The Week In Review

10/23/15

The stock market ended the week on an upbeat note thanks to an opening spike that was extended during afternoon action. The S&P 500 jumped 1.1%, extending its weekly gain to 2.1%, while the Nasdaq surged 2.3% to end the week higher by 3.0%.

Quarterly earnings released last evening ensured a higher start for the major averages while a surprise rate cut from the People's Bank of China supercharged the opening move higher. Specifically, the central bank lowered its one-year lending rate by 25 basis points to 4.35% and cut its reserve requirement ratio by 50 basis points for qualifying institutions, representing the sixth rate cut since November. With most of the action taking place before the opening bell, stocks drifted near their highs into the afternoon, building on their gains during the final hour of action.

Last evening, Alphabet (GOOGL 719.33, +38.19), Amazon (AMZN 599.03, +35.12), and Microsoft (MSFT 53.03, +5.00) delivered better than expected quarterly earnings, setting the stage for today's rally.

Alphabet and Microsoft helped the technology sector (+3.1%) spend the day well ahead of its peers while Amazon's strength helped the discretionary sector (+0.4%) end the day in positive territory even as apparel retailers struggled across the board. Retailers slumped in sympathy with Skechers (SKX 31.65, -14.54) and V.F. Corp (VFC 63.75, -9.46) after both companies reported disappointing results. The two names posted respective losses of 31.5% and 12.9% while SPDR S&P Retail ETF (XRT 44.99, -0.63) fell 1.4%.

Similar to the discretionary sector, seven other groups ended the day behind the broader market while health care (+2.0%) outperformed thanks to a rebound in biotechnology as the iShares Nasdaq Biotechnology ETF (IBB 316.28, +10.17) spiked 3.3%.

Although the market ended well above its flat line, it is worth noting that only 59.0% of NYSE-listed issues posted gains, suggesting the presence of some softness beneath a seemingly strong surface. To that point, investors used today's strength to increase their hedges, evidenced by the CBOE Volatility Index (VIX 14.40, -0.05), which essentially held its ground.

On the downside, the energy sector (-0.2%) struggled as crude oil lost 1.8%, falling to $44.59/bbl. For the week, the energy sector surrendered 1.0% while WTI crude fell 5.7%.

Elsewhere, the utilities sector (-1.8%) ended at the bottom of the leaderboard as higher Treasury yields reduced the relative attractiveness of high-yielding utility names.

Speaking of Treasuries, the 10-yr note notched its low during morning action and hovered near its low into the close with the 10-yr yield rising six basis points to 2.09%.

On a related note, the Dollar Index (97.18, +0.80) spiked in reaction to the news from China, extending its advance into the close to end higher by 0.8%.

Investors did not receive any economic data today while Monday's data will be limited to the 10:00 ET release of the September New Home Sales report (Briefing.com consensus 550K).

Nasdaq Composite +6.3% YTD

S&P 500 +0.8% YTD

Dow Jones Industrial Average -1.0% YTD

Russell 2000 -3.2% YTD

Week in Review: S&P 500 Regains 100-Day Moving Average

The stock market began the trading week on a quiet note with the major averages spending the Monday session inside narrow ranges. The S&P 500 settled just above its flat line after climbing off its opening low while the Nasdaq Composite (+0.4%) outperformed. In some ways, the range-bound action was a bit of a surprise considering investors received China's Q3 GDP report over the weekend. The growth report proved to be a mixed bag as GDP beat estimates (+6.9%; consensus 6.8%), but dipped below the official target growth rate of 7.0% year-over-year. Asian markets took the data in stride with China's Shanghai Composite and Hong Kong's Hang Seng both ending flat; however, the slowdown in the year-over-year growth rate weighed on commodities, sending crude oil lower by 3.0% to $45.90/bbl. The sell-off in crude oil futures pressured the energy sector (-2.0%) while a major sector component—Halliburton (HAL 37.36, -0.45)—lost 1.2% in reaction to better than expected earnings on below-consensus revenue.

Tuesday also ended on a quiet note after the market spent the session inside a narrow trading range. The S&P 500 shed 0.1% while the Nasdaq Composite (-0.5%) underperformed throughout the day. The Tuesday affair was very quiet with the S&P 500 spending the majority of the session near its flat line. The benchmark index opened with a modest loss and rallied into the green during morning action, but could not climb above its 100-day moving average (2,039), which served as resistance. The index followed that short-lived rally with a return into the red, where it settled for the day. Six sectors ended the day with gains, but top-weighted technology (-0.3%) and health care (-1.5%) struggled, which kept the market under pressure. Notably, the technology sector could not overcome the relative weakness in the shares of IBM (IBM 140.68, -8.54) after Big Blue reported below-consensus revenue and lowered its guidance, which overshadowed a bottom-line beat.

Equities ended Wednesday on a lower note after enduring a shaky session. The S&P 500 lost 0.6% after failing to overtake its 100-day moving average (2,038) for the second day in a row. Meanwhile, the Nasdaq Composite (-0.8%) underperformed and the Dow Jones Industrial Average (-0.3%) displayed relative strength. Stocks began the day with modest gains, but the S&P 500 notched its high during the opening minutes of the session and returned to its flat line in short order. The index traded just above the unchanged level into the afternoon, but slid to lows shortly after 13:00 ET. The S&P 500 staged a late charge to its flat line, but could not overtake that level, dropping to a new low instead. Although the market spent another day inside a relatively narrow range (21 S&P points), the same could not be said about the health care sector, which ended lower by 0.9% after showing a 1.0% gain at the start that briefly morphed into a 2.5% decline. The intraday volatility was brought on by a swoon in the biotech space after Citron Research published a report on Valeant Pharmaceuticals (VRX 118.61, -28.13), calling into question the company's relationship with Philidor RX, which is a specialty pharmacy.

Thursday proved to be a running of the bulls with "re-examine" representing the trigger that sparked the charge. The S&P 500 soared 1.7%, overtaking its 100-day moving average (2,038) in the process. The benchmark index settled near its best level of the day, registering its first close above the 100-day average since August 17, as hopes for more stimulus overshadowed mixed corporate earnings. The stock market was off to the races after equity futures revved higher an hour before the opening bell. The pre-market activity took place in response to comments from European Central Bank President Mario Draghi, who addressed the media following the latest ECB policy meeting. During his press conference, Mr. Draghi said that the central bank will "re-examine" its asset purchases at the December meeting. This was immediately interpreted as a harbinger of more monetary easing in the near future, sending the euro lower while European equities and U.S. futures spiked. Those moves accelerated after Mr. Draghi revealed that the governing council had discussed lowering the deposit facility rate at today's policy meeting. Markets in France, Germany, Spain, and Italy jumped between 2.0% and 2.5% while the euro slid throughout the session to 1.1110 against the dollar after trading just above 1.1300 prior to Mario Draghi's press conference. As a result, the Dollar Index (96.44, +1.37) spiked 1.4%, returning to levels last seen in late September.