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Biotech Feels the Hammer of the Bears


Today's financial recap and tomorrow's financial outlook.

Stocks started Friday with a bit of a relief rally, but breakdowns in key momentum sectors dragged down the major averages.

The downtrodden iShares Nasdaq Biotechnology Index ETF (NASDAQ:IBB) started the day on a rare positive note, but selling set in quickly, notably in sector leader Gilead (NASDAQ:GILD).

IBB finished down 2.9% and is now almost in negative territory for 2014 following its 21.4% rally into the February 25 peak.

We also saw intraday sell-offs in small caps, social media, and fuel cells.

The S&P 500 (INDEXSP:.INX) echoed the biotech action with a 12-point early rally up to 1866.63, but selling set in and the index finished up 0.5% at 1857.62. Importantly, the S&P did not break 1850, which is considered a key technical level and point of control for the bulls.

Plus, housing stocks were very strong today, as were other economically sensitive groups like consumer discretionary, materials, and industrial names. Emerging markets also continued to rally, with iShares FTSE/Xinhua China 25 Index ETF (NYSEARCA:FXI) up 2.1%.

The larger trend since the market topped out last week remains in play. Investors are rotating out of the more speculative areas of the US equity markets while putting money into safety plays like traditional pharmaceuticals and technology stocks, as well as emerging markets like Brazil and the aforementioned China, which up until recently were serial underperformers.

Today, Bloomberg News reported heavy outflows in technology-based ETFs, as well as an elevated put-call ratio in the Technology Select Sector SPDR Fund (NYSEARCA:XLK), indicating negative sentiment. We saw similar reports in mid-March for emerging markets funds when those stocks bottomed.

Electric carmaker Tesla Motors (NASDAQ:TSLA) marched 2.4% higher after the company announced it was adding a titanium underbody shield to its Model S vehicle in an effort to enhance safety.

BlackBerry (NASDAQ:BBRY) rallied hard in early trading on its big fourth-quarter earnings beat, but the company's weak revenues spooked investors. The stock finished down 7.1% at $8.41.

On the economics front, the February Personal Income, Personal Spending, and PCE Prices numbers were in-line.

And finally, the final March reading for the University of Michigan Consumer Sentiment Index was 80.0, a hair below the 80.5 consensus.

Tomorrow's Financial Outlook

On Monday, we'll have some US economic data points coming, the most important of which is the March Chicago PMI report. Internationally, traders will be watching Japan's February preliminary Industrial Production data, and the March advance eurozone CPI.

Fed Chair Janet Yellen will speak at a conference in Chicago, but she is not expected to make any new announcements regarding monetary policy.

Twitter: @Minyanville

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No positions in stocks mentioned.

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