Monday, February 24, 2014

21 Feb AMC - Market ended the week on negative territory.

Market Summary

The major averages finished the mixed week on a lower note. The Dow Jones Industrial Average and S&P 500 both shed 0.2% while the Nasdaq slipped 0.1%. For the week, the Dow and S&P 500 posted respective losses of 0.3% and 0.1% while the Nasdaq added 0.5%. 

In some ways, today's session resembled Wednesday's affair, during which the S&P 500 made an unsuccessful run at its 2013 closing high of 1848.36. However, today's rejection unfolded over the course of the afternoon while Wednesday's pushback from the record high occurred in one sharp move. 

The opening rally was supported by the largest S&P 500 sector, technology, which outperformed during the first 90 minutes of action. However, the morning leader became an afternoon laggard after the S&P 500's failed run at new record highs. The tech sector lost 0.3% while top components like Apple (AAPL 525.25, -5.90), Facebook (FB 68.59, -1.04), and Intel (INTC 24.48, -0.26) lost between 1.1% and 1.5%. Another tech component, Hewlett-Packard (HPQ 29.79, -0.40), lost 1.3% despite beating on earnings and revenue. 

Interestingly, once the technology sector slipped behind the S&P 500, the second largest sector—financials—was there to pick up the slack. The group struggled to keep pace with the S&P 500 since Wednesday and began today among the laggards, but was able to climb ahead of the broader market during the late-morning retreat. Despite today's slight gain of 0.03%, the sector ended the week behind the remaining nine groups with a loss of 0.9%. 

Elsewhere, the discretionary sector (+0.2%) finished in the lead thanks to all-around strength. Retailers held up well even after Nordstrom (JWN 59.24, -0.20) issued disappointing guidance. 

On the downside, the energy sector (-0.7%) spent the entire session in the red while crude oil slid 0.6% to $102.18/bbl. Elsewhere among commodities, gold remained strong, climbing 0.5% to $1317.30/ozt. 

Trading volume was above average, which resulted from options expiration. Nearly 800 million shares changed hands at the NYSE versus a 200-day average of 718 million. 

Treasuries posted modest gains with the benchmark 10-yr yield ending lower by two basis points at 2.73%. 

Week in Review: Stocks Endure Choppy Week 

On Monday, bond and equity markets were closed for Presidents' Day. 

Tuesday's session saw equity indices kick off the abbreviated trading week on a relatively quiet note. Small caps finished in the lead (Russell 2000 +1.0%) while the S&P 500 added 0.1%. The benchmark index saw a brief dip at the open, but the weakness was erased promptly thanks to the early strength of the health care sector (+0.9%). The group surged out of the gate after Actavis (ACT 218.41, -1.96) agreed to acquire Forest Laboratories (FRX 96.88, -0.42) for $25 billion. Biotechnology also factored into the sector's strength as the iShares Nasdaq Biotechnology ETF (IBB 268.71, +3.25) jumped 2.6%. 

On Wednesday, stocks ended on their lows with the S&P 500 snapping its three-day win streak. The index fell 0.7% while the Nasdaq (-0.8%) lagged throughout the session. The trading day began with slim losses, but the Dow and S&P 500 were quick to erase the early weakness. For its part, the Nasdaq was unable to make a sustained move into the green. Eight of ten sectors ended in the red with financials registering the largest decline. Citigroup (C 48.26, +0.13) was the weakest performer among the majors while regional banks also endured significant losses. The SPDR S&P Regional Banking ETF (KRE 38.15, +0.31) fell 2.8%. 

Equities ended the Thursday session on their highs with small caps in the lead. The Russell 2000 gained 1.1% while the S&P 500 rose 0.6% with all ten sectors posting gains. Prior to the open, the market appeared to be headed for a lower start as disappointing data from China, Japan, and the eurozone weighed on index futures. Specifically, China's HSBC Manufacturing PMI fell to 48.3 from 49.5 (49.4 expected), Japan posted a record trade deficit of JPY1.82 trillion (JPY1.56 trillion expected), and the Manufacturing PMI for the eurozone (53.0 versus 54.0 expected) disappointed. Despite the weak data from overseas, equity futures were able to find support when a better-than-expected Markit Manufacturing PMI for the U.S. was released (56.7 actual versus 53.0 expected). Historically, the data point has not been known for eliciting a noteworthy reaction in the market, but today's number likely fueled some short covering activity that sent futures back to their flat lines by the opening bell. In addition, buying ahead of Friday's options expiration likely factored into the morning rebound and the daylong rally. 
  • Nasdaq Composite +2.1% YTD 
  • Russell 2000 +0.3% YTD 
  • S&P 500 -0.7% YTD 
  • Dow Jones Industrial Average -2.9% YTD

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