MarketView for March 28

Summary 

The major equity indexes fell on Wednesday as a decline in both oil and metals prices gave investors a reason to sell commodity-related shares. Add in a sharp drop in crude future prices along with a weaker-than-expected durable goods report and it was not a good day on Wall Street.

An example of how some of the large cap stocks were hurt was demonstrated by Caterpillar, down 3.5 percent to close at $104.26, making it the largest drag on the Dow Jones Industrial Average. Key oil companies, such as Exxon Mobil, also ended the day in negative territory. Exxon closed down 0.9 percent at $85.86, while Chevron ended the day 1.1 percent in the red at $105.89. Yet, despite the decline, the S&P 500's ability to remain above the 1,400 level was an indication that the market's uptrend was likely still in place. Furthermore, the S&P 500 is still up 11.8 percent this quarter.

Gold and copper prices fell in tandem with durable goods orders. According to the latest data, new orders for durable goods rose 2.2 percent in February, falling short of a consensus forecast for a 3 percent gain, while a gauge of future business investment also missed forecasts, casting a shadow on the manufacturing sector's support of the recovery. Keep in mind that much of the market's recent gains have come as a result of improved economic data and accommodative monetary policies.

On Tuesday, Fed Chairman Ben Bernanke, asked in an ABC News interview about the potential for more quantitative easing, said the Fed wasn't taking any options off the table. According to Bernanke, among the sectors leading gains for the quarter, the S&P financial index ended the day up 0.4 percent and looks poised to see more strength.

In the tech sector, Apple hit yet another lifetime high of $621.45. The company said it will offer a refund to buyers of its new iPad in Australia after it was accused of misleading advertising. Apple's stock closed at $617.62, up 0.5 percent for the day.

Volume within the three major equity exchanges was slightly above average, with 6.84 billion shares changing hands. For the year to date, the daily average volume is about 6.83 billion shares.

Durable Goods Orders Fall

A report released by the Commerce Department Wednesday morning indicated that durable goods orders increased modestly in February, rising 2.2 percent, thereby partially reversing January's order decline. The durable goods data supports the view that growth will slow in the first quarter to around a two percent annual rate, a pace that is too weak to lower unemployment.

However, a survey released by the Business Roundtable on Wednesday indicated that  corporate executives' outlook brightened in the first quarter, with a growing number planning to hire more workers and invest more in capital equipment. Durable goods are items designed to last three years or more. If you exclude transportation, orders were up 1.6 percent.

Orders for non-defense capital goods, excluding aircraft, a closely watched proxy for future business investment, edged 1.2 percent higher. That statistic fell 3.7 percent in January.

The 3.9 percent increase in transportation equipment orders during the month of February, including a 6.0 percent increase in civilian aircraft orders, helped send the overall number higher. Boeing received 237 orders for aircraft during the month, according to the plane maker's website, up from 150 in January.

Business Roundtable Survey Indicates Increased Hiring

Apparently many CEOs now view of the economy in a better light with a growing number ready to hire more workers over the next six months, according to a Business Roundtable survey. Improving demand in the United States offset concerns that Europe's economy may be headed into a recession, helping to give the Roundtable's CEO Economic Outlook Index its largest uptick since the third quarter of 2009, the group reported on Wednesday.

On the key metric of employment, 42 percent of CEOs said they planned to add staff in the United States over the next six months. That is a 16 point improvement from the December reading and more than double the 16 percent of CEOs who expect to cut jobs.

Business Roundtable member companies generate $6 trillion in annual revenue and employ more than 14 million people and members such as General Electric and Caterpillar have been adding workers and of the 128 CEOs surveyed March 1-19, 48 percent said they expected to boost their U.S. capital spending in the next six months, and 81 percent forecast a rise in sales.

The group's CEO Economic Outlook Index, which measures sales, hiring and capital spending, rose to 96.9 in the first quarter from 77.9 in the 2011 fourth quarter. Any reading above 50 indicates growth. The CEOs raised their forecast for real gross domestic product growth for 2012 to 2.3 percent from 2 percent in December.

Israel Considering Selling Natural Gas

Israel said it is willing to sell some of its new natural gas bonanza to Arab neighbors, in the hope this will improve relations within the region, the country's energy minister said on Wednesday. Gas production is set to increase sharply in Israel following the discovery of some of the world's largest offshore reserves.

Exploration companies led by Texas-based Noble Energy and Israel's Delek Energy have discovered two large gas fields off the country's coast - Tamar, with reserves estimated at 9.1 trillion cubic feet, and the nearly twice as big Leviathan. An experts' panel will shortly submit its recommendations as to how Israel should use these deposits. The report is due out in a few days.

Following the report and public commentary, Israel will decide what it will do with its deposits. Among the ideas being suggested is to sell it abroad, to use it domestically for electricity or petrochemical production or to replace oil needed to meet transportation requirements.

If Israel decides to export some of it, it would sell at least 5-7 billion cubic meters each year – which is the amount that can be processed by a natural gas liquefaction (LNG) plant. First exports would be 5 to 10 years in the future.