March Market Report

April 5, 2006   

This is a little something I send to my clients in their monthly report.

March proved to be another successful month for stocks, as the major indices posted fresh five year highs and closed higher for the third straight month. During the first half of the month, the markets rose in anticipation of new Fed Chairman Ben Bernanke’s first meeting at the helm of the FMOC. Bullish sentiment then tapered off in the last few days of the month, however, as the Committee raised rates and advised that its rate-hiking campaign was likely to continue. On the 1st, stocks started with bang as the S&P 500 gained 0.8% on an upbeat reading from the manufacturing sector. Over the following week, the broader market staggered slightly, as investors digested a 2% increase of oil prices on the 2nd, and on the 3rd the University of Michigan's revision of its February consumer sentiment index was reported to be lower than expected by analysts, disappointing investors. On the 6th, news that AT&T had made a bid for Bell South over the weekend was met tentatively by investors, while in the bond pits Treasury yields spiked, further depressing stock prices. Tech stocks tanked on the 7th and the broader S&P 500 regained its footing, but investors remained cautious due to rising bond rates. On the 10th, the government reported that employers added 243,000 jobs to their payrolls in February, beating expectations. This sent stocks soaring, as the Dow added nearly 1% and the tech-heavy Nasdaq Composite added 0.5%. Merger news continued the upward momentum the following week. On the 13th, Capital One Financial announced a deal to buy North Fork Bank while news rumbled that Cerebrus Capital was close to buying ailing GM’s GMAC unit. For the remainder of the week, stocks soared, and the Dow & S&P reached fresh five year highs during each session. Bullish investors were encouraged mid-week on the release of the Fed’s “beige book,” which indicated that the Fed may be near the end of its rate hiking campaign, as well as upbeat guidance from Altria. Stocks took a break on the 20th and then declined on the 21st, though the S&P 500 and the Dow hit their monthly and 5 year highs in intra-day trading. The broader markets then surged to 5 year closing highs on the 22nd, propelled by news that GM had reached a deal with the UAW union, while Microsoft pressured the tech sector amid news that two key products releases would be delayed until 2007. Closing out the week, the major markets remained relatively stable, as Wall Street digested a large boost in existing home sales, and Google rocketed by 7% on Friday after it was announced it would be added to the S&P 500. Markets remained mixed on the 27th, as investors waited for the Fed meeting the following day. Though it was expected the Committee would raise rates, Wall Street was not pleased with the wording of its statement, which indicated that more rate hikes were likely. This news sent stocks significantly lower on the 28th, though much of the day’s losses were cut by strong gains in the tech sector on the 29th and general bargain hunting after Tuesday’s massacre. Closing out the week, month, and quarter, the S&P 500 and the Dow fell slightly on the 30th & 31st while the tech-heavy Nasdaq Composite rose slightly, as investors remained concerned over the Fed’s indication that rates may continue to rise, slowing economic growth. In March, the Dow gained 115.91 to close at 11,109.32; the broader S&P 500 increased by 14.17 points, closing at 1,294.83; and the Nasdaq Composite gained by 58.40 points, to close at 2,339.80.

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