Insights

March Comes in Like a Bull – Tech Leads the Way

Technology stocks, and especially semiconductor stocks, were strong as Wall Street started March with a bullish day.  Intel Corp. (NSDQ: INTC) paced the Dow Jones Industrial Average, finishing first with a 1.65% gain (+$0.34, $20.87) and Hewlett Packard Co. (NYSE: HPQ) in second up 1.47% (+$0.75, $51.54).  The PowerShares Dynamic Semiconductor ETF (NYSE: PSI) jumped 2.76% (+$0.36, $13.38) as Entropic Communications Inc. (NSDQ: ENTR) led the broad line semiconductor sector up 7.18% (+$0.26, $3.88) after being up as much as 14.4% earlier in the day.

The Nasdaq 100 turned in the best performance for the month of February among the three major indexes, gaining 4.47% to the second place S&P 500’s 2.86%.  Everyone must have read the summary numbers for February over the weekend and then came in as buyers today as the Nasdaq 100 continued on its winning streak up 1.52% (+27.72, 1,846.40).  The S&P 500 closed up a solid 1.01% (+11.22, 1,115.71) and the Dow Jones Industrial Average gained 0.76% (+78.53, 10,403.79) on the day.

Merger Monday was in full gear as four deals were announced last night and this morning and TrackedInsights Taryn Cooper covered them all earlier today.  Rumors of the biggest deal on the planet, Germany bailing Greece out with loans, prompted the Greek 10-year bond to drop 9 basis points (6.34% to 6.25%, +0.64) and stabilized equity markets around the world.  The Chilean IPSA Index fell 1.7% to 3,761 in reaction to the 8.8 magnitude earthquake Saturday morning, which was the fifth largest recorded since 1900.

When an earthquake hits Chile, what do you buy?  The answer is not peppers, it is copper.  Chile produces 35% of the world’s copper and if any of those mines collapsed this will slow the production and supply of the base metal, sending prices higher.  The iPath Dow Jones-UBS Copper ETN (NYSE: JJC) jumped 2.73% in the first five minutes of trading this morning but faded back, closing up 1.76% (+$0.79, $45.49).

Economists expected Personal Income and Consumer Spending to increase by 0.4% month-over-month, but we got income going up 0.1% and spending up 0.5%.  This means the consumer must have been taking on debt over the last month.  In general, the market likes it when the consumer spends more, even though signs point to them taking on more debt.  If the consumer is out there spending, that means the stocks they trade are doing more business.  Damn the torpedoes!  Who is paying their debts back these days anyways?  There is a problem here though, as Personal Income increased only 0.1% (0.4% expected) with the prior M-o-M increase being 0.4% and before that 0.5%.  The growth trend we have experienced over the past few months is slowing down as workers are receiving less income, which can be attributed to less people working.

The ISM manufacturing Index was reported at 10 a.m. and missed expectations (56.5 vs. 57.4, prior 58.4).  A reading over 50 indicates manufacturing is expanding but the number below that of last month shows it is expanding less quickly.  Construction Spending was also released at the same time and was down 9.3% Year-over-Year and down 0.6% Month-over-Month.  The MoM expectation was -0.8%, so the number was beat, but it is still declining.  While a decline in construction spending means less construction workers on the job, this is probably good in the long run as a contraction in housing supply (or a slower expansion), will mean a lower relative supply of homes in the future and a firming of home prices.

Gold had an uneventful day, gaining marginally, as all the metals action seemed to be in copper today.  The fact that gold did not drop is a story on its own as the dollar traded its highest level since last July, before fading back to gain just 0.38%.  Even the news of Germany buying Greek debt did not hold the euro up as the pound dropped sharply against the dollar with the summer election for Prime Minister in the U.K. is too close to call.  The U.K. has deficit problems of their own, and it seems once you throw in the weak economies of Spain, Portugal and Ireland, the chances of another bailout being needed seems almost certain.  Italy’s budget is always an adventure and it is starting to look like the only decent economy left in Europe is Germany.

Nymex crude dropped 78 cents as the $80 a barrel level is proving to be a difficult fence to jump.  The barrel was trading at $78.88 (-0.98%) at 4:48 p.m.