Daily Market Recap

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The S&P 500 had its worst one day decline of the year today. The average fell just 0.39%. There was a rotation today out of the recent winners in the cyclical area of the market, transports and homebuilders. The rails and airlines had been leading the transports higher. Today both areas saw profit taking. There had been talk of a market selloff being overdue for quite some time. The selling today was orderly and came mainly in areas that have moved sharply higher in 2013.

Real GDP contracted at a rate of 0.1% on an annual rate last quarter. The weakness was driven by a 22% annualized drop in defense spending and a decrease in the rate of inventory building. When you factor out the fiscal cliff induced decline in defense spending the economy actually showed strong growth. The decrease in inventory accumulation actually means that producers will not have to pullback as much on production should we see consumer spending slow.

The ADP employment report showed that private payrolls increased 192,000 in January. This level exceeded analyst expectations.

The Fed did announce that they will continue to aggressively buy mortgage backed and Treasury bonds. They did not change their stance of the duration of the program. They will remain accommodative at the current pace, at least, until they see unemployment in the 6.5% range and as long as inflation remains subdued.

Commodities traded higher from the open today. Crude, copper, precious metals and natural gas all traded higher. Gold close higher by 0.78% and silver closed higher by just more than 2%. Base metals moved higher as copper rose by 1.6%. Crude traded higher by 0.50% and natural gas reversed trend and moved higher by 2.5%.

Financials were lower on the day with the bank index ending roughly flat. REIT related financials were the leaders to the downside in the space. Capital markets related names, like Morgan Stanley, traded higher on the day.

Homebuilders have been huge winners over the past several months. There was a large spike in the industry group yesterday after much better than expected earnings from some leaders in the space. The market was disappointed in some earnings releases in the area today. The reports did not exceed expectations to the extent that other companies have recently. Homebuilders sold off as investors used the earnings announcements and the recent run higher as a reason to take some profits.

Weakness in steels and chemical names hurt the materials sector today. Several steel names released earnings numbers that didn't entice any new buying.

Source: PFS Group

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