The stock market rebounded from last week's decline with a Monday rally that sent the S&P 500 (+1.4%) back above its 50-day moving average (2,060). The benchmark index narrowed its March loss to 1.1% while the Nasdaq (+1.2%) and Russell 2000 (+0.6%) underperformed, but still logged solid gains to start the week.

 

Unperturbed by disappointing economic data, equity indices rallied out of the gate and registered the bulk of their gains during the first hour of action. Countercyclical health care (+2.2%) and utilities (+1.7%) held the lead throughout the session, but most other sectors also posted solid gains.

 

The only group that couldn't make it out of the red was the materials sector (-0.1%) as Dow component DuPont (DD 77.07, -3.43) weighed after Bank of America/Merrill Lynch downgraded the stock to 'Underperform' from 'Buy.' DuPont lost 4.3% while steelmakers also pressured the sector with Market Vectors Steel ETF (SLX 30.91, -0.06) sliding 0.2%.

 

Meanwhile, another commodity-linked sector—energy—began the day in negative territory, but rebounded to end higher by 1.4% even as crude oil dropped to a new low for the year. The energy component settled lower by 2.1% at $43.94/bbl after testing the $43.00/bbl level this morning.

 

Crude oil spent the day in the red after OPEC's monthly oil market report indicated that global demand growth is unlikely to increase from the previous month's 1.17 million barrels/day. Furthermore, a pullback in the Dollar Index (99.71, -0.63) failed to provide support. The Dollar Index lost 0.6% with the greenback giving up 0.7% to the euro, which tested the 1.0600 level.

 

Today's relative weakness in the dollar combined with the lack of a negative response to disappointing economic data suggests that participants were not all that concerned with the possibility that the Fed will strike a hawkish tone in Wednesday's policy statement. There was no strong demand for volatility protection today with the CBOE Volatility Index (VIX 15.61, -0.39) falling 2.4%.

 

As mentioned earlier, the health care sector ended in the lead. Biotechnology supported the advance step-for-step with the iShares Nasdaq Biotechnology ETF (IBB 353.97, +8.64) climbing 2.5% to a new record high.

 

In turn, the relative strength within the biotech group was not enough to keep the Nasdaq in-line with the broader market. The tech-heavy index underperformed slightly as Facebook (FB 78.07, +0.02) and Intel (INTC 30.83, -0.10) spent the day in negative territory. Intel shed 0.3%, but that had little impact on its peers as the broader PHLX Semiconductor Index gained 1.5%.

 

Elsewhere among cyclical groups, the industrial sector (+1.6%) outperformed with help from transport stocks. The Dow Jones Transportation Average jumped 1.7% with 19 of its 20 components posting gains while Matson (MATX 40.73, -0.42) lost 1.0%.

 

Treasuries registered modest gains with the 10-yr yield slipping three basis points to 2.09%.

 

Today's participation was in-line with recent averages as 740 million shares changed hands at the NYSE floor.

 

Economic data included Empire Manufacturing Index, Industrial Production, and NAHB Housing Market Index:

 

The Empire Manufacturing Survey for March registered a reading of 6.9, which was below the prior month's reading of 7.8 and below the Briefing.com consensus estimate, which was pegged at 8.8

Industrial production increased 0.1% in February after declining a negatively revised 0.3% (from +0.2%) while the Briefing.com consensus expected an increase of 0.3% 

Manufacturing production declined 0.2% in February after declining 0.3% in January, representing the third consecutive monthly contraction

Capacity utilization declined to 78.9% from 79.1% (consensus 79.5%)

The NAHB Housing Market Index for March fell to 53 from 55 while the Briefing.com consensus expected an increase to 56

Tomorrow's economic data will be limited to the 8:30 ET release of February Housing Starts (Briefing.com consensus 1.041 million) and Building Permits (consensus 1.07 million).

 

Nasdaq Composite +4.1% YTD

Russell 2000 +2.9% YTD

S&P 500 +1.1% YTD

Dow Jones Industrial Average +0.9% YTD