MarketView for March 17

Summary

The major equity indexes moved sharply higher on Monday, with the S&P 500 recovering from its worst weekly decline in the past seven weeks, as concerns eased over the situation in Crimea, while economic data indicated the economy was improving after a winter slowdown.

The 97-percent vote in Crimea in favor of quitting Ukraine was condemned as illegal by Kiev and the West, but the referendum passed without violence. In response, the United States and European Union imposed personal sanctions on Russian and Crimean officials involved in the seizure of Crimea. Russian President Vladimir Putin signed a decree recognizing the region as a sovereign state.

And while the outcome is not without continuing animosity between Russia and much fo the rest of the world, the geopolitical tension that had weighed on equities last week was partially lifted.

Economically-sensitive sectors led the way higher on Monday, with both technology and industrials gaining ground. Google closed up 1.6 percent to end the day at $1,192.10 while General Electric was up 1.3 percent at $25.43.

More importantly, the advance continued a recent trend of investors using market pullbacks as buying opportunities. Major indexes have not undergone a sustained pullback in more than a year.

The Fed’s QE3 stimulus program has helped keep a floor under equity prices, and Wall Street is looking ahead to a two-day meeting of the Fed's policy-setting committee, which begins Tuesday. Meanwhile, the latest economic data indicated that manufacturing output recorded its largest increase in six months during the month February, while factory activity in New York State expanded.

In company news, Chinese e-commerce giant Alibaba Group Holding said on Sunday it would begin the process toward a U.S. initial public offering, ending months of speculation. Shares of Yahoo, which has a 24 percent stake in the company, rose 4 percent to $39.11, making it one of the best performers in the S&P 500 index.

JA Solar Holdings rose 2.1 percent to $11.66 after the company posted its first profit in 10 quarters and forecast higher shipments for the year.

Giant Investment Ltd will acquire Chinese online gaming company Giant Interactive Group for $3 billion and take it private, the companies said on Sunday. Shares of Giant rose 1.7 percent to $11.59.

Intercept Pharmaceuticals fell 11.9 to $407.16. The company said a trial showed patients taking its experimental liver disease drug experienced a higher number of heart-related problems than those given a placebo.

Volume was light on Monday, with about 5.21 billion shares changing hands on the major equity exchanges, a number that was well below the 6.87 billion share average so far this month, according to data from BATS Global Markets.

Manufacturing Output Rises

Manufacturing output rose more than expected during February, recording its largest increase in six months. It was the latest sign that economic activity is gaining momentum after falling victim to severe weather.

Factory production increased 0.8 percent last month, its largest increase since last August, the Fed said on Monday. That almost unwound January's 0.9 percent decline, which was the largest drop since May 2009.

Manufacturing added to other data such as retail sales and employment that have suggested the economy was regaining strength after abruptly slowing down at the end of 2013 and early this year as an unusual cold winter took its toll.

Last month, mining production rose 0.3 percent, but utilities output fell 0.2 percent. The rise in manufacturing and mining output helped to lift overall industrial production 0.6 percent in February. Production at the nation's mines, factories and power plants had slipped 0.2 percent in January.

Last month, the amount of industrial capacity in use increased to 78.8 percent from 78.5 percent in January. Industrial capacity utilization, a measure of how fully firms are using their resources, was 1.3 percentage points below its long-run average.

Officials at the Fed tend to look at utilization measures as a signal of how much "slack" remains in the economy, and how much room there is for growth to run before it becomes inflationary.