By John Spence, MarketWatch
BOSTON (MarketWatch) -- Exchange-traded funds indexed to U.S. stocks roared back in March to recoup at least some of their earlier steep losses as the financial sector led a broad-market index to its best showing in nearly two decades.
The Russell 3000 Index, designed to be an all-encompassing measure of the U.S. stock market, gained 8.8% in March, marking the largest monthly gain since December 1991, according to Russell Investments.
The benchmark forms the basis of the iShares Russell 3000 Index Fund /zigman2/quotes/208731962/composite IWV -1.17% . The ETF, which has more than $2 billion in assets, still finished the first quarter down 11% despite last month's rally, according to investment researcher Morningstar Inc.
Although every market sector delivered positive returns in March, four -- financial services, materials and processing, technology, and consumer discretionary -- led the charge.
However, not everyone is convinced the worst is over for stocks as investors continue to worry about a dearth of credit, a clouded economic picture and rising unemployment.
"Although we saw a reduction in defensiveness in stock selection among investment managers in March and a little more aggressiveness, it's much too early to call a market turnaround," said Mark Eibel, director of multi-strategy solutions for Russell.
"Short term, March offered a glimmer of hope for investors that perhaps the market crisis had hit bottom, but even a great run, such as what we saw these past few weeks, isn't enough to offer us long-term clarity," he said Wednesday.
Indeed, every U.S. sector posted a loss for the first quarter except technology.
Winners and losers
Still, last month did give shell-shocked investors a bit of a reprieve, however temporary, as market indexes bounced off their lows in what many are interpreting as a classic bear-market rally.
Although growth stocks outperformed their value counterparts by losing less in the first quarter, Russell noted that this disparity was much less pronounced in March as the rising equities tide lifted all boats.
For the month ended March 31, the iShares Russell 3000 Growth Index Fund gained 8.6%, but it was down 4.7% for the trailing three months, according to Morningstar. Meanwhile, the iShares Russell 3000 Value Index Fund rose about 8% in March but was off 17.3% for the first quarter.
/zigman2/quotes/209961116/composite IWM 200.75, -3.70, -1.81%
In terms of size, mid-cap stocks had a slight edge in both March and the first quarter. The iShares Russell Midcap Index Fund /zigman2/quotes/205291424/composite IWR -1.37% added 8.6% in March but was down 9.1% for the year-to-date period.
The iShares Russell 1000 Index Fund /zigman2/quotes/209973077/composite IWB -1.10% , which tracks U.S. large-cap stocks, rose 8.2% in March and lost 10.8% for the first quarter. Its small-cap cousin, iShares Russell 2000 Index Fund /zigman2/quotes/209973077/composite IWB -1.10% added 7.7% in March, and was off 14.3% in the first quarter of 2009.
The breadth of March's snapback rally was impressive.
In the large-cap Russell 1000 Index, 80% of the stocks added value in March as 27 of them gained more than 50% for the month, according to Russell. In the small-cap Russell 2000 Index, 75% of the stocks rose for the month and 124 of them added more than 50%.
Separate research released on Wednesday suggests that trading activity among retail investors jumped in March along with the market.
"Our channel checks show that retail trading activity has surged and is up about 15% to 20% sequentially in March," wrote Sandler O'Neill analyst Richard Repetto in a report. Last month also saw record consolidated U.S. cash equity volumes, according to Repetto, who follows online brokers.
Sector returns within the Russell 3000 Index
|Materials & Processing||14.1%||-7.7%|
Source: Russell Investments