MarketView for February 27

Summary

The S&P 500 closed at a record on Thursday and ended in positive territory for the year after Federal Reserve Chair Janet Yellen said harsh weather seems to be to behind the recent somewhat soft economic data. The advance sent the S&P 500 above its 2013 year-end closing level of 1,848, which has served as resistance in recent sessions. For the year, the S&P 500 index is now up 0.3 percent.

Yellen’s comments gave the markets some relief as the blame was shifted from the worsening fundamentals in the economy, such as weak employment, retail sales, etc., to the weather. The question is whether it is really true or does the Fed need to start to take a more forceful position going forward.

Apparently the Fed is not anxious to intervene. Testifying before the Senate Banking Committee, Yellen also said the Fed would watch carefully to make sure weather was indeed behind the recent weakness. But she said it would take a, "significant change" to the economy's prospects for the central bank to put plans to reduce its bond-buying program on hold.

Some retailers scored sharp gains for a third session, with the shares of J.C. Penney and others moving higher after the companies posted strong results. During the regular session, J.C. Penney was up 25.3 percent to $7.47, a day after the retail chain forecast more improvement in its comparable sales and gross profit margin this fiscal year.

In after-hours trading, Gap’s shares were down 1 percent to $43.24 after the clothing retailer reported results. Deckers Outdoor fell 12.5 percent to $74.05 after the company, whose brands include UGG boots and Teva sandals, posted earnings.

Among other retailers, Best Buy reported better-than-expected earnings on Thursday. The stock rose as high as $28.19 before ending at $25.57, down 1 percent.

Sears Holding reported a quarterly loss that narrowed from the year-ago period, sending its shares up 6.5 percent to $43.01. Kohl's said it expected modest sales gains in its new fiscal year and reported a lower fourth-quarter profit. Kohl's shares ended the day up 2.4 percent to close at $55.74.

Mylan's shares moved up 9.4 percent to end at $56.27 after the generic pharmaceutical company offered up a 2014 forecast above Wall Street's estimates. Mylan also said it plans to make a "substantial" transaction this year that would add to future earnings.

The day's economic data added to the positive tone, with orders for long-lasting U.S. manufactured goods excluding transportation, or durable goods excluding transportation, and a gauge of business spending unexpectedly rising in January.

About 6.5 billion shares changed hands on U.S. exchanges, below the 7 billion average so far this month, according to data from BATS Global Markets.

Durable Goods Orders Rise

Orders for long-lasting manufactured goods excluding transportation unexpectedly rose last month as did a gauge of business spending plans, but that will probably not change the perception that factory activity is slowing.

According to the Commerce Department, durable goods orders, excluding transportation, rose 1.1 percent, the largest increase since May, after falling 1.9 percent in December. The increase reflected a surge in orders for computers and electronic products, fabricated metal products and defense capital goods.

Outside these three components, details of the report were weak, with declines in orders for machinery, primary metals, electrical equipment, appliances and components, and transportation equipment.

Data such as industrial production and regional factory surveys have suggested that manufacturing hit a soft patch in recent months. Part of the slowdown reflects unusually cold weather that has disrupted activity. Manufacturing is also slowing as businesses work through a massive stock of unsold goods that was accumulated in the second half of 2013. As result, they are placing fewer orders with manufacturers, holding back factory production. Overall durable goods orders fell 1.0 percent last month after plunging 5.3 percent in December.

A drop in aircraft orders at Boeing and a decline in motor vehicles orders saw orders for transportation equipment falling 5.6 percent in January. It was the second straight month of declines in this volatile component. Boeing reported on its website it received orders for only 38 aircraft last month, sharply down from 319 planes in December.

Non-defense capital goods orders excluding aircraft, a closely watched proxy for business spending plans, rose 1.7 percent after dropping by a revised 1.8 percent in December.