The Week In Review


The major averages finished a defensive week on an upbeat note. The S&P 500
gained 1.1% with nine sectors ending in the green. The rally helped the
benchmark index narrow this week's decline to 0.8% after being down near
3.0% at its lowest point on Thursday. Equities received a morning boost after the Nonfarm Payrolls report for September sailed past expectations. According to the Bureau of Labor
Statistics, payrolls grew by 248,000, which was well ahead of the consensus estimate (210,000). The unemployment rate fell to
5.9% from 6.1%, but that resulted from a drop in the labor force participation rate.
The strong report underpinned equities and sent the Dollar Index (86.66,
+1.06) to a fresh four-year high. The greenback strength weighed on
commodities, resulting in a 1.4% drop in crude oil ($89.76/bbl) and a 1.8%
decline in gold futures ($1192.90/ozt). The losses in the commodity space
pressured the two commodity-related sectors, while the remaining cyclical
groups posted gains of 0.8% or more.
Meanwhile, the energy sector (unch) underperformed throughout the session
and was down near 1.0% during morning action. The growth-sensitive sector
was able to return to its flat line, but could not avoid registering a 3.8%
decline for the week.
Similarly, the materials sector (+0.3%) ended the week in-line with energy
amid pressure from miners and steelmakers. The Market Vectors Gold Miners
ETF (GDX 20.63, -0.99) fell 4.6%, while the Market Vectors Steel ETF (SLX
42.83, -0.84) tumbled 1.9% with Cliffs Natural Resources (CLF 8.32, -1.68)
pacing the slide. The steel company plunged 16.8% following a Nomura
downgrade to 'Reduce' from 'Buy.'
Elsewhere among cyclical groups, consumer discretionary (+1.3%) and
financials (+1.5%) displayed strength throughout the session, while the
technology sector (+0.8%) ended a bit behind the market. The top-weighted
sector component-Apple (AAPL 99.62, -0.28)-acted as a drag, while chipmakers
could not keep up with the market either. The PHLX Semiconductor Index added
0.6%, but registered a 3.1% loss for the week.
The underperformance of chipmakers did not reflect the strength in other
high-beta areas. The Dow Jones Transportation Average surged 2.1% back to
unchanged for the week, while biotech stocks sent the iShares Nasdaq
Biotechnology ETF (IBB 275.33, +6.74) higher by 2.5%. Conversely, the health
care sector (+2.0%) spent the entire session in the lead. Shares of Mylan
Labs (MYL 50.23, +3.73) contributed to the strength after the company raised
its guidance.
Treasuries slumped following the jobs data, but returned to their early
morning levels by the close. The 10-yr note shed four ticks, adding one
basis point to its yield (2.44%), while the long bond posted a modest gain,
lowering its yield by one basis point to 3.13%.
Today's participation was ahead of average with more than 796 million shares
changing hands at the NYSE.
Economic data included Nonfarm Payrolls, Trade Balance, and ISM Services:
Nonfarm payrolls added 248,000 jobs in September following an upwardly
revised 180,000 (from 142,000) gain in August, while the
consensus expected an increase of 210,000
Stripping out government jobs, private payrolls added 236,000 jobs in
September (consensus 205,000) after adding an upwardly revised 175,000 (from
134,000) in August
The hourly workweek ticked up to 34.6 hours from 34.5 hours and hourly
earnings growth was flat
While the unemployment rate fell to 5.9% from 6.1%, which easily beat
consensus expectations of 6.1%, much of the gain came from the 97,000 person
decline in the labor force. Had the participation rate remained at August
levels, the unemployment rate would have remained at 6.1%
The U.S. trade deficit fell to $40.10 billion in August from a downwardly
revised $40.30 billion (from $40.50 billion) in July, while the
consensus expected an increase to $40.90 billion
The goods deficit increased to $59.90 billion in August from $59.80 billion
in July and the services surplus increased to $19.80 billion from $19.50
The ISM Non-manufacturing Index fell to 58.6 in September from 59.6 in
August, while the consensus expected a drop to 58.9
Even though the index declined in September, the trends show robust economic
growth with both business activities/production (62.9 from 65.0) and new
orders (61.0 from 63.8) remaining above 60
There is no economic data on Monday's schedule.

Nasdaq Composite +7.2% YTD
S&P 500 +6.5% YTD
Dow Jones Industrial Average +2.6% YTD
Russell 2000 -5.0% YTD
Week in Review: Stocks Slide as Q3 Ends

The stock market began the new week on a cautious note. The S&P 500 lost
0.3%, but managed to erase more than half of its opening decline. Thanks to
the rebound, the benchmark index reclaimed its 50-day moving average
(1976.78) after slipping below that level in the morning. Equities slumped
at the open amid a couple global developments that dampened the overall risk
appetite. Continued student protests in Hong Kong and a potential response
from China weighed on the Hang Seng index (-1.9%), while other regional
indices held up relatively well with Japan's Nikkei (+0.5%) and the Shanghai
Composite (+0.4%) posting gains. Meanwhile in Europe, participants showed
concerns about the Catalan independence referendum scheduled to take place
on November 9. However, a twist was introduced to the story during the
afternoon when the Spanish Constitutional Court announced it will block the
independence vote.

On Tuesday, the market finished the third quarter on a defensive note with
small caps leading the retreat. The S&P 500 shed 0.3% to narrow its Q3 gain
to 0.6%, while the Russell 2000 (-1.5%) widened its quarterly loss to 7.9%.
The retreat represented the second consecutive decline for the benchmark
index, which registered a September loss of 1.6%. The S&P 500 displayed
modest strength in the early going with help from influential sectors like
technology (+0.2%), financials (-0.2%), and industrials (-0.1%), but slid
from highs amid significant weakness in the two commodity-related sectors.
Most notably, the energy space (-1.2%) widened its Q3 loss to 9.2% and was
pressured by a 3.6% decline in crude oil, which fell to $91.16/bbl,
registering a 13.6% loss for the quarter.