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Proprietary Trading Weekly Market Recap For Friday, Mar. 28, 2014

Stocks Slump as Momentum Names Tumble

Stocks were under pressure during most of the week as momentum stocks tumbled led by the biotech sector. Social networking names and high flyers in the technology space were the worst performing stocks, as investors took profits after experiencing robust returns in January and February. Economic data released during the week was mixed, but at best the growth projected by the data can be considered modest. For the week the Nasdaq was down 2.8%, while the S&P 500 declined 0.48%.

During the week, there were a number of Fed speakers but few offered a clarification of Fed Chair Janet Yellen's comments during her press conference following the Feds monetary policy meeting. Charles Plosser the President of the Philadelphia Federal Reserve commented that he was puzzled by the market's reaction to Janet Yellen's comments. He believes that Yellen described the Fed thinking in a clear concise manner, and the likelihood of Fed tightening before the third quarter of 2015 will be data dependent.

Economic data released during the week was mixed. New home sales continued to disappoint declining 3.3% year over year while consumer confidence moved to a 6-month high at 82.3 from 78.2 in January. February's sales were below the 445,000 rate forecast by economists. Recent home-price pressure, however, may be easing. The Commerce Department report showed the median price for a new home sold in February fell 1.2% from the same period a year earlier to $261,800.

On Wednesday the Government released a mixed Durable Goods Order's report. Headline Durable goods orders increased by 2.2% in February, but the majority of the climb was in the aircraft sector. Economists polled had expected durable-goods orders to be unchanged. Excluding transportation, orders rose a smaller 0.2% in February, according to the Commerce Department. Orders for core capital goods fell 1.3% last month and the increase in January was revised lower. Shipments of core capital goods, a category used to calculate quarterly economic growth advanced 0.5%.

Chinese data did little to buoy US stocks. Chinese factory activity has contracted for the fifth straight month in March, as the purchasing manager's index reported in the EU slipped to 48.1 from 48.5 in February missing consensus of 48.7. According to HSBC, weakness is broadly based with domestic demand softening further. Hopes of such stimulus helped push the Shanghai Composite up 0.9%, while the Hang Seng rose 1.9%. Chinese data has not impressed since exports dropped 18% in February. Each data point is scrutinized carefully and each softer than expected number is met with dollar purchases.

European data continued to reflect modest growth ahead of the impending ECB meeting. Eurozone business activity has cooled slightly in March with the flash composite PMI dropping to 53.2 from 53.3 in February but topping consensus of 52.6. Manufacturing and services PMI fell, although the euro-zone enjoyed its best quarter for business activity since Q2 2011 according to Markit. The purchasing manager's survey showed a 0.5% increase in Q1 GDP after growth of 0.3% in Q4. German PMI readings disappointed, but France's business activity surprisingly returned to growth. The pressure on a weaken economy will fall on the ECB to present an action plan.

Initial claims for unemployment benefits, a measure of layoffs across the economy, fell by 10,000 to a seasonally adjusted 311,000 in the week ended March 22, the Labor Department said Thursday. Economists surveyed by Dow Jones Newswires had forecast 325,000 new claims for the week. The number of initial claims for the week ended March 15 was revised up a bit to 321,000. The four-week moving average of initial claims, a measure that smooth's out week-to-week gyrations, fell to 317,750 last week.