MarketView for March 9

Summary 

A poor earnings projection from Texas Instruments weighed on the Nasdaq on Wednesday and pushed an index of chip makers below a key technical level in a worrisome sign for the market's six-month uptrend. The PHLX semiconductor index .SOX fell 3 percent to close below its 50-day moving average, which represents medium-term momentum, for the first time since September.

Texas Instruments led the parade downward, after its earnings target disappointed Wall Street. Its shares fell 3.1 percent to $34.74. However, IBM helped the Dow Jones industrial average tread water, as the stock, the largest component in the price-weighted index, rose 2.2 percent to close at $165.86. IBM had reached an intraday high of $167.72, its highest ever when adjusted for stock splits, after analysts raised their target price on the stock. A day earlier, the tech giant reaffirmed its 2015 earnings target.

Even though semis' gains have outpaced the broader market in the last several months, the S&P 500 and the semiconductor index have been moving in the same direction, which could mean further declines in the sector and spell more of the same for the overall market. A 20-day correlation between the S&P 500 and the semiconductor index .SOX was at 0.77, with a reading of 1 suggesting a perfect correlation. The semiconductor index is up 41 percent since the start of September, when the recent rally began, while the S&P 500 is up 26 percent.

High oil prices hurt the markets on the two-year anniversary of stocks' run from the S&P 500's 12-1/2-year closing low of 676.53, which was sparked by the financial crisis.

Tech shares also felt the weight of Finisar. The stock plummeted 38.5 percent to $24.61 after the network equipment maker forecast a dismal fourth quarter, blaming an inventory pile-up by telecommunications equipment makers in China. Finisar is up 100 percent since the start of September, when the recent stock market rally began. Shares of sector peer JDS Uniphase fell 16.7 percent to $21.14.

In the oil market, Brent crude gained $2.88 to settle at $115.94 a barrel as turmoil in Libya continued. The higher prices reinforced worries that high energy costs could dampen economic growth. Copper fell 3 percent on investor concerns that elevated crude oil prices could lead to inflation and crimp global growth. Freeport McMoran Copper and Gold fell 3.3 percent to $48.45 and has lost more than 7 percent on increasing trading volumes in the last four days.

Volume for the three major exchanges was about 7.04 billion shares, well below the daily average of 8.47 billion last year.

Wholesale Inventories Rise

Wholesale inventories were higher in January and sales set their fastest pace in 14 months, suggesting restocking and strong demand would give a lift to the economy in the first quarter. According to a report released by the Commerce Department on Wednesday morning, total wholesale inventories increased 1.1 percent to $436.88 billion, the highest level since November 2008. The report also stated that inventories rose an upwardly revised 1.3 percent in December. At the same time, sales at the wholesale level jumped 3.4 percent, the largest gain since November 2009, and December's increase was revised higher as well.

A slowing pace of inventory accumulation had weighed on GDP growth in the fourth quarter, but a need to restock shelves should now help spur more production. The rise in inventories also offers a signal that businesses expect further sales growth ahead.

Given the upward adjustment to December's wholesale inventories reading, the government will likely revise up its measure of fourth-quarter GDP growth to a near 3.2 percent annual rate from the 2.8 percent reported last month. The Commerce Department will publish its final estimate for fourth-quarter gross domestic product on March 25.

January's trade data scheduled for release on Thursday and a report on Friday on overall business inventories, which includes retail stocks, will shed more light on the size of the potential revision to fourth-quarter GDP growth, as well as the outlook for the current quarter.

The surge in crude oil prices is expected to have pushed up overall U.S. imports in January, slightly widening the trade deficit to $41.5 billion from a gap of $40.6 billion in December, but the report on GDP is adjusted for price impacts.

In January, the rise in wholesale inventories was almost across the board, with petroleum stocks posting their largest increase since March. Sales were in part boosted by a 10.6 percent jump in petroleum, the biggest gain since November 2007.

With sales setting a fresh 3-1/2 year high, the inventory-to-sales ratio -- a measure of how long it would take to sell off stockpiles at the current sales pace -- fell back to an all-time low of 1.13 months' worth from 1.15 in December. If the declines in the ratio continue, it will be good for industrial production over the next few months as firms keep pace with demand.