Market Wrap (3/30)

The S&P closed down 3.5% as the Obama Administration advocated Chapter 11 bankruptcy to best restructure GM and Chrysler. As I mentioned in yesterday's post, the market was due to consolidate this week following its recent 25% run-up off the March 6th lows. Financials and basic materials were the worst performing sectors, declining by roughly 5.6% and 4.6% respectively. Chatter centered on banks needing to raise additional capital coupled with general profit taking accounted for a majority of the decline in bank shares today. Most of the major banks closed down more than 10% ending the session near their lows. Investors should continue to steer clear of bank stocks and just allow the speculators to whip these shares around. I do not believe that any financial deserves to trade above tangible book value, and I am sure that market will agree with me in due time.

Basic materials traded down with commodities and oil on the back of a stronger dollar and renewed concerns over energy demand. Light sweet crude and gasoline futures each closed down 7%, but remain at trading levels well above their 3-month moving averages. Commodities have traded in correlation with equity markets over the past several months, and I expect this pattern to continue in the near-term. Note that a stronger dollar is generally bearish for commodity and equity markets in the near-term.

The Nasdaq outperformed the broader market, declining by only 2.8%. The technology sector is only down 5% on the year buoyed by Google, Amazon, and Apple. This strength is unjustified given that the weakness in the general economy is only now beginning to filter down to the consumer. With first quarter earnings just around the corner, I do not consider this sector a buy at these levels.

Three key releases are due out tomorrow morning with Consumer Confidence, the S&P Case-Shiller Home Price Index, and Chicago PMI kicking off the weekly economic calendar. I provided a preview of these releases in yesterday's post. Tomorrow is the last day of the quarter for fund managers, so I expect the market to trade in a range as funds close their books with the aforementioned economic releases setting the tone for the day.