The Week In Review

11/15/13

Equities registered modest gains as the S&P 500 added 0.4%, registering its sixth consecutive weekly gain. The benchmark index spent the bulk of today's quiet session inside of a four-point range until the now-familiar final-hour rally sent the index to a fresh nominal record high of 1798.18. The Dow Jones Industrial Average (+0.5%) outperformed as all but five components finished in positive territory.

All ten sectors registered gains with energy (+0.7%) and materials (+0.6%) ending in the lead. The energy sector received support from Exxon Mobil (XOM 95.27, +2.05), which rallied 2.2% after Berkshire Hathaway disclosed a 40.1 million share stake in the largest sector component. On a related note, crude oil ended little changed at $93.82/bbl after spending the entire session near its flat line.

Meanwhile, the other commodity-related sector, materials, was underpinned by steelmakers as the Market Vectors Steel ETF (SLX 49.04, +0.49) gained 1.0%. Similar to crude oil, the underlying commodities ended little changed. Gold futures added $1.00 to $1287.50/ozt while copper futures ticked up one cent to $3.1715/lb.

Other cyclical sectors were more of a mixed bag as financials (+0.5%) outperformed while consumer discretionary (+0.3%), industrials (+0.3%), and technology (+0.3%) lagged.

Speaking of technology, the tech-heavy Nasdaq (+0.3%) underperformed as participants displayed limited buying interest in some momentum names like Facebook (FB 49.01, +0.02), Priceline.com (PCLN 1139.53, +2.09), and Tesla (TSLA 135.45, -2.15). In addition, the largest Nasdaq component, Apple (AAPL 524.99, -3.17) lost 0.6%.

With regard to countercyclical sectors, consumer staples (+0.2%) underperformed while health care (+0.6%), utilities (+0.6%), and telecom services (+0.5%) ended ahead of the broader market.

Treasuries registered modest losses as the 10-yr yield ticked up one basis point to 2.70%.

Light volume has been a recurring theme throughout the week, but today's options expiration prevented another below-average finish as just under 800 million shares changed hands on the floor of the New York Stock Exchange.

On the economic front, wholesale inventories increased 0.4% in September after increasing an upwardly revised 0.8% (from 0.5%) in August (Briefing.com consensus +0.3%). The strong gain in wholesale inventories in September, along with the large upward revision to August, will likely result in a sizable upward revision to third quarter GDP. The Bureau of Economic Analysis assumed that wholesale inventories fell 0.1% in September, which was obviously well below what actually occurred.

Export prices, excluding agriculture, ticked down 0.4% in October after increasing 0.3% in the prior reading. Excluding oil, import prices were unchanged, which followed last month's uptick of 0.2%.

Separately, industrial production levels fell 0.1% in October after increasing an upwardly revised 0.7% (from 0.6%) in September (Briefing.com consensus +0.1%). All in all, industrial production held up well in October considering the dire predictions that were associated with the government shutdown. In fact, the government shutdown seemed to have no negative effects on the entire industry.

The contraction in industrial production can be completely attributed to normal and cyclical fluctuations in utilities and mining. Utilities production dropped -1.1%, but that type of decline was expected following an unusually strong September (4.5%) gain. Mining production fell 1.6%, which, again, was a normal pullback after six consecutive months of gains.

Lastly, the Empire Manufacturing Survey for November registered a reading of -2.2, which was down from the prior month's reading of 1.5. Economists polled by Briefing.com expected the survey to improve to 4.3.

On Monday, September net long-term TIC flows and the November NAHB Housing Market Index will be released at 9:00 ET and 10:00 ET, respectively.



Nasdaq +32.0% YTD

Russell 2000 +31.4% YTD

S&P 500 +26.1% YTD

DJIA +21.8% YTD

Week in Review: Another Week, Another Advance



Equities began the week on a quiet note as the S&P 500 added just over a point (+1.27) after spending the entire session inside of a five-point range. Excluding the first 30 minutes of action, the benchmark index was confined to a two-point range as many participants elected to forego the session. With the bond market closed for Veterans Day and no market-moving economic or company news, equity indices drifted near their flat lines throughout the day. Small caps outperformed the broader market, but the Russell 2000's gain was limited to just 0.1%. Meanwhile, the S&P crept higher as six of ten sectors registered gains. Financials (+0.1%) and health care (+0.2%) paced the slight advance, but only the health care sector was able to end among the leaders.



On Tuesday, the S&P 500 shed 0.2% after spending the entire session in negative territory. The index sold off steadily through the first four hours of action, but managed to regain most of its losses by the close. Meanwhile, the Nasdaq ended flat as the relative strength of technology (+0.3%) underpinned the index. The tech sector was one of just two advancers among cyclical groups as top components provided leadership. Chipmakers also rallied with the PHLX Semiconductor Index adding 0.6%.



Wednesday saw the major averages settle on their best levels of the session despite showing some early weakness. The S&P 500 rose 0.4% while the Nasdaq outperformed with an advance of 0.7%. The tech-heavy Nasdaq paced the rebound as momentum names provided support after suffering group-wide weakness last week. Facebook, LinkedIn (LNKD 231.06, +9.62), and Priceline.com gained between 2.3% and 5.4%. Tesla also displayed intraday strength, but surrendered the bulk of its gain into the close amid reports of fire department activity at the company's factory in California.



On Thursday, the S&P 500 added 0.5%, but all eyes were focused on Washington where Janet Yellen appeared in front of the Senate Banking Committee for her confirmation hearing. The hearing did not generate any bombshells, and Ms. Yellen's comments strengthened the belief that the central bank will not be in any hurry to reduce the pace of its asset purchases. On that note, the Fed Chair nominee said:



The benefits of bond buying exceed the costs

The Fed is apt to maintain accommodative policy for some time after the asset purchase program ends

QE cannot go on forever, but there is no set time for when the Fed will reduce the pace of its asset purchases

It is important not to remove support while the recovery is still fragile

There doesn't appear to be a bubble in stock prices when considering the level of P/E ratios and the equity risk premium