The Nasdaq Composite started the week with a 37-point loss. That slide was precipitated by a selloff in many of the high-beta momentum stocks that came under fire in a Barron's feature story for having bubble-like valuations. In a true sign of the underlying bullish bias in the market, the Nasdaq finished the week nearly six points higher than where it began the week.
To be sure, the buy-the-dip trade was alive and well once more, prevailing in the face of concerns about the suggestion in the minutes from the October FOMC meeting that the Fed could slow the pace of its asset purchases in coming months if the data proved consistent with its outlook for ongoing improvement in labor market conditions.
The aforementioned acknowledgment caused a bit of a hiccup on Wednesday, yet the market wasted little time making up the losses that followed the release of the FOMC Minutes. Its resilience was attributed generally to two reasons: (1) the idea that the Fed didn't really tell the market anything in the minutes it didn't already know and (2) the notion that the market is perhaps growing more comfortable with the Fed's position that a tapering isn't a tightening and that the fed funds rate target is apt to stay at the zero bound even well after the Fed ends its asset purchase program.
Separately, some weak inflation data this week in the form of the CPI and PPI reports seemed to support the market's thinking that the Fed won't curtail its asset purchases before the end of the year. That thinking has the potential to change with the November employment report (out on Nov. 6), but with total CPI up 1.0% over the last 12 months -- the smallest rate of increase since October 2009 -- it is clear that the Fed is still falling well short of meeting the inflation side of its dual mandate.
Another key happening related to the Fed is that Janet Yellen's confirmation as the next Fed chairman appears imminent after the Senate Banking Committee gave her a thumbs up this week. The market likes the thought of continuity in leadership, so it wasn't lost on participants that Fed Chairman Bernanke told the National Economists Club that he agreed with the views Ms. Yellen expressed in her testimony at her confirmation hearing.
Notably, only four out of the ten economic sectors closed the week higher; however, they were four of the market's most influential sectors by weight. The winners of note included the financial (+1.7%), health care (+1.6%), energy (+0.7%), and industrials (+0.6%) sectors. The week's biggest laggard was the rate-sensitive utilities sector (-1.8%).
Longer-dated Treasury securities enjoyed a positive session on Friday as stocks rose, but the yield on the benchmark 10-yr note climbed five basis points on the week to 2.75%. Another loser of note this week was gold, which dropped 3.40% to $1243.00/oz., broadsided both by the weak inflation readings and rumblings about a tapering.
The week ahead will be a short week due to the Thanksgiving holiday on Thursday. So, allow us in advance to wish you a good weekend and a happy Thanksgiving.
|Index||Started Week||Ended Week||Change||% Change||YTD %|