MarketView for March 28

Summary

The major equity indexes ended the week on Friday on a higher note but off their session highs as a late afternoon selloff in the biotechnology sector weighed on the overall market. The Nasdaq Composite Index fell nearly 3 percent for the week, marking its worst week since October 2012.

The three major equity indexes had been significantly higher in most of the morning and early afternoon trade following comments from China's Premier Li Keqiang indicating that the country's government was ready to take steps to support its slowing economy.

But a 2.8 percent drop in the Nasdaq biotechnology index led the major indexes to session lows. The biotech sector index fell 7 percent for the week. With just one trading day left in March, the index was down about 13 percent for the month at Friday's close.

Gilead Sciences fell 4.1 percent to end at $68.55 and Biogen Idec lost 5 percent to close at $294.12. The two stocks were among the S&P 500's biggest decliners.

For the week, the Dow Jones Industrial Average was up 0.1 percent, while the S&P 500 was down 0.5 percent and the Nasdaq was down 2.8 percent. The week's losses were concentrated in the Nasdaq as investors took profit in some of the market's largest outperformers, mostly in the Internet and biotech space. Some analysts say the selloff in "momentum" stocks has yet to run its course, though this could benefit more value-oriented names. A move to such companies helped limit the Dow's weekly decline.

Netflix also continued its downward trend, ending the day down 1.5 percent to close at $358.87. The shares have been down for 16 of the last 18 sessions, losing about a fifth of its value over that period.

Red Hat reported fourth-quarter earnings that exceeded expectations late Thursday, though the open-source software provider gave a full-year profit view that was below forecasts. Red Hat's closed down 6.9 percent to $52.23.

In the latest snapshot of the economy, personal income and consumption both rose 0.3 percent in February, an indication that weak data earlier this year was due to bad weather rather than worsening fundamentals.

U.S. consumer sentiment fell in March as consumers were less hopeful about the prospects for the overall economy, according to the Thomson Reuters/University of Michigan's final March reading on the overall index on consumer sentiment. While the report was up by 0.1 from the preliminary March read, it was also slightly under expectations.

Approximately 5.7 billion shares changed hands on the major equity exchanges, a number that was below the 6.9 billion share average so far this month, according to data from BATS Global Markets.

Consumer Spending Rises

The Commerce Department reported on Friday that consumer spending rose 0.3 percent last month after a downwardly revised gain of 0.2 percent in January. Consumer spending, which accounts for more than two-thirds of all economic activity, increased due to a rise in outlays for services, likely because of higher demand for health care and utilities.

When adjusted for inflation, spending rose 0.2 percent, but January's gain was just 0.1 percent, not the more-robust 0.3 percent increase reported a month ago. The revision suggested spending cooled this quarter after logging its fastest pace in three years in the final three months of 2013.

Separately, the Thomson Reuters/University of Michigan's consumer sentiment index dipped to 80.0 in March from 81.6 in February. It was little changed from a preliminary reading earlier this month.

A combination of bad weather, an effort by business to work off increased inventories, the expiration of long-term unemployment benefits and cuts to food stamps is expected to hold back growth to around a 1.5 percent annual pace in the first quarter. However, a rebound is expected as those factors fade. The economy grew at a 2.6 percent rate in the fourth quarter.

The Street paid little attention to the day’s economic data, interested instead by Chinese Premier Li Keqiang that his government was ready to support China's cooling economy.

Goldman Sachs lowered its first-quarter GDP growth estimate by one-tenth to a 1.5 percent rate, while forecasting firm Macroeconomics Advisers cut its forecast by two-tenths to a 1.3 percent pace.

Income rose 0.3 percent last month after rising by the same margin in January. It continues to be supported by government transfers for healthcare payments, which offset the drag from the expiration of the long-term unemployment benefits.

The saving rate, which is the percentage of disposable income households are socking away, rose to 4.3 percent from 4.2 percent in January.

There was little sign of inflation. A price index edged up 0.1 percent for a second straight month, and was up just 0.9 percent from a year ago. That marked a slowdown from January's 1.2 percent year-on-year advance and was the smallest 12-month gain since October. Moreover, if you exclude food and energy, prices rose just 0.1 percent for an eighth straight month, keeping the 12-month gain capped at 1.1 percent, the same as in January. Both measures remain stuck well below the Federal Reserve's 2 percent target, providing ample scope for the central bank to move slowly in raising interest rates.