The Week In Review

3/20/15

The major averages ended the week on an upbeat note with the Dow Jones Industrial Average (+0.9%) in the lead. The price-weighted index ended the week higher by 2.1% while the S&P 500 (+0.9%) gained 2.7% for the week.

Equity indices climbed throughout the session with trading volume running well above average due to today's quadruple witching. As a result, more than two billion shares changed hands at the NYSE floor.

Meanwhile, the Dollar Index (97.89, -1.37), which was a point of focus throughout the week, fell 1.4% to narrow its March gain to 2.5%. Notably, the euro gained 1.3%, climbing to 1.0800 against the greenback with the move partially supported by upbeat comments from the Eurogroup. Specifically, Greece has agreed to present a new reform plan within the next few days in order to receive funds needed to prevent a liquidity shortage.

Today's pullback in the dollar was a supportive factor for the commodity market. Crude oil settled higher by 2.4% at $46.58/bbl, but backed off its best level of the session after the latest Baker Hughes rig count registered its 15th consecutive weekly decline (-56 to 1069). Meanwhile, the energy sector (+1.4%) finished well ahead of other groups.

Elsewhere among cyclical sectors, financials (+1.3%) and consumer discretionary (+1.1%) outperformed with the discretionary sector rallying behind homebuilders after KB Home (KBH 15.26, +1.19) reported better than expected results. Shares of KBH jumped 8.4% while the broader iShares Dow Jones US Home Construction ETF (ITB 27.82, +0.54) gained 2.0%. Meanwhile, apparel and luxury retailers were a bit more mixed. Dow component Nike (NKE 101.98, +3.66) spiked 3.7% after beating bottom-line estimates while Tiffany & Co (TIF 82.99, -3.38) lost 3.9% after below-consensus revenue and light guidance overshadowed in-line earnings.

Also of note, the technology sector (+0.5%) slumped to the bottom of the leaderboard during the final minutes as Apple (AAPL 126.05, -1.45) fell to a fresh session low.

Over on the countercyclical side, the consumer staples sector (+1.2%) outperformed while health care (+0.8%) lagged. Despite today's underperformance, health care gained 4.5% for the week, ending ahead of other sectors. Volatility in the biotech space pressured the sector from its early high as the iShares Nasdaq Biotechnology ETF (IBB 366.52, +1.27) narrowed its gain to 0.4% after being up near 2.0% at the start. The early strength stemmed from a 9.8% spike in the shares of Biogen Idec (BIIB 475.98, +42.33) after the company issued an encouraging report on a developmental drug for the treatment of Alzheimer's disease. For its part, the biotechnology ETF logged a 5.7% gain for the week.

Treasuries climbed throughout the morning, ending on their highs with the 10-yr yield lower by five basis points at 1.93%.

Monday's economic data will be limited to the Existing Home Sales report for February, which will be released at 10:00 ET.

Nasdaq Composite +6.1% YTD

Russell 2000 +5.1% YTD

S&P 500 +2.4% YTD

Dow Jones Industrial Average +1.7% YTD

Week in Review: Fed in Focus

The stock market rebounded from the previous week's decline with a Monday rally that sent the S&P 500 (+1.3%) 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) weighed after Bank of America/Merrill Lynch downgraded the stock to 'Underperform' from 'Buy.'

The market ended Tuesday on a mixed note ahead of Wednesday's release of the latest policy directive from the Federal Reserve. The Nasdaq Composite added 0.2% while the S&P 500 and Dow Jones Industrial Average lost 0.3% and 0.7%, respectively. Equity indices endured some selling in the early going, but the Nasdaq spent the day ahead of the broader market thanks to relative strength in the technology sector (+0.1%). Specifically, shares of Apple (AAPL) climbed 1.7%, which underpinned the sector and the Nasdaq. Meanwhile, most large cap components struggled, which was also the case with high-beta chipmakers. The PHLX Semiconductor Index fell 0.7%. That being said, the daylong strength within the technology sector helped the broader market erase the bulk of its early decline. The Nasdaq received another measure of support from biotechnology with the iShares Nasdaq Biotechnology ETF (IBB) climbing 0.6% to a new record.

Equities spent the first half of the Wednesday session in the red, but surged into the green following the latest policy statement from the Federal Open Market Committee. The S&P 500 settled higher by 1.2% with all ten sectors ending in the green. Over the past few days, much of the discussion centered around Wednesday's FOMC Statement with participants speculating whether the central bank was going to remove its call for patience. Although the Fed took out "patient," the statement remained quite dovish as the Fed lowered its 2015 GDP forecast range to 2.3%-2.7% from 2.6%-3.0% that was expected in December. Furthermore, the central bank lowered its inflation forecast range to 0.6%-0.8% from 1.0%-1.6%. Staying on the inflation theme, the committee noted that it needs to be "reasonably confident" that inflation will move back towards the 2.0% objective before hiking rates. The S&P 500 spiked about 20 points immediately following the statement and continued its advance as the afternoon progressed. Similarly, Treasuries surged in reaction to the diminished likelihood of June rate hike with the 10-yr yield falling 10 basis points to 1.95%. The benchmark note continued its advance during electronic trading, pressuring its yield to the lowest level since early February (1.92%).

Thursday ended on a mixed note. The S&P 500 lost 0.5% after spending the entire session in negative territory while the Nasdaq Composite added 0.2%. The tech-heavy Nasdaq extended its week-to-date gain to 2.5% while the S&P 500 extended its weekly advance to 1.7%. Wednesday's dovish FOMC policy statement pressured the greenback, but the Dollar Index (99.23, +0.67) wasted no time, stringing together a swift comeback. The index added 0.7% on Thursday and returned to Tuesday's low. Notably, the euro retraced the bulk of Wednesday's move, returning below 1.0650 versus the dollar. Likewise, the dollar strength weighed on crude oil, sending the energy component lower by 2.5% to $45.50/bbl. In turn, this kept the energy sector (-1.7%) near the bottom of the barrel while the other commodity-related sector—materials (-1.7%)—finished just behind energy.