The Week In Review

8/14/15

The stock market ended a volatile week on a modestly higher note with the S&P 500 adding 0.4%. The benchmark index extended its weekly gain to 0.7% while the Nasdaq Composite (+0.3%) underperformed, ending the week higher by 0.1%.

The first four trading days of the week were jam-packed with macroeconomic events, but the Friday affair was very quiet with fewer than 700 million shares changing hands at the NYSE floor.

Equity indices began the final session of the week near their flat lines and spent the first two hours of action alternating between gains and losses. However, heavily-weighted sectors like financials (+0.7%) and industrials (+0.6%) displayed relative strength from the early going while the top-weighted technology sector (+0.5%) contributed to the afternoon strength.

The financial sector continued its rebound off Wednesday's low with today's move lifting the influential sector to a weekly gain of 0.3%. Meanwhile, industrials received support from transport stocks, evidenced by a 0.7% increase in the Dow Jones Transportation Average. The bellwether complex gained 0.8% for the week with 19 of 20 components contributing to today's advance. Freight carrier Con-way (CNW 37.45, +0.71) was the top performer, climbing 1.9% while shipper Matson (MATX 40.79, -0.05) shed 0.1%.

Elsewhere, the technology sector overcame relative weakness among high-beta chipmakers with large cap components like Apple (AAPL 116.00, +0.85), Google (GOOGL 689.37, +2.86), and Microsoft (MSFT 47.00, +0.27) gaining between 0.4% and 0.7% while the PHLX Semiconductor Index lost 0.6% and contributed to the underperformance in the Nasdaq.

Similarly, biotechnology names also weighed on the Nasdaq, but iShares Nasdaq Biotechnology ETF (IBB 364.06, -2.33) was able to narrow its loss to 0.6% by the close. The ETF surrendered 1.3% for the week while the health care sector added 0.3% today, ending the week flat.

On the downside, the energy sector (-0.2%) was among the early leaders, but retreated as crude oil slid from its morning high. The energy component added 0.5% and settled at $42.47/bbl, but still lost 3.6% for the week. Meanwhile, the energy sector climbed 3.2% during the week, ending ahead of the remaining nine groups.

Treasuries registered slim losses after slipping in reaction to a July PPI report that came in just ahead of expectations. The 10-yr note ended just below its flat line with the benchmark yield adding one basis point to 2.20%.

Also of note, today's eurogroup meeting with Greek representatives produced an agreement, which puts Greece on track to receive EUR13 billion in bailout funds next week.

Economic data included PPI, Industrial Production, and the Michigan Sentiment Index:

Producer prices increased 0.2% in July after increasing 0.4% in June while the Briefing.com consensus expected an increase of 0.1% 

Energy prices, which provided the bulk of the gain in June, fell 0.6% in July. Gasoline prices increased 1.5%, but that was offset by big declines in the prices of home heating oil (-9.5%), liquefied petroleum (-4.3%), diesel fuel (-2.6%), and residential natural gas (-2.4%)

Food prices fell 0.1% in July after increasing 0.6% in June

Excluding food and energy, core prices increased 0.3% for a second consecutive month in July while the consensus expected an increase of 0.1% 

The entire increase in core prices resulted from a 0.4% increase in services prices

Industrial production increased 0.6% in July after increasing a downwardly revised 0.1% (from 0.2%) in June while the Briefing.com consensus expected an increase of 0.3% 

That was the largest increase since a 0.9% increase in November 2014

Manufacturing production increased 0.8% in July after declining 0.3% in June

Nearly the entire increase in industrial production resulted from historic gains in the auto industry. Excluding autos, total industrial production was flat in July and manufacturing production increased only 0.1%

The University of Michigan Consumer Sentiment Index declined to 92.9 in the preliminary August reading from 93.1 in July while the Briefing.com consensus expected an increase to 93.7 

Concerns over a downward trending stock market were offset by improvements in labor market conditions, as shown by the historic lows in the initial claims level, and lower gasoline prices

Both the Current Conditions (107.1 from 107.2) and Expectations (83.8 from 84.1) Indices were virtually unchanged in August

On Monday, the Empire Manufacturing Index for August will be released at 8:30 ET while the August NAHB Housing Market Index will be reported at 10:00 ET.

Nasdaq Composite +6.6% YTD

S&P 500 +1.6% YTD

Russell 2000 +0.6% YTD

Dow Jones Industrial Average -1.9% YTD

Week in Review: China Seizes the Spotlight

The stock market began the trading week on a sharply higher note with the S&P 500 spiking 1.3% while the Dow (+1.4%) and Nasdaq (+1.2%) bookended the benchmark index. Equity indices surged out of the gate after the overnight session featured a 4.9% spike in China's Shanghai Composite after below-consensus trade data from China was viewed as an argument in favor of more policy easing. The overnight strength carried over to the European session as regional indices rallied amid reports suggesting Greek officials and eurozone negotiators are nearing a final agreement on a third bailout package for Greece. Once the opening bell rang on Wall Street, U.S. stocks perked up with the S&P 500 charging above its 50-day (2,096) and 100-day (2,098) moving averages. The benchmark index overtook both those levels during the opening hour, and inched to new highs during afternoon action with nine sectors ending in the green.

Global equity markets retreated on Tuesday as investors responded to an overnight devaluation of China's yuan. Specifically, the People's Bank of China lowered the yuan fix by the largest amount on record, sending the USD/CNY pair higher by 1.9% to 6.3249. The move invited renewed trepidations about the pace of economic growth in China while also feeding concerns that China's trading partners may feel compelled to respond by weakening their own currencies. For instance, the Japanese yen was in focus during the session amid speculation the Bank of Japan may be forced to step up its easing efforts to support the country's exporters. As a result, the dollar/yen pair climbed 0.4% to 125.07, nearing a 13-year high. The major European indices lost between 1.1% and 2.7% with the retreat paced by exporter stocks while the S&P settled lower by 1.0% and retraced the bulk of its advance from Monday. The day's selling sent the benchmark index back below its 50-day (2,096) and 100-day (2,098) moving averages with eight sectors registering losses. To little surprise, cyclical groups paced the slide, but the energy sector (-0.2%) spent the day in a steady rally off its opening low. The sector fought its way back to Monday's high even as crude oil plunged 4.2% to $43.08/bbl, settling at a six-year low.

The market ended Wednesday on a slightly higher note despite showing considerable weakness at the start of the trading day. The S&P 500 added 0.1% while the Nasdaq Composite (+0.2%) settled just ahead. Equity indices faced selling pressure at the start after the overnight session featured another move to devalue China's yuan. Specifically, the People's Bank of China fixed the yuan 1.6% lower and then stepped in to support the currency late in the session. Following the intervention, the USD/CNY pair ended higher by 1.0% at 6.3870 while the continued tinkering with the exchange rate by the PBoC fueled a continuation of Tuesday's risk-off move across global markets. The selling pressure persisted until the end of the European session with major equity indices across the old continent losing between 1.4% and 3.4%. Regional markets notched their session lows not long before the close, after Germany's Bild reported that the German government views the third Greek bailout package as insufficient. This was a noteworthy shift, considering the market had believed the bailout agreement was all but complete. Once equity markets in Europe closed, U.S. indices rallied steadily off their lows with the S&P 500 swiftly returning above its 200-day moving average (2,075). Thanks to the intraday recovery, seven sectors registered gains while three groups finished in the red, but above their early lows.

The stock market ended the Thursday session on a modestly lower note after spending some time on both sides of the unchanged level. The S&P 500 shed 0.1% while the Dow Jones Industrial Average eked out a slight gain (+0.03%). Overnight, the People's Bank of China tried to calm investor fears by holding a press conference, during which bank officials said the yuan adjustment "is almost complete" and called the rumors of a 10.0% devaluation "nonsense." Markets across Asia posted gains while European indices ended mostly higher. Once the U.S. session got going, stocks slipped from their opening levels, but the early weakness was largely isolated to the energy sector (-1.4%), which retreated alongside crude oil. The energy component faced selling pressure throughout the day, notching a fresh six-year low under $42.00/bbl during intraday action before inching up to settle lower by 2.3% at $42.25/bbl.