The Month in Brief

The stock market was hardly placid in March – while some key economic indicators, earnings news and M&A action encouraged investors, dollar strength and depressed oil prices weighed on stocks and commodities again. The Dow lost 1.97% for the month and ended the quarter down 0.26% YTD, and the S&P 500 and Nasdaq also staged March retreats. Consumer confidence and hiring were again bright spots, home sales took a turn for the better, and both consumer prices and wages managed to rise. On the downside, retail sales numbers and a key manufacturing index disappointed and data from overseas could have been better. The Federal Reserve downgraded its 2015 economic projections and reiterated that it would move very slowly in adjusting interest rates.1

Domestic Economic Health

March ended with the Conference Board’s monthly index defying expectations. It rose to 101.3 from its revised 98.8 February mark; analysts surveyed by felt it would come in at 96.4. (It was at 91.0 as recently as November.) March brought a 2.4-point dip for the University of Michigan’s consumer sentiment index, which posted a final reading of 93.0.2

More good news arrived pertaining to consumers: the Commerce Department said household wages had improved 0.4% in February, even though consumer spending increased just 0.1%. Households didn’t seem to be spending too much of those wage gains, however. U.S. retail purchases lessened 0.6% in February according to the Census Bureau (though minus auto buying, they were only off 0.1%). Inflation did actually pick up in the year’s second month: the Consumer Price Index rose 0.2% for February following its 0.7% January retreat, with the core CPI up 0.1%.3,4

On the producer front, wholesale inflation was certainly muted: both the headline and core Producer Price Index sank 0.5% in February, down for another month. Hard goods orders also went south in February: the 1.4% dip followed a 2.0% rise in January.3,4

Employers added 295,000 new jobs in February as the annualized pace of hiring improved 2.3% year-over-year. The headline unemployment rate ticked down to 5.5%, a low unseen since May 2008, while the broader U-6 rate measuring the unemployed and underemployed fell to 11.0%.5

Forward momentum seemed to be ebbing in the manufacturing sector, however. In March, the Institute for Supply Management’s manufacturing PMI fell to 51.5 from February’s mark of 52.9. The ISM service sector index was notably higher in February at 56.9.3

The Federal Open Market Committee seemed to present an old message in a new way in its March policy statement. Fed officials removed the word “patient,” but countered investor questions about the timing of a rate hike with reductions in their 2015 inflation and GDP forecasts and indications that no interest rate moves would be made until later in the year.6

Global Economic Health

If the euro area economy wasn’t getting a whole lot better, at least it wasn’t getting worse. In March, according to the latest Eurostat flash estimate, consumer prices appeared down 0.1% annually; that was better than the 0.3% deflation recorded in February. The euro area jobless rate was at 11.3% in February, the lowest since May 2012. “Growth is gaining momentum,” European Central Bank president Mario Draghi maintained before the European Parliament on March 31, and some hopeful signs had emerged for the region: a 3.7% annualized growth in retail sales, slightly improved consumer confidence, and the year-over-year difference in euro area money supply about to turn positive.7,8

In the far east, the most-watched purchasing manager index was barely showing manufacturing sector growth. China’s official factory PMI came in at 50.1 for March, and that hinted at a subpar Q1 for that nation’s economic engine. Indonesia’s manufacturing activity shrunk for a sixth consecutive month in March, with the most severe drop in new orders ever recorded; Japan’s domestic factory orders declined for the first time in nearly a year. Falling crude oil prices were putting deflationary pressure on the region’s economies.9

World Markets

European benchmarks made some substantial March gains. The DAX rose 4.95%, the STOXX 600 1.30%, the CAC 40 1.66% and the IBEX 35 3.07%. Italy’s FTSE MIB climbed 3.67%. The Europe Dow, on the other hand, lost 3.15% in March and the Russian RTS fell 1.81%; the FTSE 100 was off 2.50%.1

Major Asian bourses were up and down: Sensex, -4.78%; Shanghai Composite, +13.25%; Nikkei 225, +2.18%; Hang Seng, +0.31%. The Asia Dow lost 0.72%. In the Americas, Brazil’s Bovespa lost 0.84%, Mexico’s IPC All-Share 1.05% and Canada’s TSX Composite 2.18%; March also brought a 1.65% dip for the Dow Jones Americas index. Argentina’s always-volatile Merval jumped 12.87% for the month. The Global Dow went -2.47%, the MSCI Emerging Markets Index -1.59% and the MSCI World Index -1.81%.1,10

Commodities Markets

Losses characterized this sector, again. Some metals did advance. Gold fell 2.44% for the month, settling at $1,183.10 on the COMEX on March 31; platinum declined 4.17%. Copper futures gained 1.38%, however, and silver futures rose 0.24%, closing March at $16.60. The U.S. Dollar Index settled at 98.36 on March 31 and finished February at 95.29, so its monthly advance was 3.22%.11,12

Crude oil wrapped up the month at a NYMEX price of $47.60, sinking 3.96% for March. Heating oil dropped 22.25%. Monthly losses were smaller for unleaded gasoline (1.40%) and natural gas (2.55%). Key crops declined across the board: cotton lost 1.81%, sugar 13.93%, wheat 0.29%, soybeans 5.08%, cocoa 12.77%, coffee 3.49% and corn 1.37%.11

Real Estate

Home sales improved in February, with a major boost evident for new home buying. According to the Census Bureau, new home sales rose 7.8% in the second month of 2015, which put the annualized gain at an impressive 24.8%. The National Association of Realtors found the pace of resales up 1.2% for February, and NAR’s pending home sales index showed a 3.1% rise for the same month. As for house prices, the January edition of the S&P/Case-Shiller home price index showed an overall 4.5% year-over-year gain.3,13

Eyeing Freddie Mac’s March 26 and February 26 Primary Mortgage Market Surveys, we see it became even cheaper to finance a home purchase last month. On March 26, the average interest rate on the 30-year FRM was 3.69%, down from 3.80% in February’s last PMMS. In the same interval, the average interest on the 15-year FRM declined a tenth of a point to 2.97%. Average interest rates on the 5/1-year ARM and the 1-year ARM were respectively 2.92% and 2.46% in late March compared with 2.99% and 2.44% in late February.14

As for groundbreaking and new projects, the Census Bureau reported a 3.0% February rise in the pace of building permits (with multifamily construction permits up 18.3%). That was the good news. It also reported a 17.0% plummet in housing starts, possibly influenced by weather, less available land and a decrease in builder sentiment.15

Looking Back…Looking Forward

The Russell 2000 outshone the Dow, S&P and Nasdaq last month, gaining 1.57% to settle at 1,252.77 and bring its quarterly performance to +3.99%. March 31 saw the Dow settle at 17,776.12, the Nasdaq at 4,900.88 and the S&P at 2,067.89; the Dow fell 1.97% in March, the S&P 1.74% and the Nasdaq 1.26%. As for fear, the CBOE VIX rose 14.62% across March to end the month at 15.29. It was truly an up-and-down month: the S&P went 28 straight trading days without consecutive gains until March 30. Only twice in the past 58 years has that happened.1,16

April Stock Charts

Sources:,, – 3/31/151,17,18,19
Indices are unmanaged, do not incur fees or expenses, and cannot be invested into directly. These returns do not include dividends. 10-year TIPS real yield = projected return at maturity given expected inflation.

Can stocks overcome widespread pessimism about this oncoming earnings season? With the dollar being so strong, S&P 500 earnings are truly challenged to surprise to the upside this quarter. FactSet projects a 4.7% slip for Q1, which would mark the first retreat since Q3 2012. While the past is no indicator of the future, bulls may be reassured by how the S&P has performed in recent Aprils: over the past ten years, its median advance has been 0.3% in the first half of the month and 1.8% in the second half of the month. In fact, April is the second-best month in S&P history since 1950, with the index up an average of 1.5%. Perhaps strong economic indicators here and better ones abroad will help history repeat.16

Disclosures & Footnotes