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Weekly market recap: Markets suffering from spring fever?

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For the week ending March 29, 2014

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Overview

The markets ended mixed this past week with only the Dow making a small gain. As the weather improves, economic data is showing some improvement as well; flash services PMI for March increased to 55.5 (from prior month final of 53.3). However, the markets are currently caught in a period of consolidation as asset managers continue to rotate out of high growth and financial stocks, and into more conservative (low beta) stocks in anticipation of further news from the Ukraine (hence the larger drops in the Nasdaq and Russell indices).

The Fed announced the results of its bank stress tests, and five out of thirty failed; most notably Citigroup, which led the financial sector down after the Fed rejected the bank's plan to repurchase $6.4 billion in shares and raise dividends. The Fed also rejected Zions Bancorp's plan on Wednesday. See USA Today article.

Globally, most equity indices made gains despite ongoing concerns over the Ukraine, which were offset by better than expected economic data and the planned fiscal stimulus by China.

Plans for the G-8 (Group of Eight) summit to meet in Soshi were cancelled on Monday in response to Russia's annexation of Crimea. President Obama and the leaders of six allied nations have warned Russia of increasing economic sanctions (Russia is now facing a possible recession) as Russia increases its forces on the border of the Ukraine. Without Russia, the G-7 will meet in Brussels in June.

Economic data in the EU was mixed, while the UK was mostly positive. The Central Banks of Australia, India, and the ECB will meet next week and the expectation is for policy to remain unchanged. ECB President Draghi is likely to be questioned during the meeting about plans to stimulate the EU to address possible deflation.

Japan's national sales tax will increase to 8 percent (from 5 percent) on April 1st, the first such increase since 1997. Japan has officially fallen into a recession with GDP at a negative 4 percent annual rate leading to the resignation of Prime Minister Hashimoto. However, this is expected to be short-lived as the consumer base is strengthening (due to companies increasing wages to boost personal spending) along with a stronger global economy. Both the government and the BOJ are prepared to increase stimulus as needed through fiscal and monetary policy.

Overall, in the U.S., first quarter data reflects the impact of unusually bad weather, but the numbers are not as bad as initially expected. Moderate gains in consumer income, mixed manufacturing reports (weather being a factor), and increases in housing prices, indicate a likely improvement in the second quarter.

The focus next week will be on the Employment Situation data (Jobs Report and Unemployment Rate). Expectations are slightly better due to the improvement in last week's Initial Jobless Claims. Investors will be looking at the Motor Vehicle Sales for signs of post-weather improvement. Additional data will be the ISM Manufacturing and final Markit PMI for March.

Market Gauge

Year-to-date the markets are mixed: Dow -1.5%; S&P500 0.5%; Nasdaq -0.5%.

The Markets for the past week were: DJIA up 0.1%; S&P500 down -0.5%; Nasdaq COMP down -2.8%.

Commodities (ETFs) for the past week were: Gold (GLD) down -3.04%; Silver (SLV) down -2.36%; Oil (OIH) up 2.76%; Dollar (UUP) up 0.05%; 30-yr Bonds (TYX) dropped 6 basis points to 3.55%.

The VIX this past week (a measure of market sentiment and volatility) dropped to 14.41% due to improving economic news and China's anticipated fiscal stimulus.

Top Headlines

To view details of headlines, go online to CNBC.

In the U.S.: US consumer sentiment falls; Minimum wage hike comes with costs; Fed official: No rate rise until 2015; US income, spending rise in February; 3 reasons the US manufacturing comeback is no myth; $1 trillion student loan debt widens US wealth gap; Russia can ill-afford tighter sanctions; US economy presses ahead as new claims slide; Home sales fall for 8th-straight month in February; Connecticut Senate approves highest minimum wage; 'Still falling short': Cleveland Fed chief; Bullard: Potential risk of bubble as policy unwinds; Americans still bummed about economy: Survey; Being poor not a person's fault: CNBC survey; Americans chill with pot businesses: Survey; Lion in winter: US durables roar in February; March services, private sector growth accelerates; Fed's Bullard: Here's where jobless rate is headed; Declining US profits signal recession: SocGen bear; Plosser: Market reaction to statement 'puzzling'; US home prices gain in January: S&P/Case-Shiller; Home sales sink in Feb.; confidence goes other way; Why Kocherlakota won't become Fed's chief dissenter; and Krueger: The 'most serious problem' we face now.

In Europe: ‘Black gold’ could boost this country; UK's relationship with Germany just got cozier; Watchdog to probe £150bn policies; UK's current account deficit bigger than expected; Spanish CPI shock flags euro deflation risks; Cash-strapped Italy auctions luxury cars…on eBay; Hold the viola jokes! Rare Strad could bring $45M; Is the 'honeymoon' between Germany and China fading?; Facing a Russian gas bill, EU looks to renewables; Russia can ill-afford tighter sanctions; Is it time to buy Ukraine debt?; Ukraine and IMF announce up to $18 billion bailout; UK energy firms face probe after price hike; As UK regains strength, time to hike rates?; H&M profit below forecast, March sales rise 12%; Royal family, Bank of England warn of housing 'shock'; European banks feel effects of Crimea crisis; Russia growth seen down—and it’s not just Crimea; ECB to get drastic? QE could be on the table; Obama to Europe: Cut reliance on Russian gas; UK and China strike renminbi bank deal; Ukraine to hike domestic gas prices by 50%; and 19-year-old makes viral game hit in a weekend.

In Asia: India firm to staff: Pay the boss's bail; Kiwi on fire, but is it about to burn out?; Missing jet search area shifts after 'credible lead'; Kim Jong Un haircut mandate debunked; Danger of pricing in a 'big bang' China stimulus; Rupee on a roll, but how far will it go?; Japan puts out mixed bag of data ahead of tax hike; This year so far: Japan crumbles, Indonesia shines; Japan tax hike? We aren't worried: Rakuten CEO; How a rumor sparked a bank run in China; Australia’s first bank note sold for $260,000; Search for jet resumes, focus on hundreds of objects; ANA bulks up on Boeing jets in biggest-ever order; Murdoch sets up sons to take over media empire; Japan stocks: Time to bottom fish?; Japan’s sales tax hike: What you need to know; Chinese developers go after alternative financing; Honda enters the jet market: Great timing?; China's plan for global yuan hits speed bumps; Japan braces for first sales tax hike in 17 years; MH370: Satellites show over 100 'potential objects'; China's metal export quotas violate trade law: WTO; and 5 reasons the BOJ will unleash fresh stimulus.

Weekly Review

To see the week in review, go to the Econoday calendar.

On Monday, despite good economic news, the Dow dropped fractionally to 16,276.

On Tuesday, with growing new home sales and improved consumer confidence, the Dow rose 0.6% to 16,367.

On Wednesday, with mixed economic news and despite strong durable goods orders, the Dow dropped -0.6% to 16,268.

On Thursday, with mixed economic news and weakness in pending home sales, the Dow dropped fractionally to 16,264.

On Friday, with good economic news on the consumer, the Dow rose 0.4% to 16,323.

Next Week's Calendar

To see what's on the calendar for next week, go to the Econoday calendar.

The economic calendar for next week is full: on Monday – Chicago PMI, Janet Yellen speaks; on Tuesday – Motor Vehicle Sales, ISM Mfg Index, Construction Spending; on Wednesday – Weekly EIA Petroleum Status Report, ADP Employment Report, Factory Orders, FedSpeak; on Thursday – Weekly Jobless Claims, International Trade, ISM Non-Mfg Index; and Friday – Employment Situation.

If the Markets move down, stay on the side lines or consider Contra ETFs. For Option players, selling premium is advised. To learn more about options and earning consistent weekly income, go to optionsannex.com.

To the Charts

The following ETFs (DIA, SPY, QQQ) provide a technical review of the Market (and are also excellent Option trading vehicles). Represented are the Dow Industrials (DIA), S&P500 (SPY), and Nasdaq 100 (QQQ).

The Charts for each include views for Monthly, Weekly (including Price Channels), and Daily (including monthly Pivot Points) with MACD and Stochastic indicators. The Pivots are: white for central pivot point; yellow for R1 and S1; magenta for R2 and S2; red for R3 and S3.

DIA

The Dow Industrials (DIA) closed up at 162.85. If the DIA drops, then the next level of support will be at 153.12 (weekly chart); the next level of major resistance is 165.05 (weekly chart).

The monthly chart indicates a bullish posture (up Arrow) with the MACD positive but weakening, and the Stochastic moving down above the overbought area.

The weekly chart indicates a bullish posture (up Arrow) with the MACD positive and strengthening, and the Stochastic moving down at the overbought area.

The daily chart indicates a bullish posture (up Arrow) with the MACD positive and strengthening, and the Stochastic moving down at the midpoint.

SPY

The S&P500 (SPY) closed down at 185.49. If the SPY drops, then the next level of support will be at 173.71 (weekly chart); the next level of major resistance is 189.02 (weekly chart).

The monthly chart indicates a bullish posture (up Arrow) with the MACD positive but weakening, and the Stochastic moving down above the overbought area.

The weekly chart indicates a bullish posture (up Arrow) with the MACD positive but weakening, and the Stochastic moving down at the overbought area.

The daily chart indicates a bearish posture (down Arrow) with the MACD negative but strengthening, and the Stochastic moving down at the oversold area.

QQQ

The Nasdaq 100 (QQQ) closed down at 87.05. If the QQQ drops, then the next level of support will be at 83.74 (weekly chart); the next level of major resistance is 91.36 (weekly chart).

The monthly chart indicates a bullish posture (up Arrow) with the MACD positive but weakening, and the Stochastic moving down above the overbought area.

The weekly chart indicates a bearish posture (down Arrow) with the MACD positive but weakening, and the Stochastic moving down below the overbought area.

The daily chart indicates a bearish posture (down Arrow) with the MACD negative and weakening, and the Stochastic moving down below the oversold area.

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