This March, U.S. equity indices posted mixed results topping off their largest quarterly losses since the third quarter of 2002. The S&P 500, Dow Jones Industrials and NASDAQ 100 cash indices recorded monthly changes of -0.60%, -0.03% and +2.10%, respectively.
As the deleveraging saga continued to unfold, some of the month's worst days occurred early-on as Thornburg Mortgage and The Carlyle Group were rumored to have missed margin calls, and culminated mid-month with the failure of Bear Stearns, the country's fifth largest investment bank.
Even as inflation signs bounced around the court and commodities hit the board with all time highs, the Federal Reserve traveled to the rescue once again with a sweeping series of actions, including: an emergency weekend 25 basis point cut, followed by an additional 75 basis point cut, and new extended lending facilities featuring the acceptance of subprime collateral from investment banks. In spite of wild ranging days in both directions, the equity markets ended the month nearly where they began as the realities of an economic slowdown overcame the relief of having sidestepped a nationwide financial crisis.
Style-Box performance was firmly in the Large-Cap camp, with Small-Cap Value stocks also showing relative strength. Since March's retest and bounce off of the January lows, many market pundits claim we have "seen the bottom." That may be so, but we have a good deal of technical resistance overhead to dribble past first. One thing is certain, as the first quarter's "Margin Madness" comes to a close, traders will be looking forward to the much ballyhooed second-half comeback.
The Style Box below was calculated using the following PowerShares™ ETFs: Small-Growth (PWT), Small-Value (PWY), Mid-Growth (PWJ), Mid-Value (PWP), Large-Growth (PWB), and Large-Value (PWV).
The Standard & Poors 500, Dow Jones Industrial Average and NASDAQ 100 may be traded through ETF proxies, including the SPY or IVV, DIA and QQQQ, respectively.
Volatility: Highly Elevated (VIX 25-32)
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