The Week In Review


Equities climbed throughout the session despite showing early signs of a potential continuation to yesterday's weakness. The S&P 500 advanced 1.3% while the Nasdaq and Russell 2000 outperformed with respective gains of 1.6% and 1.9%.

Before today's opening bell, it was announced that nonfarm payrolls increased by 204,000 in October ( consensus 100,000). The immediate reaction was consistent with increased expectations of tapering sooner rather than later as bonds and futures fell to lows. However, equity futures returned into positive territory by the opening bell while Treasuries settled on their lows with the 10-yr yield up 15 basis points at 2.75%. The dollar also strengthened, sending the Dollar Index higher by 0.5% to 81.24.

Stocks rallied with the financial sector (+2.3%) paving the way after the group struggled to keep pace with the S&P earlier in the week. All major banks posted solid gains, and JPMorgan Chase (JPM 53.96, +2.31) surged 4.5%.

Other cyclical sectors also displayed strength, but only financials added more than 2.0%. Meanwhile, the materials space was the second-best performer (+1.8%) as steelmakers provided support. The Market Vectors Steel ETF (SLX 49.37, +0.81) gained 1.7%. Miners posted modest gains as the Market Vectors Gold Miners ETF (GDX 24.28, +0.14) added 0.6% despite weakness in gold. The yellow metal fell 1.8% to $1284.60 per troy ounce.

Elsewhere, the technology sector (+1.1%) was the only cyclical group unable finish ahead of the broader market as top components traded in mixed fashion. Apple (AAPL 520.56, +8.07) and Cisco Systems (CSCO 23.51, +0.40) gained 1.6% and 1.7%, respectively, while IBM (IBM 179.99, -0.01) and Intel (INTC 24.09, +0.03) ended little changed.

Yesterday, the Nasdaq was pressured by biotechnology and momentum names, but both groups displayed relative strength today. The iShares Nasdaq Biotechnology ETF (IBB 204.18, +6.36) climbed 3.2% while (PCLN 1073.20, +50.31) paced the gains among momentum names after beating on earnings.

Also of note, Twitter (TWTR 41.65, -3.25) endured a forgettable second-day of trading after Hudson Square initiated coverage of the stock with a 'Sell' rating. The social media stock tumbled 7.2%.

Trading volume was well above average as 823 million shares changed hands on the floor of the New York Stock Exchange.

Taking another look through today's data, with the exception of government, every sector reported positive payroll gains in October. That included a 44,400 increase in retail employees. It has been reported that retailers started hiring earlier than normal for the holiday season.

Private payrolls added 212,000 new jobs in October, up from 150,000 in September. That was the biggest monthly gain since February when 319,000 jobs were added. The consensus expected only 110,000 new private jobs.

The average workweek remained at 34.4 hours and hourly wages increased by 0.1%. Combined with the solid increase in private payrolls, aggregate wages increased 0.3%. That is enough to keep consumption growth moving ahead.

The unemployment rate increased to 7.3% in October from 7.2% in September, as expected.

Separately, the November University of Michigan Consumer Sentiment Index dropped to 72.0 in the preliminary reading from 73.2 in October. The consensus expected the index to increase to 75.0. With the government shutdown over and the economy returning to its normal, albeit weak, trends, it was expected that consumer sentiment would return to September (77.5) or August (82.1) levels.

There is no economic data scheduled to be reported on Monday.

Nasdaq +29.8% YTD
Russell 2000 +29.5% YTD
S&P 500 +24.2% YTD
DJIA +20.3% YTD
Week in Review: Stocks Test Record Highs

The major averages kicked off the week with modest gains as the S&P 500 added 0.4%. The Russell 2000 (+1.1%) outperformed, but its relative strength came after the small cap index struggled to keep pace with the prior week's advance in the broader market. Outside of the notable outperformance among small caps, the session unfolded in an uneventful fashion. Overseas markets did little to upset the state of affairs as Japan's Nikkei was closed for Culture Day while China's Shanghai Composite ended flat despite its Non-Manufacturing PMI rising to a 14-month high of 56.3 from 55.4. All ten sectors ended in the green, but only energy (+1.3%) and telecom services (+0.8%) posted gains in excess of 0.4%. Energy was responsible for pacing much of the advance as the sector rallied throughout the session. Meanwhile, crude oil ended little changed at $94.59 per barrel.

On Tuesday, the major averages ended on a mixed note as the S&P 500 shed 0.3% while the Nasdaq added 0.1%. Equities spent the entire session climbing off their early lows after weakness in Europe set the stage for a lower open. European indices hovered near their worst levels of the day at the outset of the U.S. session after the European Commission lowered its 2014 GDP forecast for the region to 1.1% from 1.2%. Similar to equities, core EU bonds also sold off as Germany's 10-yr yield added four basis points to 1.74% while the French 10-yr yield rose six basis points to 2.21%. Although stocks began the U.S. session in negative territory, the buy-the-dip trade was at work once again, fueling a day-long rebound. The tech-heavy Nasdaq was able to eke out a modest gain thanks to the outperformance of biotechnology as the iShares Nasdaq Biotechnology ETF rose 0.7%.

Wednesday saw the major averages register broad gains at the open, but only the Dow Jones Industrial Average (+0.8%) and S&P 500 (+0.4%) were able to end in positive territory while the Nasdaq (-0.2%) and Russell 2000 (-0.4%) posted modest losses. The Dow finished at a fresh record high of 15,746.63 as 27 of 30 components registered gains. Of those 27, twelve added at least 1.0%. Microsoft (MSFT 37.78, +0.28) was the top index performer, climbing 4.2% amid reports Ford (F 16.85, +0.30) Chief Executive Officer Alan Mullaly remains on the list of candidates hoping to replace outgoing CEO Steve Ballmer.

The major averages ended Thursday on their lows after opening gains turned into broad-based losses. The S&P 500 fell 1.3% while the Nasdaq underperformed with a decline of 1.9%. Prior to the open, the European Central Bank cut its key interest rate by 25 basis points to 0.25% after recent data suggested the price level is moving away from the ECB's inflation target. The rate cut fueled a surge in the dollar while also sparking a risk bid. However, the equity gains were capped after a better-than-expected headline Q3 GDP reading (2.8% versus 2.5% consensus) fostered renewed speculation about a potential tapering announcement coming sooner rather than later. The immediate reaction in Treasuries also reflected a 'taper on' trade as bonds sold off, sending the 10-yr yield from its low to a session high. However, Treasuries returned to their best levels of the day as weakness among equities redirected some flows into safe-haven assets. The 10-yr yield ended lower by four basis points at 2.61%.