MarketView for March 20

Summary 

Concerns over China's growth sparked selling in energy and industrial shares on Tuesday, but the broad market's losses were contained, a sign of market resilience. The steady drumbeat of calls for a correction has not abated since the S&P 500 hit its highest level in nearly four years. Signs of a slowdown in China were the catalyst for selling, though the S&P 500 ended far off the day's lows.

Before Tuesday, the S&P 500 index was at its highest point since May 2008 and about 10 percent below the record closing high of 1,565.15 set in October 2007. Easing concerns about the euro zone's debt crisis and improving U.S. economic data have lifted the S&P 500 by 11.8 percent for the year and over 27 percent from an October low.

Global mining giant BHP Billiton said it saw signs of "flattening" iron-ore demand from China, the world's top metals consumer, hitting the commodities markets and energy stocks. Permits for U.S. homebuilding neared a 3-1/2 year high in February, even as groundbreaking activity slipped; suggesting a nascent recovery in the housing sector was still on track.

Consumer stocks advanced, led by a gain of almost 4 percent in Amazon a day after the online retailer agreed to buy Kiva Systems for $775 million in cash. The advance in Amazon and luxury retailer Tiffany, alongside continued strength in bank shares, helped erase most of the day's losses in late trading. Amazon ended the day up 3.7 percent to close at $192.33, while at the same chalking up more than twice the previous 10 days' average volume. Shares of Tiffany rose 6.7 percent to $73.27 after the jewelry chain forecast higher sales this year, helped by expansion in Asia and the Americas.

Lions Gate Entertainment (LGF.N) shares hit an all-time high of $15.30 ahead of the release of its highly anticipated movie, "The Hunger Games." Its stock closed up 7.2 percent at $15.28. Adobe Systems lost 3.9 percent to close at $33.16, a day after the company reported quarterly revenue growth had slowed, as the company missed forecasts.

About 6.2 billion shares changed hands on the three major equity exchanges, as compared with the daily average so far this year of about 6.9 billion shares.

Homebuilding Permits Up Sharply

Permits for homebuilding neared a 3.5-year high in February, suggesting a budding recovery in the housing market was still on track even though groundbreaking activity slipped.

New building permits surged 5.1 percent to a seasonally adjusted annual rate of 717,000 units last month, the highest since October 2008, the Commerce Department said on Tuesday. The increase reinforced views that the housing market was improving. It is now assumed that home building will add to economic growth this year for the first time since 2005.

While green shoots are emerging in the housing market, an oversupply of unsold homes is depressing prices and starts are still less than a third of the 2.27 million rate peak reached in January 2006.

In February, housing starts slipped 1.1 percent to a rate of 698,000 units, but there was more new construction activity in January than previously reported. Moreover, starts were up 34.7 percent from February last year, largest year-on-year increase since April 2010.

Construction of single-family homes - the largest share of the market -- fell 9.9 percent last month, but groundbreaking for multi-family housing projects was up 21.1 percent. Over the past year, starts on single-family homes are up 17.8 percent, while multi-family starts have nearly doubled as demand for rental properties has risen, with many Americans moving away from homeownership.

While home building now accounts for only about 2.5 percent of gross domestic product, it remains a major force in the economy. It is estimated that for every one house built, about 2.5 jobs are created.

Permits last month saw a 4.9 percent increase in approvals for single-family home projects to their highest level since April 2010. It was the fifth straight month that building permits for single-family homes had increased. Permits usually lead home construction by about a month, meaning that starts will likely reverse their slide in March. Permits for multi-family homes rose 5.6 percent to a 245,000-unit rate.

The data followed a report on Monday that showed sentiment among home builders held at a near five-year high in March.