The Week In Review
5/23-2/27/15
The stock market capped a quiet week with a subdued Friday session. However, it is worth noting that the range-bound week followed sharp gains registered earlier this month. The S&P 500 shed 0.3% on Friday to narrow its February gain to 5.5% while the Nasdaq Composite (-0.5%) underperformed today, but climbed 7.1% since the end of January.
Equity indices spent the bulk of the session near their flat lines before a wave of profit-taking during the final 90 minutes sent the indices to fresh session lows. Eight of ten sectors finished the day in the red, but only one sector—utilities (-0.1%)—registered a February loss. The rate-sensitive group fell 7.0% during the month as higher yields made Treasuries more attractive.
The technology sector (-0.5%) finished the day at the bottom of the leaderboard, but still added 7.9% for the month. Similar to the sector, the top-weighted component—Apple (AAPL 128.48, -1.94)—endured some profit taking following a big run in February. Shares of AAPL fell 1.5% today, but still ended the month higher by 9.7%.
Elsewhere, the energy sector lost 0.4% to narrow its February gain to 3.5% even though crude oil settled on its high. The energy component spiked 3.3% to $49.76/bbl, adding nearly 10.0% for the month. WTI crude surged off its afternoon low even after the Baker Hughes rig count registered its 12th consecutive decline (-43) to 1267.
Meanwhile, the remaining cyclical sectors finished closer to their respective flat lines. For instance, the discretionary sector (-0.1%) ended slightly lower with many apparel retailers enjoying gains after Gap (GPS 41.60, +1.23) reported a one-cent beat, announced a $1 billion buyback, and boosted its dividend by 5.0%, which overshadowed below-consensus guidance. Peer J.C. Penney (JCP 8.50, -0.62) headed in the opposite direction, falling 6.8%, after missing earnings estimates.
The countercyclical side looked a bit better today with consumer staples (+0.4%) and telecom services (+0.3%) registering modest gains while the aforementioned utilities sector (-0.1%) and health care (-0.5%) settled in the red.
Consumer staples rallied behind Coca-Cola (KO 43.30, +0.84) and Monster Beverage (MNST 141.12, +16.38) after the latter reported better than expected results. On the flip side, Herbalife (HLF 31.01, -3.81) tumbled 10.9% after its disappointing revenue and cautious guidance overshadowed a bottom-line beat.
Treasuries registered modest gains with the 10-yr yield slipping three basis points to 2.00%. Despite today's advance, the 10-yr note ended February in the red with its yield 32 basis points above where it ended January. For its part, the Dollar Index (95.33, +0.03) eked out a slim gain on Friday and finished the month higher by 0.4%.
Although the final week of February was relatively quiet on the international front, that could change in a hurry. Yesterday evening, Kathimerini reported that Greece is due to pay EUR1.60 billion to the IMF next month, but it is uncertain whether the country will be able to make the payment on time. The IMF is scheduled to receive the first installment in the amount of EUR310 million on Friday, March 6.
Economic data included Q4 GDP, Chicago PMI, Michigan Sentiment Index, and Pending Home Sales:
Fourth quarter GDP was revised down to 2.2% in the second estimate from 2.6% in the advance estimate after increasing 5.0% in Q3
The Briefing.com consensus expected a revision down to 2.1%
Despite the downward revision, the GDP report actually reveals slightly better economic trends in the second estimate. Nearly all of the revision resulted from weaker inventory growth -- $88.40 billion vs. $113.10 billion in the advance release. Excluding inventories, real final sales were revised up to 2.1% from an originally reported 1.8%
The University of Michigan Consumer Sentiment Index was revised up to 95.4 in the final February reading from 93.6 while the Briefing.com consensus expected a revision up to 94.0
Even after the revisions, the Consumer Sentiment Index is still down from 98.1 in January
The Chicago PMI declined to 45.8 in February from 59.4 while the Briefing.com consensus expected a drop to 58.0
This was the first reported contraction in the Chicago region since April 2013 and the largest contraction since the index dropped to 42.7 in July 2009
Readings throughout the report were abysmal, and every index, with the exception of supplier deliveries (58.3 from 54.9), contracted in February
Pending home sales for January rose 1.7% while the Briefing.com consensus expected an increase of 2.4%
On Monday, Personal Income/Spending and Core PCE Prices for January will be reported at 8:30 ET while Construction Spending for January and February ISM Index will be released at 10:00 ET.
Nasdaq Composite +4.8% YTD
Russell 2000 +2.4% YTD
S&P 500 +2.2% YTD
Dow Jones Industrial Average +1.7% YTD
Week in Review: S&P 500 Locked in Sideways Action
The major averages began the week on a sleepy note with the S&P 500 ending flat after spending the day in a seven-point range while the Nasdaq (+0.1%) finished a little ahead of the benchmark index. Participants stuck to the sidelines ahead of Tuesday's semiannual testimony on monetary policy. Six of ten sectors registered losses with all six cyclical sectors ending in the red. Most notably, the energy sector (-0.4%) slumped to the bottom of the leaderboard at the start, exerting pressure on the market throughout the day. The group lagged as crude oil fell 2.5% to $49.56/bbl. The energy component saw a brief afternoon spike into the $50.00/bbl area after Nigeria's oil minister said the sharp slide in crude prices could lead to an emergency OPEC meeting. WTI crude returned to its afternoon low after OPEC refuted the report, announcing no plans for an emergency meeting at this time.
Equity indices endured another quiet session on Tuesday before a late afternoon rally sent the S&P 500 (+0.3%) to a new record high. The price-weighted Dow (+0.5%) outperformed while the Nasdaq Composite (+0.1%) and Russell 2000 (+0.1%) struggled to keep up. Trading volume was well below average with fewer than 700 million shares changing hands at the NYSE floor. The key indices spent the bulk of the day near their flat lines, seeing little reaction to Fed Chair Janet Yellen's testimony on monetary policy before the Senate Banking Committee. Chair Yellen reiterated the Fed's intent to remain patient before raising rates, due to weak wage growth and low inflation. In addition, Ms. Yellen indicated the Fed will change its forward guidance prior to hiking rates, and that change to the outlook will clear the way for a potential hike in any particular meeting that follows. Although the testimony had little impact on equities, Treasuries spiked with the 10-yr yield sliding eight basis points to 1.98% as bond traders showed little concern for a rate hike in the near term.
The stock market ended the midweek session on a flat note after spending the trading day in a narrow range. The S&P 500 shed 0.1% while the Nasdaq (-0.02%) registered its first loss since February 9. Once again, the session featured below-average activity with only 687 million shares changing hands at the NYSE floor. Equities faced some selling pressure at the start with the top-weighted technology sector (-0.7%) responsible for the early weakness. Specifically, Hewlett-Packard (HPQ) pressured the sector after reporting uninspiring results for the quarter. The former Dow component plunged 9.9% after its one-cent beat was overshadowed by a 4.7% year-over-year decline in revenue and below-consensus guidance. Despite the opening weakness, the market was able to reclaim its early loss by midday, but renewed selling in the tech sector sent equity indices to fresh lows during the afternoon. The largest stock by weight—Apple (AAPL )—fell 2.6% to lead the afternoon pullback.
The market endured another range-bound session on Thursday with the S&P 500 shedding 0.1% after respecting a seven-point range. The Dow (-0.1%) and S&P 500 began the day under pressure due to noteworthy weakness in the energy sector (-1.8%). Meanwhile, most other cyclical groups also began in the red while technology (+0.7%) outperformed throughout the day and kept the Nasdaq (+0.4%) in the green. The top-weighted technology sector received support from some of its largest components by weight like Apple (AAPL), Google (GOOGL), and Facebook (FB). The three names gained between 1.1% and 2.2% with Apple climbing into the green after announcing a press event on March 9 where the company is expected to launch its wristwatch.