EmailThe first quarter ended on a perfect note for the S&P 500, which joined the Dow Jones Industrial Average in establishing a new, all-time closing high. It was a bullish end to a three-month period that featured headline volatility on the political and economic fronts and sector leadership that wasn't as offensive-minded as the strong gains in the major indices seemed to suggest.
The S&P 500 surged 10.0% in the first quarter, led by the health care (+15.2%), consumer staples (+13.8%), utilities (+11.8%), and consumer discretionary (+11.8%) sectors. Put another way, the best-performing areas were primarily defensive-oriented. They are also the sectors known for offering some of the best dividend-paying stocks.
The second quarter, which begins today, is set to begin on a relatively flat note. The S&P futures are trading close to fair value.
There isn't any corporate news of note to move the market and a number of foreign markets remained close for Easter Monday. Japan and China were open, however, and neither did particularly well after some economic reports that failed to live up to higher expectations.
Japan declined 2.1% in response to a Tankan survey for large manufacturers that showed a reading of -8 for March versus an estimate for -7. A number below zero suggests large manufacturers are more pessimistic than optimistic about business conditions.
In turn, China's Shanghai Composite slipped 0.1% in the wake of the government's PMI report indicating business activity increased to 50.9 in March from 50.1 in February. The disappointment reportedly is that the expansion isn't stronger and that the consensus estimate called for a higher reading of 52.0. The HSBC manufacturing PMI slipped to 51.6 from 51.7.
On a related note, today's trading activity could take a cue from the March ISM Index, which will be released at 10:00 a.m. ET. It is expected to hold fairly steady at 54.0 versus 54.2 in February. Construction spending data for February (Briefing.com consensus +0.9%; prior -2.1%) will be released at the same time, but should take a backseat to the ISM number.
Data for the months of January and February were generally better than expected, so incoming reports for March will be closely monitored to determine if there were any drag effects from the imposition of the higher payroll tax, the sequestration, and higher gasoline prices.
The big economic event of the week, though, will come Friday with the release of the March nonfarm payrolls report.
What happens between now and then is anyone's best guess. The market is due for a pullback, yet that was an ignored refrain time and again throughout the first quarter.
