. Investors viewed the report as a positive sign regarding the health of Ciena's peers. F5 Networks (FFIV 94.23, +1.12) and JDS Uniphase (JDSU 15.23, +1.08) ended with respective gains of 1.2% and 7.6%. Equities were driven higher by cyclical sectors, but the Dow Jones Transportation Averagewhich has climbed 14.6% year-to-datewas absent from the rally. The bellwether complex lost 0.5% amid broad weakness in railroads. While the record-setting levels in the Dow Jones Industrial Average received notable headline attention, the Dow Jones Transportation Average was setting an all-time high of its own. The transports marked fresh highs shortly after yesterday's open, but have surrendered nearly 2.0% since. The underperformance of a group which made large contributions to this year's rally bears noting. However, since the broader market registered gains today, this suggests money was moving around the market rather than out of the market. On the downside, defensively-oriented consumer staples, health care, and utilities registered losses. The utilities sector was the weakest performer and the SPDR Utilities Select Sector ETF (XLU 37.89, -0.17) shed 0.5%. Investors received a handful of economic data points today. Weekly initial claims were reported at 340,000 while the consensus had expected a reading of 350,000. The report was encouraging as this was the second week which saw claims remain below the 350,000-400,000 range observed for much of last year. Productivity was revised slightly higher to show a 1.9% decline versus a 2.0% decline that was previously reported. Unit labor costs were revised up to show a 4.6% increase versus the prior reading showing a 4.5% increase. January trade deficit widened to $44.4 billion from $38.1 billion in December. Today's reading fell short of the $43.0 billion deficit expected by the consensus and the January report is apt to be a negative factor in many economists' models for first quarter GDP growth forecast. According to the Federal Reserve, consumer credit increased by $16.2 billion in January. This follows the prior month's revised $15.1 billion increase, and is higher than the $12.8 billion that had been broadly expected among economists polled by Tomorrow's economic data will focus on jobs. February nonfarm payrolls, nonfarm private payrolls, unemployment rate, hourly earnings, and average workweek are all scheduled for an 8:30 ET release. Lastly, January wholesale inventories will be reported at 10:00 ET.

March 6, 2013
The major averages began today's session on a positive note, but the initial strength was unable to hold throughout the day. The Dow managed to settle near its highs while the S&P 500 and Nasdaq finished near their lows. The first sign of weakness manifested itself when the Nasdaq turned negative due to selling pressure in the technology sector. The sector and the tech-heavy index underperformed as large cap names weighed. Apple (AAPL 425.66, -5.48), Google (GOOG 831.38, -7.22), and Microsoft (MSFT 28.09, -0.26) all lost between 0.9% and 1.3% with Microsoft declining after European regulators imposed a $731 million fine resulting from an antitrust case. Though major tech components underperformed, the remainder of the sector held up relatively well. Chipmakers traded ahead of the broader market and the PHLX Semiconductor Index tacked on 0.1%. Today's underperformance also came from the consumer discretionary sector where Staples (SPLS 12.34, -0.95) fell 7.2% after its quarterly report beat on earnings and missed on revenue. Meanwhile, the broader SPDR S&P Retail ETF (XRT 68.44, -0.24) slid 0.4%. Although technology and consumer discretionary trailed behind the broader market, two other cyclical sectors, financials and materials, led the way. Financials built on the relative strength of major banks and the SPDR Financial Select Sector ETF (XLF 18.06, +0.12) gained 0.7%. Elsewhere, materials climbed as steelmakers garnered buying interest throughout the day. The Market Vectors Steel ETF (SLX 45.55, +1.08) advanced 2.4%. The mixed performance from cyclical sectors appeared to be indicative of today's indecision in the market. Defensively-oriented consumer staples, telecom, and utilities all finished among the day's biggest laggards while health care settled with slim gains. In the currency market, the British pound and the euro lagged notably against the dollar. As a result, the dollar index climbed steadily through the day, finishing higher by 0.5% near 82.50. Trading volume was below average as 684 million shares changed hands on the floor of the New York Stock Exchange. The market received a healthy dose of economic data today. In addition, the Federal Reserve released its March Beige Book. In the summary of economic activity from the 12 districts, most described growth as "modest to moderate". Service demand was described as generally positive while automobile sales were characterized as strong in most districts. Similarly, a number of regions saw an increase in tourism. With regards to prices, modest pressure was reported with certain raw materials seeing a rise in prices. Reviewing today's remaining data, factory orders declined 2.0% in January after increasing a downwardly revised 1.3% (from 1.8%) in December. The consensus expected the reading to indicate a decline of 2.2%. As the advance durable goods report already showed, the decline in orders was a result of weaker aircraft demand with those orders falling 45.7% in January. According to today's ADP Employment Change report, the private sector added 198,000 jobs during February. Today's reading came in ahead of the consensus (150,000), and indicated the services sector was responsible for the bulk of the job gains. In tomorrow's economic news, weekly initial claims, continuing claims, January trade balance, fourth quarter productivity and unit labor costs will all be reported at 8:30 ET. The final data point of the day will come in form of January consumer credit. This report will be released at 15:00 ET. Also note the Bank of England, European Central Bank, and the Bank of Japan are all set to announce their interest rate decisions.

March 5, 2013
Today began with all eyes turned to the Dow Jones Industrial Average after the blue chip index ended yesterday's session just 37 points below its all-time closing high. However, the anticipation was promptly removed after the bell when equities jumped higher and the Dow marked its fresh all-time best at 14,286.37. Following the steady climb of the first hour, they key indices leveled off and held the bulk of their gains throughout the afternoon. In addition to the Dow, the Dow Jones Transportation Average marked an all-time high of its own. The bellwether complex settled higher by 1.5% thanks to outperformance from freight carriers and shipping services. Con-way (CNW 36.07, +1.36) and FedEx (FDX 107.91, +2.11) finished with respective gains of 3.9% and 2.0%. The notable strength among transportation stocks also contributed to the outperformance of the industrial sector. The SPDR Industrial Select Sector ETF (XLI 41.40, +0.58) settled higher by 1.4% after finishing among yesterday's biggest laggards. Similarly, the technology sector underperformed yesterday, but finished as today's leader. Applied Materials (AMAT 13.74, +0.17) and Qualcomm (QCOM 67.97, +1.34) both hiked their quarterly dividends which helped support other chipmakers. The broader PHLX Semiconductor Index gained 2.0%. Although the market finished with broad gains, some pockets of weakness could be spotted. J.C. Penney (JCP 14.96, -1.78) has been in the news since reporting downbeat quarterly earnings on February 27. Today, shares of the retailer fell 10.6% after reports indicated recent weakness has prompted major investors from exiting the stock. In addition, the New York Post reported the company is facing delays in its court case against Macy's (M 41.72, +0.18). Though J.C. Penney finished firmly lower, the weakness appeared to have no effect on other retailers. The SPDR S&P Retail ETF (XRT 68.68, +0.76) gained 1.1%. Walgreen (WAG 40.72, -1.05) was another retailer which missed out on today's rally. The weakness followed disappointing second quarter revenue guidance as well as February comparable store sales which missed expectations. The relative weakness in Walgreen contributed to the underperformance of consumer staples, which registered the slimmest gains of all 10 sectors. The CBOE Volatility Index (VIX 13.47, -0.54) fell 3.9% and slid back to levels last seen two weeks ago. Looking back at the final S&P 500 sector alignment, technology (+1.5%), industrial (+1.4%), and consumer discretionary (+1.0%) stocks outperformed. On the downside, consumer staple (+0.3%), utilities (+0.6%), and materials (+0.6%) trailed behind the broader market. Trading volume was once again below average as 683 million shares changed hands on the floor of the New York Stock Exchange. Today's economic data was limited to the February ISM Services Index, which increased from 55.2 in January to 56.0 in February. Today's reading was ahead of the consensus, and put the index at its highest level since February 2012. Business activity growth was essentially flat as the respective index increased a modest 0.5 points to 56.9 in February. However, the report did not signal impending weakness in the services sector. Tomorrow, the weekly MBA Mortgage Index will be reported at 7:00 ET. At 8:15 ET, the February ADP Employment Change will cross the wires with January factory orders scheduled for a 10:00 ET release. Lastly, the Federal Reserve will release its March Beige Book at 14:00 ET.

March 4, 2013
The S&P 500 settled with a gain of 0.5% despite spending the majority of the day in negative territory. The first session of the week began amid cautious trade resulting from news out of China where officials announced steps to curtail the rapid rise in the country's housing prices. The news contributed to a slightly lower open for the U.S. session, which lacked any notable economic data. Similarly, earnings reaction was rather muted with only a handful of names reporting their quarterly results. Industrials and materials lagged for the duration of the session as the news from China signaled lower demand for basic materials as well as heavy machinery. Steelmakers weighed on the materials space as the Market Vectors Steel ETF (SLX 44.11, -0.71) fell 1.6%. In the industrial sector, machinery producer Caterpillar (CAT 89.75, -1.61) fell 1.8%, and weighed on its peers. In addition, the weekend implementation of the automatic spending cuts known as the "sequester" resulted in underperformance from defense-oriented stocks. The PHLX Defense Sector Index lost 0.5%. The Dow Jones Transportation Average prevented the industrial sector from registering wider losses as the bellwether complex gained 1.0% amid strength from airlines. Delta Air Lines (DAL 15.65, +0.83) jumped 5.6% after the company's February unit revenue grew 5.0% year-over-year. The technology sector underperformed amid weakness from its largest component. Apple (AAPL 420.05, -10.42) lost 2.4%, and its shares filled the gap which resulted from the company's January 2012 earnings report. In addition, several Apple suppliers traded notably lower. Cirrus Logic (CRUS 22.73, -0.66) dropped 2.8% and Broadcom (BRCM 33.45, -0.42) slid 1.2%. Other chipmakers also contributed to the underperformance of the tech sector as the PHLX Semiconductor Index shed 0.3%. Among tech names reacting to earnings, Stratasys (SSYS 68.82, +4.56) spiked 7.1% after beating on the bottom line and guiding its revenue midpoint above consensus. Interestingly, despite the underperformance of higher-beta sectors, consumer discretionary stocks traded higher. Retailers outperformed the broader market and the SPDR S&P Retail ETF (XRT 67.92, +0.49) gained 0.7%. As most cyclical sectors traded in the red for the bulk of the session, defensively-oriented stocks climbed throughout the day. The utilities sector finished as the top advancer and the SPDR Utilities Select Sector ETF (XLU 37.88, +0.38) added 1.0%. Trading volume was below average as 692 million shares changed hands on the floor of the New York Stock Exchange. Crude oil fell 0.7% and weighed on energy stocks. The energy component settled just over $90.00 per barrel. Reviewing the S&P 500 performance, utilities (+1.0%), consumer discretionary (+1.0%), and financials (+0.9%) outperformed the broader market. Meanwhile, energy (-0.2%), industrial (-0.1%), materials (+0.1%), and technology (+0.2%) lagged. In the treasury market, the 10-yr note saw steady selling throughout the day with the 10-yr yield ending higher by three basis points at 1.88%. Tomorrow's economic data will be limited to the February ISM Services Index with the report set to cross the wires at 10:00 ET.