MarketView for March 31

Summary

The major equity indexes ended the month on a positive not, while at the same time chalking up the fifth straight quarterly rise for both the S&P 500 and the Nasdaq, though it was the smallest three-month advance for both since the fourth quarter of 2012. Both the Dow Jones Industrial Average and the S&P 500 indexes rose for a second straight month in March.

Gains were broad, with nine of the S&P 500's 10 sector indexes rising for the day. About 73 percent of stocks traded on both the New York Stock Exchange and the Nasdaq closed higher. The best sector index was the materials sector, up 2.1 percent, while the utility sector chalked up a 1.2 percent gain.

Technology and financial shares, which along with materials are tied to the pace of economic growth, also outperformed for the day. Micron rose 8 percent to $23.66, ranking as the S&P 500's top percentage gainer. Oracle was up 3.4 percent to close at $40.91.

In her first public speech since becoming Fed chair two months ago, Yellen said that the Fed's "extraordinary" commitment to boosting the economy would be needed for some time to come.

Earlier this month, Yellen raised concerns by saying that the period between the end of the Fed's quantitative easing program and the first rate increase from the central bank could be six months, a faster timeline than many had anticipated.

Equities also received help from end-of-quarter "window dressing," when money managers adjust positions to improve the look of their portfolios.

Biotech stocks stayed in focus with the Nasdaq Biotechnology index ending the day up 3 percent, following a 7 percent decline last week, in what was the index's fifth consecutive weekly decline.

Among some of the more active names, Vertex Pharmaceuticals rose 4.3 percent to close at $70.72, while Biogen Idec added 4 percent to close at $305.87.

The S&P 500 rose 0.7 percent in March and gained 1.3 percent in the first quarter. The Dow rose 0.8 percent for the month, but fell 0.7 percent in the quarter. The Nasdaq fell 2.5 percent for March, but rose 0.5 percent for the quarter.

The Institute for Supply Management-Chicago business barometer was at 55.9 in March, its lowest level since August, and down from 59.8 in February.

Prana Biotechnology fell 71.6 percent to close at $2.80 after the company said its experimental drug to treat Alzheimer's disease failed to meet the main goal of a mid-stage study in patients with a mild form of the condition.

Approximately 5.28 billion shares changed hands among the major equity indexes, a number that was below the 6.9 billion share average so far this month, according to data from BATS Global Markets.

Strong Words from Janet Yellen

Monday saw Federal Reserve Chair Janet Yellen take a page from a politician's playbook to defend the Fed's easy-money policies, citing the struggles of three Americans in a speech and touring a college workshop to shake hands with students and teachers.

It was her first public address since becoming Fed chair two months ago, and the tour of a manufacturing laboratory at Daley College on Chicago's southwest side was her first high-profile effort to lend an empathetic ear to the concerns of Americans five years into a frustratingly slow U.S. recovery from recession.

Ostensibly, the excursion to Daley College, a community college that is part of the City Colleges of Chicago, was meant to highlight promising efforts to train skilled workers and to explain that the economy remains "considerably short" of the Fed's of goal of maximum sustainable employment and stable inflation, as Yellen put it in her morning remarks.

However, behind the polite questions about course studies and job prospects, the trip around Chicago may have been as much about protecting the central bank's cherished independence from political interference.

If Yellen can convince college students that her sometimes perplexing institution serves the public's interest, the Fed has a better shot at beating back efforts in Washington it argues could erode its ability to make unfettered decisions on monetary policy.

Since the 2007-2009 recession, the Fed has effectively printed some $3 trillion. It has kept interest rates near zero for more than five years, and this month said it will keep them there for a considerable time even after it ends its bond-buying program, which is to be wound down later this year.

In her speech to some 1,100 people at a downtown convention center, Yellen said the "recovery still feels like a recession to many Americans, and it also looks that way in some economic statistics."

She said "considerable" slack still exists in the job market and said further monetary stimulus could be effective.

"I think this extraordinary commitment is still needed and will be for some time, and I believe that view is widely shared by my fellow policymakers," Yellen said.

In an unusual move, she cited by name three workers who lost their jobs or absorbed sharp pay cuts when the recession hit, including one who "scrambled for odd jobs and temporary work."

"This is not just an academic debate," she said. "For Dorine Poole, Jermaine Brownlee and Vicki Lira, and for millions of others dislocated by the Great Recession who continue to struggle, the cause of the slow recovery is enormously important."

Road trips are common for the presidents of the Fed's regional banks, who are supposed to gather information on the economy to bring to policy-setting meetings in Washington. However, this has never applied to whoever was the current Chair of the Fed, that is until Yellen's predecessor, Ben Bernanke, broke that mold with a concerted public campaign to address the Fed's critics.

In his last few speeches before retiring, Bernanke indicated that the Fed needed to show it is working in the public's interest or risk losing its policy independence. Yellen, herself, who was the Fed's vice chair before becoming the central bank's chief, was previously president of the San Francisco Fed and did many such road trips.

In House testimony in February, Yellen strongly rejected the "Audit the Fed" bill, warning of how it could bring "political pressures to bear on the committee's judgment about what is the appropriate way to implement monetary policy."

The pressure could cool if the economy keeps improving. U.S. economic growth picked up in the second half of last year, and the unemployment rate has dropped from a post-recession high of 10 percent in 2009 to 6.7 percent last month. That drop is due in part to the droves of Americans who have given up the search for work.

Some economists and more hawkish Fed officials believe the decline in unemployment means little slack remains in the labor market and that inflation will soon rise. Yellen has disagreed, pointing to the unusually large proportion of long-term unemployment and the elevated number of Americans working part time who want full-time work. She also noted that there has been little upward pressure on wages.