Small caps, energy continue to surge.
Stocks picked up in the first quarter of 2006 where they left off in late 2005, posting solid gains in the face of economic uncertainty and potentially setting the stage for a fourth straight year of equity gains after the brutal bear market from 2000 through 2002.
All Morningstar diversified equity indexes were higher for the trailing 13 weeks through March 22, as small caps led the way in what is now an all-too-familiar pattern. Those anticipating a rotation to large caps will have to wait a little longer, since investors apparently haven't quite lost their affinity for smaller stocks. The Morningstar US Market Index rose 5.6%.
The market weathered additional debt downgrades and intensified solvency questions for embattled automaker General Motors
Although financier Carl Icahn dropped his bid to restructure TimeWarner, influential investor Bruce Sherman encouraged the McClatchy-Knight Ridder merger. Warren Buffett added private company Business Wire to Berkshire Hathaway
As media stocks continued to suffer, energy stocks continued to surge, finishing with a 7% gain for the trailing 13 weeks through March 22. However, commodity futures prices themselves took a breather. The Dow Jones-AIG Commodity Index dropped nearly 7% for the quarter. Additionally, falling natural-gas prices and revisions by Morningstar's energy analysts to their assumptions placed some businesses in the natural-gas industry, such as Houston Exploration
New Federal Reserve Chairman Ben Bernanke will have to guide a slowdown in residential housing delicately, taking care not to send prices down precipitously as he manages inflation. The Fed's rate-raising campaign had its effect on bonds, with the Lehman Brothers Aggregate Index adding a measly 0.34% for the quarter through Feb. 28.
Surveying the Sectors
The developing world's torrid growth helped industrial-materials stocks lead the way. Cement companies such as Lafarge