Market Report – March 19, 2012

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In The Rear View Mirror:

Despite another sluggish Friday, U.S. equities enjoyed a stellar week as buyers continued to make their presence known and the bears were once again sent running for cover. Even after moderate down days for the Dow Jones Industrial Average and the Nasdaq to close the week, the Dow closed with a gain of just over 2% while the Nasdaq was seen higher by nearly 2.5%. The S&P 500 was the lone member of the trio to close in the green on Friday, keeping its head above the all-important 1,400 zone, and also added almost 2.5% for the week.

Economic news for the week continued its strong uptrend, though Friday’s consumer sentiment number was a tad disappointing. Consumer sentiment fell to 74.3 in March from 75.3 in February. Economists were expecting a March reading of 76.5.

Two things to note about that number:

First, it is the preliminary reading for March, so it’s possible that we could see a more bullish final number. Second, it is likely that rising gas prices are leading to some caution among the consumer. Along those lines, the Labor Department said the consumer price index increased 0.4% last month, primarily due to the sharp increase in gasoline prices. The February increase was the largest in 10 months.

The Markets @ 3/16/2012
 
Index Close Weekly % Change YTD Change YTD%
DJIA 13232.62 310.6 2.40% 1015.06 8.31%
NASDAQ 3055.26 66.92 2.24% 450.11 17.28%
S&P 500 1404.17 33.3 2.43% 146.57 11.65%
NYSE Comp 8270.41 168.3 2.08% 793.38 10.61%
NYSE Amex 2423.88 1.31 0.05% 145.54 6.39%
RUS 2000 830.18 13.18 1.61% 89.26 12.05%
VANG INTL 14.82 0.22 1.51% 1.76 13.48%
USX CHINA 5156.1 -10.35 -0.20% 626.3 13.83%
EMERG MKTS 7009.97 28.58 0.41% 1004.66 16.73%

Market Report

What was constructive about the action this week is that big name stocks NOT called Apple (Nasdaq: AAPL) contributed to the rally. The sector that really delivered the eye-catching performance for the week was financial services. Ahead of largely positive stress test results and much to the chagrin of the Federal Reserve, administrator of the stress tests, marquee banking names started announcing positive dividend and share repurchase news.

Apple was up 6% on the week, but the Financial Select Sector SPDR (NYSE: XLF) wasn’t far behind. The SPDR S&P Bank ETF (NYSE: KBE) left both in the dust with a gain of 8%. Those stats may speak to the notion that bank stocks are now overbought, and in the very near-term they might be.

However, the financial services group is still under-owned by institutional and retail investors alike and news of increased dividends could be just the tonic to get investors to really embrace bank stocks for the first time since the financial crisis.

Oddly enough, profits in the S&P 500 are soaring faster than its price, leaving the gauge 9 percent cheaper than it was in April even after American equities climbed within 0.1 percent of last year’s high, Bloomberg reported. That buoys the case of more than a few pundits that have argued over the past year that U.S. stocks are trading at attractive valuations.

There were no “Mixed Results” this week…Major Indexes All Flashing Green

The Dow broke through and closed above the 13,000 barrier at 13,232.62… YTD +8.31%.

Nasdaq and the S&P 500 raced forward too, with another week of impressive gains…up 2.24% and 2.43% respectively.

The Russell 2000, our bench mark small cap index continued upward with a 1.61% gain last week…totaling a solid 12.05% gain YTD.

The Internationals and Emerging Markets moved up to the tune of +1.51% and +0.41% respectively and are showing some real strong YTD numbers. However, China stumbled with a small 0.20% loss for the week…but is still showing a solid 13.83% gain YTD.

Gold looks like a seesaw from week to week…it closed Friday at $1.655.50…off $55.40. Here’s a link to a very interesting video entitled: Ask The Experts: Gold To Breach $2,000 In 2012: http://www.youtube.com/watch?v=rln8nbVmfHk

WTI Crude Oil … down a whopping $0.34, to close at $107.06. Friday, North Sea Brent Blend for May delivery closed up $3.21 at $125.81 per barrel on the London-based ICE Futures Europe exchange. The European benchmark contract was at a premium of $18.08 to New York futures for the same month as reported by Bloomberg BusinessWeek.

The dollar lost 0.0030, closing at 0.7590 Euros; the 10-year bond closed down $2.375 at $97.375 and the 30-year bond lost $4.234 to close the week at $94.750. Treasuries continue to fall as the Federal Reserve continues to raise its assessment of the economy and dampens the “refuge appeal” of U.S. government debt.

The Bottom Line for Stocks:

With the market continuing to grind higher, there will be the inevitable calls for a pullback. That’s the nature of the beast, but just because someone says something should happen, doesn’t mean that event will actually take place. Frankly, the biggest risk to stocks in the near-term is the market’s propensity to start out strong in March and then wilt in the latter half of the month.

Tech and financials account for about 35% of the S&P 500’s weight and if those sectors continue to drive this rally, then it is sustainable. Translation: Microcap chip, computer services and bank stocks are excellent ideas at the moment.

Research and Editorial Staff
MicroCap MarkePlace