U.S. equities finished lower on Monday in a relatively quiet session. Investors were concerned about new headlines out of Greece as well as a comment by a Federal Reserve official that market expectations on rate hikes were too pessimistic.
With the latest Fed meeting minutes due later this week, rate hike probabilities will be in focus as stocks contend with major overhead resistance levels.
In the end, the Dow Jones Industrial Average lost 0.3%, the S&P 500 fell 0.3%, the Nasdaq Composite dropped 0.5% and the Russell 2000 lost 0.8%. Treasury bonds were mixed, the dollar was slightly lower, gold lower 0.6% and crude oil lost 3% to close at $35.67 a barrel.
Materials led the decliners with a 1% loss while healthcare stocks bucked the trend to rise 1%. The weakness in energy pushed the ProShares UltraShort Crude Oil (NYSEARCA:SCO) recommended to Edge subscribers 5.5% higher to a gain of nearly 19% since recommended on March 24.
Virgin America Inc (NASDAQ:VA) gained 41.7% after agreeing to a buyout offer from Alaska Air Group, Inc. (NYSE:ALK) in a $4 billion deal. Groupon Inc (NASDAQ:GRPN) gained 9.4% after announcing a $250 million investment from an outside group.
Facebook Inc (NASDAQ:FB) fell 3% after Deutsche Bank analysts warned first-quarter results could come in lighter than expected, adding that sentiment was extended, and revenue expectations elevated.
On the economic front, February factory orders were in-line with expectations, dropping from a downwardly revised result for January.
Greece was in the headlines amid an ongoing dispute between the European Union and the International Monetary Fund over fiscal targets and debt sustainability. A recent leak of internal IMF documents suggests the fund could withdraw its support in the third bailout effort for the troubled country if Athens isn’t offered debt relief measures — something that has been a difficult political ask for Brussels and Berlin.
Turning to the Fed, Boston Fed President Eric Rosengren said that market expectations for just one — or possibly zero — rate hikes this year is “surprising” and could be “too pessimistic” based on inflation trends and labor market gains.
With stocks at major resistance levels, the bulls were disheartened by the hawkish Fed talk as well as weakness in Big Tech “FANG” stocks such as FB and Netflix, Inc. (NASDAQ:NFLX).
Also, after bouncing strongly out of the Feb. 11 low, crude oil has been breaking down on a lack of progress toward a Russia/OPEC supply freeze deal. Iran continues to insist that any deal be done at its pre-sanctions output level of 4 million barrels per day (vs. around 3.2 million now).
Given that the various OPEC producers are literally engaged in a proxy religious war I don’t think an agreement is likely.
Anthony Mirhaydari is founder of the Edge and Edge Pro investment advisory newsletters. A two-week and four-week free trial offer has been extended to InvestorPlace readers.
