Closing Market Summary: Stocks End Down Week on Cautious Note Ahead of Crimean Referendum
The major averages ended the week on a lower note as participants continued reducing their risk exposure ahead of the weekend, which will feature a Sunday referendum in Crimea on potential annexation to Russia.
The stock market opened with modest losses, but made a quick recovery with help from most sectors; however, the S&P 500 (-0.3%) was unable to make a sustained move above the 1852 level, which marked the session high for the benchmark index.
After making an early jump to highs, the S&P 500 spent the next hour in a steady retreat towards its session lows as the three top weighted sectors—financials (-0.6%), technology (-0.7%), and health care (-0.5%)—refused to take part in the rally. The three groups remained among the laggards throughout the day, keeping the broader market from maintaining its gain after the major averages jumped back into the green in the late morning.
The return into positive territory occurred after comments from the press conference held by Russia's Foreign Minister Sergei Lavrov made the rounds. Specifically, Mr. Lavrov said Russia has no intentions of invading Eastern Ukraine. That remark gained the most traction, but Mr. Lavrov continued, saying U.S. and Russia remain at odds regarding Ukraine and that Russia does not need any international structure to mediate in Russia-Ukraine relations.
After the Russian Foreign Minister delivered his statement, U.S. Secretary of State John Kerry conducted a press conference of his own. Secretary Kerry said that despite prolonged discussions with his Russian counterpart, not much has changed and that the Sunday referendum remains on schedule.
Although stocks made their way back into the green after Mr. Lavrov's press conference, they spent the afternoon in a slow retreat as the largest sectors weighed. Interestingly, small caps outperformed with the Russell 2000 holding a modest gain throughout the session. The index ended higher by 0.4% while large caps were not as fortunate.
The technology sector (-0.7%) ended at the bottom of the leaderboard. The space was pressured by its largest members. Apple (AAPL 524.69, -5.96), Google (GOOG 1172.80, -16.26), and Qualcomm (QCOM 74.74, -0.89) lost between 1.1% and 1.3%.
Elsewhere, the financial sector (-0.6%) trimmed its month-to-date gain to 0.4%. Even though the sector maintained its gain for the month, it surrendered its year-to-date advance (-0.5%). Top sector components registered losses across the board with Bank of America (BAC 16.80, -0.36 leading the weakness with a 2.1% decline.
Even though stocks finished on their lows, Treasuries did not move mucduring afternoon action. The benchmark 10-yr yield ended little changed at 2.65% versus 2.72% registered last Friday.
While Treasuries did not signal additional safe-haven flows today, the foreign exchange market did. The Japanese yen continued its recent strength, sending the dollar/yen pair to the 101.30 area after startin the week around 103.30.
Volatility protection was in demand throughout the session, pushing the CBOE Volatility Index (VIX 17.77, +1.55) to levels last seen on February 6. Similar to yesterday, trading volume was on the light side with only 628 million shares changing hands at the NYSE.
Looking back at today's data:
* Producer prices declined 0.1% in February after increasing 0.2% in January while the Briefing.com consensus expected producer prices to increase 0.2%. The drop in producer prices was the result of a sharp drop in producer services costs. Final demand for goods rose 0.4% for a third consecutive month whereas final demand for services declined0.3% in February. Excluding food and energy, overall core prices declined 0.2% in February after increasing 0.2% in January. The consensus expected these prices to increase0.1%.
* The University of Michigan Consumer Sentiment Index slipped to 79.9 in the March preliminary reading from 81.6 in February. The consensus expected the index to increase to 82.0. The Current Conditions Index increased to 96.1 from 95.4 in February. The Expectations Index fell to 69.4 in March from 72.7.
On Monday, the Empire Manufacturing Survey for March will be announced at 8:30 ET while the January Net Long-Term TIC Flows report will cross the wires at 9:00 ET. The Industrial Production and Capacity Utilization report for February will be released at 9:15 ET while the day's data will be topped off with the 10:00 ET release of the NAHB Housing Market Index for March.
* Russell 2000 +1.9% YTD * Nasdaq Composite +1.7% YTD * S&P 500 -0.4% YTD * Dow Jones Industrial Average -3.1% YTD