Week 13 in Brief
North America
Wall Street rallied more than 1% on Friday and the Nasdaq notched its biggest quarterly percentage gain since June 2020, as signs of cooling inflation bolstered hopes the Federal Reserve might soon end its aggressive interest rate hikes.
The S&P 500 closed at its highest level since Feb. 15 and posted a second straight quarter of gains, led by the technology sector’s 21.5% rise in the first quarter.
The S&P 500 financial sector was the quarter’s worst-performing sector, posting a 6.1% drop, while the KBW regional bank index fell 18.6% for the period.
The Commerce Department report Friday showed U.S. consumer spending rose moderately in February while inflation cooled.
How did the major indices perform?
- The Dow Jones Industrial Average (.DJI) rose 415.12 points, or 1.26%, to 33,274.15
- The S&P 500 (.SPX) gained 58.48 points, or 1.44%, to 4,109.31
- The Nasdaq Composite (.IXIC) added 208.44 points, or 1.74%, to 12,221.91.
What Drove the U.S. Market?
- On Thursday, three officials from the Federal Reserve indicated that they were open to further rate increases to tackle high levels of inflation. Two of them suggested that problems in the banking sector could generate enough headwinds on the economy to help cool price pressures faster than expected.
- Semiconductors were among the best-performing stocks during the quarter, with the Philadelphia semiconductor index gaining 27.6%.
- Shares of big tech rose as investors moved away from banks and U.S. Treasury yields fell.
- Apple Inc shares increased by 1.6% on Friday, along with other megacap stocks. The company also won its appeal against the British antitrust regulator’s decision to investigate its mobile browser and cloud gaming services. F
- Former CEO of Starbucks, Howard Schultz, defended himself and the company against allegations of “union busting” at a U.S. Senate hearing in Washington on Wednesday.
- On Friday, Boston Fed President Susan Collins emphasized the importance of maintaining the current level of rate hikes to bring inflation back to the 2% target.
- Finally, trading volume on U.S. exchanges was 11.98 billion shares, slightly lower than the 20-day average of 12.74 billion shares.
How Did the European Markets Perform?
- European shares rose on Friday, as fears of a full-blown banking crisis continued to recede and a record monthly drop in euro zone inflation figures and a dip in the U.S. Federal Reserve’s favoured inflation gauge lifted sentiment.
- The STOXX 600 index closed up 0.7%, headed for its second consecutive quarterly gain, but on track to end March slightly lower after a turbulent period following the collapse of two U.S. lenders and the takeover of Credit Suisse.
- The banking sector was a laggard, falling 0.4%, with Swedbank tumbling 4.9%. The sector slumped 14% in March, marking its worst monthly performance since 2020.
- The European Central Bank still has a “little way” to go with interest rate increases to vanquish core inflation, French ECB policymaker Francois Villeroy de Galhau said in a newspaper interview.
- London stocks closed higher on Friday helped by gains in healthcare and consumer staples, while cooling U.S. inflation data bolstered hopes of a softer monetary policy stance from the U.S. Federal Reserve.
- Among individual stocks, Swiss engineering company ABB announced a $1 billion share buyback and gained 1.8%
- Ocado Group Plc advanced 1.5% on winning a High Court legal action brought by Norwegian robotics firm AutoStore after the judge dismissed its patent infringement claims.
- UBS raised its price target for Adidas, sending the stock up 5%, and H&M jumped 3.4% following an upbeat Q1 earnings report that triggered several analyst upgrades.
- Retail shares continued to maintain momentum, adding 1.7%.
How did Asian Markets Perform
- Markets in the Asia-Pacific traded higher on Friday as technology stocks continued to see renewed interest and led gains on Wall Street, with some shaking off concerns of a further banking crisis.
- In Japan, the Nikkei 225 rose 0.93% to 28,041.48 and the Topix rose 1.02% to 2,003.5 as Tokyo’s inflation print continued to show lower levels from its recent peak of 4.3% seen in December. The S&P/ASX 200 in Australia rose 0.78% to close at 7,177.8.
- South Korea’s Kospi also rose 0.97% to end its session at 2,476.86 while the Kosdaq fell 0.35% to 847.52.
- By percentage change, JD.com gained the most and traded 6.5% higher as technology sector in the index gained about 1.6%.
- Shares of Tokyo Electron fell sharply after the announcement and traded 1.8% lower, while Nikon Corp erased some of its earlier gains and traded slightly above the flatline.
- In mainland China, the Shenzhen Component gained 0.64% and the Shanghai Composite inched up 0.36%
Bonds and Commodities
- Oil prices rose by more than a dollar a barrel on Friday to record their second-straight week of gains, as supplies tightened in some parts of the world and U.S. inflation data indicated price rises were slowing.
- The most actively traded Brent futures, for June delivery, settled up $1.29, or 1.6%, at $79.89 a barrel. Brent futures for May delivery, which expired upon settlement, gained 50 cents, or 0.6%, to settle at $79.77 a barrel.
- Gold prices were on track for a second straight quarterly rise on Friday, as growing bets that the U.S. Federal Reserve will slow the pace of interest rate hikes drew investors to the metal.
- Spot gold was down 0.6% at $1,968.25 per ounce by 2:26 p.m. EDT (1826 GMT), after prices moved as much as 0.4% higher following data that showed U.S. consumer spending rose modestly in February. U.S. gold futures settled down 0.6% at $1,986.2.
- The two-year U.S. Treasury yield, which typically moves in step with interest rate expectations, was down 4.7 basis points at 4.052% on the day, after touching a low of 4.023%.
Currencies
- The dollar pared some gains against the euro in the wake of the U.S inflation data, as investors see the Fed pausing its rate hiking cycle before the European Central Bank.
- The dollar index rose 0.342%, with the euro down 0.53% to $1.0843. The dollar index is on pace for its second straight quarterly decline.
- The Japanese yen weakened 0.08% versus the greenback at 132.74 per dollar, while Sterling was last trading at $1.2331, down 0.42% on the day.
- Sterling weakened 0.4% on Friday to $1.2337, as a murky economic outlook overshadowed data showing Britain avoided a recession in the final months of 2022.
- In cryptocurrencies, bitcoin was 1.1% higher at $28,340. The digital currency came under pressure recently as investors worried over cryptocurrency exchange Binance and Chief Executive Changpeng Zhou being sued by the Commodity Futures Trading Commission(CFTC) over regulatory violations.
Next Week
The U.S. markets will have a shortened trading week with Friday closed for the holiday. The labor market will take center stage, starting with the release of the February Job Openings and Labor Turnover Survey (JOLTS) report on Tuesday, followed by ADP’s National Employment Report on Wednesday, tracking private sector payrolls. These reports will set the stage for the latest nonfarm payrolls report on Friday, which will track job growth in March.
Additionally, S&P Global and the Institute for Supply Management (ISM) will provide Purchasing Managers’ Index (PMI) readings to offer the latest insights on the strength of the U.S. manufacturing and service sectors.
On Monday, officials from the Organization of the Petroleum Exporting Countries (OPEC) and their allies, led by Russia, will hold a virtual meeting to discuss the possibility of further supply cuts. In November, OPEC+ cut output by two million barrels per day to support declining prices.