The Week In Review

39-3/13/15

Triskaidekaphobia or the fear of the number 13. Friday the thirteen was not good to the markets today. The stock market finished the week on a defensive note with the S&P 500 (-0.6%) returning below its 50-day moving average (2,059). The benchmark index settled ahead of the Dow Jones Industrial Average (-0.8%), but behind the Nasdaq Composite (-0.4%).

Equity indices began the day with modest losses and spent the first two hours of action in a steady slide that involved all ten sectors. The S&P 500 hovered near its morning low into the afternoon, but was able to rally into the middle of its trading range during the final 90 minutes of the day.

Once again, the early pressure was largely due to continued greenback strength that sent the Dollar Index (100.22, +0.78) higher by 0.8% to extend its March advance to 5.1%. The unyielding strength fed concerns about the impact to earnings of multinational companies while also pressuring crude oil. The energy component fell 4.7% to $44.89/bbl and notched its low after the Baker Hughes rig count fell to 1125 (-67), registering its 14th consecutive weekly decline.

For the week, WTI crude lost 9.1% while the energy sector (-0.5%) fell 2.8%, ending the week well behind the remaining groups. Today, however, the sector finished ahead of the broader market thanks to a late rally amid speculation ExxonMobil (XOM 83.87, -0.35) may be interested in Whiting Petroleum (WLL 40.00, +1.64). Meanwhile, the materials sector (-1.0%) was the weakest performer on the cyclical side as steelmakers weighed with Market Vectors Steel ETF (SLX 30.97, -0.72) falling 2.3%.

Elsewhere, the technology sector (-0.5%) stayed ahead of the broader market thanks to relative strength among chipmakers. The PHLX Semiconductor Index gained 0.7% with NXP Semiconductor (NXPI 104.66, +6.09) jumping 6.2% after Needham initiated coverage of the stock with a 'Strong Buy' rating. As for large cap names, Intel (INTC 30.93, +0.13), Microsoft (MSFT 41.38, +0.36) and Oracle (ORCL 42.38, +0.76) finished in the green while other major tech components registered losses.

The Nasdaq settled a little ahead of the broader market thanks to those pockets of strength while biotechnology names also contributed to the outperformance. The iShares Nasdaq Biotechnology ETF (IBB 345.33, +0.50) added 0.1% after being up more than 1.0% this morning. On a related note, the health care sector (-0.2%) finished ahead of the remaining groups.

Treasuries ended flat after showing intraday gains with the 10-yr yield settling at 2.12%.

Today's participation was a bit light with fewer than 790 million shares changing hands at the NYSE floor.

Economic data included PPI and Michigan Sentiment:

Producer prices declined 0.5% in February after declining 0.8% in January while the Briefing.com Consensus expected an increase of 0.3% 

The drop in producer prices was a shock. Most analysts expected a rise in energy prices would offset any weaknesses from other sectors, but that did not happen 

Energy prices were flat in February after declining 10.3% in January

Food prices declined 1.6% in February after declining 1.1% in January, which was the third consecutive monthly decline in food prices. Most of the drop resulted from a 17.1% decline in fresh and dry vegetable prices

Excluding food and energy, core PPI also declined 0.5% in February after declining 0.1% in January while the consensus expected an increase of 0.1%

The University of Michigan Consumer Sentiment Index dropped to 91.2 in the preliminary March reading from 95.4 while the Briefing.com consensus expected an increase to 95.8 

Slightly higher gasoline prices and a volatile equity market offset continued strengthening in the labor market

On Monday, the Empire Manufacturing report for March will be released at 8:30 ET while February Industrial Production and Capacity Utilization will be announced at 9:15 ET. The day's data will be topped off with the 10:00 ET release of NAHB Housing Market Index for March.

Nasdaq Composite +2.9% YTD

Russell 2000 +2.3% YTD

S&P 500 -0.3% YTD

Dow Jones Industrial Average -0.4% YTD

Week in Review: Dollar Strength in Focus

The stock market began the week on an upbeat note with the Dow Jones Industrial Average (+0.8%) pacing the Monday advance. The price-weighted index settled well ahead of the S&P 500 (+0.4%) while the Nasdaq Composite (+0.3%) spent the bulk of the day near its flat line. Equity indices climbed out of the gate with cyclical sectors fueling the early advance. Meanwhile, countercyclical groups struggled early, but only the telecom services sector (-0.3%) failed to turn positive by the closing bell. Eight of ten sectors finished the day in the green with industrials (+0.9%) settling in the lead. The sector benefitted from solid gains among large cap names like 3M (MMM), Boeing (BA), and Caterpillar (CAT) with the three Dow components advancing between 0.9% and 1.2%. The trio helped the Dow climb throughout the session while the Nasdaq underperformed due to relative weakness in biotechnology and major chipmakers like Taiwan Semiconductor (TSM) and Intel (INTC).

The market endured a daylong selloff on Tuesday with the S&P 500 (-1.7%) sliding below its 50-day moving average and surrendering its Q1 gain. Equities stumbled out of the gate after the Dollar Index (98.60, +1.01) continued its charge, climbing to a fresh 12-year high during overnight action. The index spent the morning near its overnight high and built on that gain into the afternoon. The greenback strength sent the euro into the 1.0700 area while the Dollar Index extended its March gain to 3.4%. The unwavering dollar strength fueled concerns about the earnings prospects of multinational companies while also putting pressure on overseas entities that conduct their dealings in dollars. As a result, a wave of recent downward earnings revisions has lowered 2015 EPS growth expectations to just 1.1% from 9.8% on December 1, according to S&P Capital IQ. The diminished prospects for solid earnings growth broadsided the six growth-sensitive sectors while countercyclical groups did not fare much better. Sellers remained in control throughout the day with the two largest sectors by weight—technology (-2.2%) and financials (-2.1%)—pacing the retreat.

The Dow (-0.2%), Nasdaq (-0.2%), and S&P 500 (-0.2%) registered modest losses on Wednesday while the Russell 2000 (+0.6%) outperformed. The small-cap index climbed steadily throughout the afternoon while the S&P 500 spent the day in an 11-point range near its flat line before settling just below its 100-day moving average (2,042). Tuesday's sharp slide was paced by the two largest sectors by weight, but technology (-0.7%) and financials (+0.6%) spent Wednesday on opposite sides of their unchanged levels, which contributed to the sideways action. The financial sector settled in the lead ahead of the evening release of the complete results of the stress test administered by the Federal Reserve.

The major averages enjoyed a broad-based rebound on Thursday after the S&P 500 (+1.3%) lost 3.6% during the previous seven sessions. The benchmark index reclaimed its 50- (2,060) and 100-day (2,044) moving averages while the Russell 2000 (+1.7%) outperformed. Equity indices charged higher out of the gate and maintained narrow ranges into the afternoon before extending to new highs during the last hour of action. The market all but ignored a disappointing retail sales report for February (-0.6%; Briefing.com consensus +0.4%), but it could be argued that the weak reading increased the likelihood that the Fed will delay its first rate hike. More notably, the greenback weakened a bit with the Dollar Index (99.26, -0.54) shedding 0.5% to narrow its March gain to 4.1%. The Index was down more than 1.0% in the morning, but climbed off its session low that was notched after the release of the retail sales report. Thursday's dollar weakness was not enough to keep crude oil from ending the pit session lower by 2.3% at $47.11/bbl while the energy sector (-0.5%) was the only group that finished in the red. Meanwhile, the remaining nine sectors posted gains between 0.5% (technology) and 2.2% (financials).