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Closing Market Summary: Stocks End Week on Modestly Higher Note While Biotech Remains Volatile

The stock market finished a cautious week on a modestly higher note, but kept only a portion of its opening gain. The S&P 500 added 0.5%, trimming its weekly loss to 0.5%, while the Nasdaq Composite added 0.1%, finishingthe week with a 2.8% decline.

Emboldened by stimulus talk during the overnight session, equity indices began the day on a strong note with the Nasdaq leading the way. The tech-heavy index displayed early strength thanks to gains in biotechnology and other recently-battered momentum names. In all likelihood short covering played a part in the early advance that turned many recent laggards into leaders. One such area was the consumer discretionary sector, which added 0.8% for the day, but ended the week behind the remaining nine sectors with a loss of 2.1%.

Although the discretionary space held the bulk of today's gain, that was not the case with biotechnology. The iShares Nasdaq Biotechnology ETF (IBB 229.38, -6.76) s urged out of the gate and notched a high 15 minutes into the day before spending the remainder of the session in a steady retreat. Selling pressure intensified in the afternoon as the ETF dropped to yesterday's lows before settling with a loss of 2.9%.

The continued weakness in biotech pressured the health care sector (-0.4%) while other heavily-weighted groups ended mixed with respect to the broader market. Like the aforementioned consumer discretionary space, industrials (+0.7%) outperformed while financials (+0.4%) lagged. For its part, the largest S&P 500 sector, technology, ended in-line with the broader market.

Also of note, the energy sector (+1.2%) outperformed for the second day in a row, bringing its weekly gain to 2.5%. The sector drew strength from Dow component ExxonMobil (XOM 97.70, +1.46), which gained 1.5% while crude oil added 0.4% to $101.67/bbl.

On the countercyclical side, all four sectors ended behind the broader market. The telecom services (-0.1%) sector posted a modest loss while consumer staples (+0.4%) and utilities (+0.2%) registered gains.

Treasuries ended near their lows after retreating throughout the sessio. nThe benchmark 10-yr yield rose three basis points to 2.72%.

Trading volume was on the light side with just over 620 million shares changing hands at the NYSE.

Reviewing today's data:

* Personal income increased 0.3% for a second consecutive month in February. The consensus expected income to increase 0.2%. As foretold in the employment report, wages and salaries were up 0.2% in February after increasing 0.3% in January. The Medicaid expansion from the implementation of the Affordable Care Act offset declines in unemployment insurance from the expiration of the emergency unemployment benefits. In all, government social benefits increased 0.8%. Personal spending met expectations, increasing 0.3% in February, up from a downwardly revised 0.2% (from 0.4%) in January. 

* The University of Michigan Consumer Sentiment Index was revised up to 80.0 in the final March reading from 79.9 in the preliminary reading (consensus 80.0). Sentiment is still below the 81.6 final reading from February. There was a divergence between the March Conference Board's Consumer Confidence and the University of Michigan Consumer Sentiment indicators. The Confidence Index jumped to a six year high on stronger future expectations while the respondents in the University of Michigan survey were much more subdued. Competing trends are nothing new, but they do discount the effectiveness of using these data points to predict future consumption growth. 

Weekly Market Update: March Goes Out Like a Lamb

- Global markets diverged this week as investors concentrated on vertical phenomena rather than cross-market influences. In Asia, the prospect of stimulus to support Abenomics and the slowing Chinese market sent Hong Kong and Japan equities broadly higher, although Shanghai was flat. In Europe, another round of decent economic reports reinforced hopes the continent was starting to pull itself out of the hole, epitomized by France's preliminary March PMI manufacturing data, which moved into expansion for the first time in more than two years. In the US, the S&P500 and DJIA traded sideways as traders continued to reposition after Yellen rearranged assumptions last week. The Conference Board's March Consumer Confidence survey unexpectedly jumped to 82.3 from February's upwardly-revised 78.3 reading, marking the highest level since January 2008. The advance durable goods report for February was mixed but on balance somewhat weaker than expected, showing the persistent impact of weather issues. Meanwhile the Nasdaq had its worst week since October 2012, dropping 2.8%, as many high-flying tech stocks saw stiff losses.

- The Federal Reserve released the second component - capital plan reviews - of its Comprehensive Capital Analysis and Review (CCAR) this week. Twenty five of thirty large bank capital plans were approved. The Fed objected to capital plans from Citigroup, HSBC North America, RBS Citizens, Santander Holdings USA and Zions. Note that three of these are US branches of European banks, while Zions failed the earlier stress test. Citigroup shares took the biggest hit after the Fed rejected its request for a $6.4 billion stock buyback program and an increase of the quarterly dividend to $0.05. Bank of America and Goldman Sachs were forced to adjust their initial capital plan submissions to gain approval.

- Facebook announced another big acquisition, paying $2 billion in cash and stock for virtual reality gaming technology company Oculus VR. The company's immersive virtual reality technology headset, the Oculus Rift, has been lauded as a major breakthrough by the tech press. Facebook CEO Zuckerberg explained that he is looking ahead of Mobile to the next major computing platform interface, noting Oculus can be used as more than just platform for gaming, potentially becoming the "most social platform ever."

- Popular "momentum stocks" cratered this week in unison. Stocks of Facebook and Twitter tracked each other through the week, with the two names down more than 12% on the week by Thursday morning, although they retook some losses into the end of the week. Netflix gave up 12% on the week. Biotechs that set off the Nasdaq tumble last Friday saw additional losses this week, with Biogen leading the way down.

IPOs showed signs of oversaturation for the second straight week. King Digital Entertainment, the designer of the highly addictive Candy Crush mobile videogame, launched its IPO on the NYSE this week, opening for trading at 10% below the IPO price. Shares lost another 10% of their value through the end of the week, as investors worried the company is a one-hit-wonder.

- US Treasury markets spent the week consolidating after the post-FOMC recalibration. The long bond was the best performer with the yield briefly dipping back below 3.5% on Thursday. For the week the 10-year has traded up modestly, putting the benchmark rate back toward 2.7%. In the belly, yields barely budged after the recent cheapening helped demand easily gobble up this week's new supply in 5- and 7-year paper. Despite a raft of Fed speak emphasizing that last week's commentary did not signal any change to policy, 2015 fed fund futures contracts were little changed and continue to project the rate will rise by at least 50 basis points beginning sometime next summer.

- EUR/USD continued to back away from the ominous 1.40 area, helped along by plenty of verbal intervention. ECB President Draghi put a new spin on his same old positions by saying the ECB's forward guidance implies short-term real rates will fall in the future. ECB's Liikanen said a negative deposit rate was no longer a "controversial subject." But perhaps the biggest verbal bomb came from the Bundesbank's Weidmann, who surprised many observers by seeming to reverse Germany's longstanding opposition to ECB QE by saying the bank might consider purchasing euro zone government bonds or top-rated private sector assets. The ECB meets next week and some analysts believe the bank needs to do something more than talk to show it's dealing with ever-sharpening disinflation.

- China's March flash manufacturing PMI slid to an eight-month low and saw its third consecutive month in contraction territory. The March reading could not be shrugged off as easily as weak February data that was blamed on seasonal distortions caused by the Lunar New Year. Asia markets moved higher on Monday in the wake of the data as it seemed to further cement the case for government stimulus, however later in the week respected former PBoC adviser Li Daokui cautioned that the State Council would probably not undertake more stimulus spending.

- After widening its currency trading band earlier this month, the PBoC kept markets guessing on the yuan this week. Early on, the central bank's yuan midpoint fixing was stronger, taking USD/CNY back below the key 6.20 level on Tuesday. However the midpoint was weaker in the back half of the week, reversing the some of the gains. USD/CNY closed out the week around 6.21.

- Starting April 1st with the beginning of the new fiscal year, Japan's sales tax will rise from 5% to 8%. The hike is part of Prime Minister Abe's broad reform program, specifically to help fulfil his promise to achieve a budget surplus by 2020. Data out on Friday suggested that Abenomics saw a mixed performance in February: nationwide inflation accelerated to 1.5% from 1.4% in January, however overall household spending saw a 2.5% decline, its first slip in six months. While the government clearly wants the central bank to take action to help cushion the blow to growth from the tax hike, there were reports this week that BoJ Governor Kuroda does not share its pessimistic sentiment as of yet. USD/JPY was pretty tepid until Friday, when the currency ramped up to close the week just shy of 103.

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RED DOT READER: Hedge Fund’s $100m Iran Bet; Fortune Top Leaders 2014-03-28 16:53:22.271 GMT

By Arie Shapira and Molly Kissler March 28 (Bloomberg) -- Cover story and long-form feature topics include RD Legal’s bet on Iran, ex-Lehman currency trader Ted Yang, Wedgewood Partners CIO David Rolfe, Richard Branson’s “space tourism fantasy,” Klout, Jared Remy, Irving Azoff and Fortune’s 50 greatest leaders list. * For feedback or to receive Red Dot Reader in your Bloomberg inbox every Friday, email ashapira3@bloomberg.net

BLOOMBERG * “Jain Haunted by Rainmaker Past as Deutsche Bank Fines Multiply” (Bloomberg: NSN N30ID86TTDSL <GO>) - Anshu Jain won the job of Deutsche Bank co-CEO after leading its investment bank to record profit; two years later that rainmaker role is coming back to haunt him. * “Fraternity Chief Feared for Son as Hazings Spurred JPMorgan Snub” (Bloomberg: NSN N32PNT6TTDSK <GO>) -JPMorgan stopped managing an investment account earlier this month for a prominent client: the charitable foundation of Sigma Alpha Epsilon, one of the U.S.’s largest fraternities. * “Billionaires Buying Islands Off Australia Find Perilous Paradise” (Bloomberg Pursuits: NSN N2YCJF6TTDSP <GO>) - In the past three years, four of the most iconic Great Barrier Reef islands have been sold for a total A$25 million, a fraction of their former valuations. * “Ivy League Sailors Starting From Scratch to Battle Billionaires” (Bloomberg: NSN N2YEER6VDKHT <GO>) - Two Brown University alumni will be at the helm of Team Alvimedica’s 65-foot ocean racing yacht, which will compete against the world’s best sailors next month.

THE STREET * “Hedge Fund’s $100 Million Bet: Iran Will Pay for Terror Attack” (WSJ: http://on.wsj.com/1mqQ4MN) - RD Legal Capital plans to bet as much as $100 million that it can collect on court judgment against Iran three decades after a car bomber killed 241 American servicement at Marine barracks in Beirut. * “Why Trade Bonds When You Can Trade Ads?” (WSJ: http://on.wsj.com/1do4MB9) - MediaCrossing founder and former Lehman Bros. currency trader Ted Yang is part of a growing migration of Wall Street talent to Madison Avenue. * “High Conviction” (Barron’s: http://on.barrons.com/1mqQnat) - Profile of Wedgewood Partners CIO David Rolfe, whose “small handful of big bets has paid off nicely.” * “A Pension Fund Invests Against the Rules, and Wins” (NYT: http://nyti.ms/1mqQ5jM) - How a Tampa pension fund is unique in its approach to managing assets, which stood at $1.76 billion as of last September.

BUSINESS * “The World’s 50 Greatest Leaders” (Fortune: http://cnnmon.ie/1ds5XQ1) - Ford CEO Alan Mulally, Amazon CEO Jeff Bezos and Warren Buffett make the top 10; Derek Jeter gets the 11th spot.

TECH * “The Virtual Genius of Oculus Rift” (Time: http://ti.me/1dwUfDY) - Oculus, a company being bought by Facebook, is working on a developer kit that is “still a far cry from the virtual reality experience it needs to sell to actual consumers.” * “Immigrants From the Future” (Economist: http://econ.st/1gy7oMC) - Cover story on how robots “offer a unique insight into what people want from technology.” * “Silicon Valley’s Avenging Angel” (Fast Company: http://bit.ly/1mqQ3s2) - If a company doesn’t have a presence on AngelList, a firm that finds funding for tech start-ups, it’s either “hiding something” or doesn’t know what’s going on. * “How Controversial Startup Klout Sold For Hundreds Of Millions Of Dollars” (Business Insider: http://read.bi/1dwUxL0) - Social influence tool Klout grew from founder Joe Fernandez’s obsession with Twitter and generated $10 million in revenue last year.

CONSUMER * “Failure To Launch: How New Mexico Is Paying For Richard Branson’s Space Tourism Fantasy” (BuzzFeed: http://bzfd.it/1mqQin0) - New Mexico, which invested almost a quarter billion dollars creating a hub for Virgin Galactic, is trying to keep the site from becoming the country’s “costliest, most futuristic ghost town.” * “A Fight Is Brewing” (NYT Magazine: http://nyti.ms/1ds56Pm) - Borg Bjergso and Jeppe Jarnit- Bjergso are quarrelsome identical twins who brew delicious, creative beer for competing companies. * “How Yoox Became the Amazon of the Fashion World” (Telegraph: http://bit.ly/1ds2sJu) - Little known Italian- based Yoox “handles the logistics, picking, packing, shipping, customs, returns and customer service” of some of the world’s leading luxury brands.

HEALTH CARE & DEFENSE * “Getting Cancer Wrong” (Newsweek: http://bit.ly/1ds2m4s) - A group of scientists is “making enemies of its own” in the war against cancer. * “The Chaos Company” (Vanity Fair: http://vnty.fr/1mtiE07) - The world’s third-largest private-sector employer, security firm G4S, “commands a force three times the size of the British military.”

POLITICS * “Sinkhole of Bureaucracy” (Washington Post: http://wapo.st/1mqQ7rK) - Deep inside an old limestone mine the U.S. Office of Personnel Management, employees slowly process the retirement papers of the government’s own workers by hand. * “The Catholic Roots of Obama’s Activism” (NYT: http://nyti.ms/1mqQ9QF) - President Obama’s recent visit with the Pope was a “potential point of confluence,” despite his close ties to the Catholic community. * “The Drone That Shot Down the Feds” (WSJ: http://on.wsj.com/1mqQqmz) - This month, 29-year-old Austrian entrepreneur Raphael Pirker won his court case against the U.S. government, leaving the field wide open for private drone flight.

INTERNATIONAL * “Sarajevo: The Crossroads of History” (FT Magazine: http://on.ft.com/1do4Wso) - A look at how the assassination of Austrian Archduke Franz Ferdinand is still affecting the world 100 years later.

SPORTS * “For Jared Remy, Leniency Was the Rule Until One Lethal Night” (Boston Globe: http://b.globe.com/1mqQfrp) - The son of the man recognized as “the president of Red Sox Nation” kept getting chances after multiple run-ins w/ the law “until one lethal night.” * “The Man in the Middle” (NYT: http://nyti.ms/1do4Rox) - Irving Azoff, a 66-year-old music industry executive, helped broker the deal that brought Phil Jackson to the Knicks as team president. * “Is Being A Good Mentor (And Michelle Obama’s Brother) Enough To Save Craig Robinson’s Job?” (BuzzFeed: http://bzfd.it/1mqQaUB) - The president’s brother-in-law and head coach for Oregon State’s basketball team loses more than he wins. * “Curtis Malone: Basketball Mentor and Drug Dealer” (Washington Post Magazine: http://wapo.st/1rKSK8Z) - Curtis Malone was a go-to guy for top college basketball coaches for recruiting Washington, D.C.’s best players; he was also a major player in an East Coast cocaine and heroin distibution ring.

REVISITED * “The Long Fall of One-Eleven Heavy” (Esquire, July 2000: http://bit.ly/1mqQlz6) - A look at SwissAir Flight 111 crash after the recent vanishing of Malaysian Airlines Flight 370.

For all Red Dot weekly pieces: NI REDDOT <GO>

For Related News and Information: First Word scrolling panel: FIRST<GO> First Word newswire: NH BFW<GO>

To contact the reporters on this story: Arie Shapira in New York at +1-212-617-1488 or ashapira3@bloomberg.net; Molly Kissler in New York at +1-212-617-7201 or mkissler@bloomberg.net To contact the editors responsible for this story: Brad Skillman at +1-212-617-2763 or bskillman1@bloomberg.net Libby Sallaberry