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US: Wall Street caps stellar Q1 on up note

On Friday, March 30, US stock and commodities markets wrapped up not only a day and a week, but also a month and a quarter that witnessed turbulent events and collisions. Nonetheless, equities closed their strongest quarter in more than two years on a positive note. On top of this, March’s last trading session saw a string of American and global economic data and also a thick flow of European political and financial news. 

Economic data out of the US turned out to be mixed. Investors were pleasantly surprised by an increase in the final reading of the University Consumer Sentiment Index to 75.3 in March, the highest from last February’s 76.2, despite a temporary drop to 74.3 during the preliminary phase of survey and the finally forecast 74.5. At the same time, the Chicago Business Activity Index, which usually correlates closely with the country’s general economic trends, fell to 62.2 in March compared to the expected 63 from February’s 64, while remaining above 60 for the fifth month in a row. 

Household budget data also looked ambiguous. In February personal income, as January revised data showed, rose 0.2% against the expected 0.4%. At the same time, consumer spending, driven by a sharp rise in gasoline prices, rose 0.8%, the steepest increase in the past seven months, outstripping the forecast 0.6% and February’s reading revised to 0.4%. The Core PCE Index, as expected, was up 0.1% in February and the index jumped 1.9% y-o-y.

Global economic data were also patchy, with most negativity coming from Germany where retail sales unexpectedly dropped and Japan reporting a slide in industrial output in February against forecast growth. Investors welcomed a decision taken by EU finance ministers to ramp up the overall amount of Europe’s emergency funds to EUR 800 bn, while the initial proposal to boost them to EUR 940 bn was blocked by Germany.

Under the influence of all these factors and during the last trading session of the first quarter of this year when many funds and corporations tend to reposition their investment portfolios, the Dow and the S&P 500 Index locked in robust gains, while the Nasdaq Index were less sanguine. Stock exchanges celebrated unexpectedly much better numbers. The Dow Jones Industrial Average gained 2% in March and surged 8.1% in January - March. The S&P 500 Index rose 3.1% in March and 12.0% in Q1. The Nasdaq Composite Index climbed 4.2% in March and an impressive 18.7% in January - March. Q1 was the best starting quarter for the Dow and the S&P 500 Index since 1998, and the best season for the Nasdaq Composite Index since 1991.

Recapping the indexes, the Dow Jones Industrial Average advanced 0.50% to 13,212.04, ending the week 1% higher. The Standard & Poor's 500 Index grew 0.37% to end at 1,408.47, a weekly gain of 0.8%. The Nasdaq Composite Index edged lower 0.12% to 3,091.57, adding 0.8% during the week.

In the blue chip segment, an overwhelming majority of liquid names (27 of 30) finished in positive territory. The market was led higher by multimedia empire Walt Disney (+1.8%), global PC and printer leader Hewlett-Packard (+1.4%) and pharmaceutical giant Merck (+1.0%). Leading microchip producer Intel (down 0.2%) led the small group of decliners that saw mild losses.

Shares of BlackBerry smartphone maker Research In Motion shot up 6.9% on reports the company would shake up its management and focus on corporate sales.

O&G corporation Cabot Oil & Gas added 3% on news a flash fire that hit the company’s gas compressor in Pennsylvania was immediately extinguished and caused no major damage.

The world’s largest consumer electronics retailer Best Buy retreated 4.4% on news the company plans to close stores and lay off staff, and pick small-store sales as its main strategy in a bid to compete with online retailers.

The world’s leading producer of equipment for forklift trucks Cascade pulled back 9.5% on news its Q4 sales fell far short of the numbers anticipated.

Major sportswear and footwear retailer Finish Line plummeted 16.3% as the company’s Q1 profit guidance missed the consensus expectations by a wide margin.

In commodities, April gold futures rose USD 17.10, or 1%, to USD 1,669.30/oz on COMEX.

Gold futures moved higher as a recent pullback the metal again presented itself as an attractive investment option for many investors who decided to rebalance their portfolios as the month and the quarter drew to a close. Gold contracts fell 2.5% in March, but jumped 6.5% in January – March 2012.

May light, sweet crude added 24 cents, or 0.2%, to USD 103.02/bbl on NYMEX.

Crude-oil futures rose on a weaker dollar and remarks by US President Barack Obama that the global community needs to abandon Iranian oil supplies and the United States would impose stricter sanctions on Iran and countries that buy Iranian oil. WTI retreated 3.8% in March, the worst result since September 2011, but ended the first quarter 4.2% higher y-o-y.

Dmitriy Simonyan, Analyst, Global Markets (Finam)