Day Traders Diary


The stock market closed out a volatile month of March on an upbeat note with small caps leading the advance. The Russell 2000 gained 1.8% while the S&P 500 settled higher by 0.8% with nine sectors ending in the green. The benchmark index was able to eke out a 0.7% gain for the month while the Nasdaq Composite and Russell 2000 could only trim their losses. The Nasdaq ended the month with a decline of 2.5% while the Russell 2000 lost 1.0% in March.
Equity indices made the bulk of their advance during the opening hour before spending the remainder of the session inside narrow ranges. The upbeat start took place after a weekend phone call between President Obama and Vladimir Putin, discussing the situation in Ukraine, was viewed as a step that increased the chances for a diplomatic solution to the standoff between Russia and Ukraine.
The early buying interest was also bolstered by comments from Fed Chair Janet Yellen, who spoke at a conference in Chicago, saying the Fed remains short of its employment and inflation goals and that the economy requires 'considerable support for some time.'
Today's session featured outperformance in some areas that have been lacking in strength recently. Biotechnology, which was under close scrutiny over the past two weeks, displayed broad gains with the iShares Nasdaq Biotechnology ETF (IBB 236.40, +7.02) climbing 3.1%. The ETF trimmed its March decline to 10.6% while the group's outperformance gave a boost to the health care sector (+1.3%), which finished the day ahead of the remaining groups.
Similar to health care, most other top-weighted sectors ended among the leaders. Financials (+1.0%), industrials (+1.0%), and technology (+0.8%) outperformed while the discretionary sector (+0.6%) lagged.
Notably, the industrial sector received strong support from transports as indicated by a 1.7% gain in the Dow Jones Transportation Average. The bellwether complex rallied with all 20 components finishing in the green. Airlines had the best showing among specific industry groups with United Continental (UAL 44.63, +1.67) setting the pace.
Elsewhere, the discretionary space trailed the benchmark index throughout the session, which was fitting for a sector that ended the month at the bottom of the leaderboard (-2.9%). General Motors (GM 34.42, -0.31) lost 0.9% after Reuters reported the company accepted ignition switches from its supplier even though the parts did not meet standards set by the company.
Treasuries ended flat after showing morning losses. The benchmark 10-yr yield ended at 2.72%.
Participation was above average with month-end flows contributing to the strong volume as more than 820 million shares changed hands at the NYSE.
Today's economic data was limited to the Chicago PMI for March, which fell to 55.9 from 59.8 while the consensus expected an increase to 60.1. After three consecutive months above 60, the Chicago PMI fell to into the 59 range in January and February. At the time, severe winter weather conditions were blamed for the weakness in the PMI. As temperatures returned to normal, the consensus assumed manufacturing activities would return to their Q4 2013 levels, but that did not happen. A sharp drop in new orders (58.8 from 63.6) led to an overall pullback in manufacturing activities. Production, meanwhile, managed to improve to 61.7 from 59.6 as manufacturers worked down their backlogs (50.4 from 53.7).
Tomorrow, the ISM Index for March ( consensus 54.0) and February Construction Spending ( consensus 0.1%) will both be reported at 10:00 ET.

S&P 500 +1.3% YTD
Russell 2000 +0.9% YTD
Nasdaq Composite +0.5% YTD
Dow Jones Industrial Average -0.7% YTD

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