On the final day of the first quarter, the stock market was seeing a rise, with the Nasdaq increasing by over 15%, and the S&P 500 gaining above 6%. As of noon ET on Friday, the S&P 500 was up 0.8%, the Dow Jones Industrial Average had risen 0.6%, and the Nasdaq Composite had gained 1%.
The rally was broad-based across all 11 sectors of the S&P 500, with Consumer Discretionary and Communication Services leading the way, rising 1.8% and 1.2%, respectively. The positive momentum marked the end of an eventful quarter.
On Friday, stock futures showed improvement after the release of inflation data indicating a slowdown in the Personal Consumption Expenditures (PCE) index, the preferred inflation measurement of the Federal Reserve.
In February, the core PCE rose 0.3% over the previous month and 4.6% over last year, with the annual increase lower than the expected rise of 4.7% by Wall Street. A decline in inflation could help ease pressure on the Federal Reserve to continue its rate-hiking campaign.
Consumer sentiment data from the University of Michigan showed that consumers were pessimistic about their prospects, with sentiment falling for the first time since November. However, the bank crisis caused by the collapse of Silicon Valley Bank did not contribute to negative views on the economy.
According to Joanne Hsu, director for the survey of consumers at the University of Michigan, the banking sector’s turmoil this month had a limited impact on consumer sentiment, which was already showing downward momentum before the Silicon Valley Bank collapse.
Friday marked the final trading session in a quarter that witnessed the outperformance of tech stocks, with the Nasdaq 100 up more than 18% year-to-date, with significant gains from companies such as Apple, Amazon, Tesla, and Meta Platforms.
Fundstrat’s Tom Lee wrote a note to clients published on Thursday stating that two consecutive quarterly gains for the S&P 500 usually mark the beginning of bull markets. This will be confirmed at Friday’s close, after the S&P 500 rose 7% in the fourth quarter of 2022. Lee noted that despite the recent banking crisis, the S&P 500 rose 5.5% in the first quarter of 2023 and 2.3% in March.
He believes that these gains solidify that “bears are now trapped.” Lee also argued that the bank crisis is likely to be a blip rather than a protracted event, CFTC data shows that traders remain net short the market, and historically, April has been the S&P 500’s best month over the last 20- and 50-year periods.