WORLD

Stocks rally to cap a winning month, quarter for Wall Street

Mar 30, 2023, 11:41 PM | Updated: Mar 31, 2023, 1:36 pm

A person walks in front of an electronic stock board showing Japan's Nikkei 225 index at a securiti...

A person walks in front of an electronic stock board showing Japan's Nikkei 225 index at a securities firm Friday, March 31, 2023, in Tokyo. Asian stocks followed Wall Street higher Friday ahead of a United States inflation update that traders hope will prompt the Federal Reserve to ease plans for more interest rate hikes. (AP Photo/Eugene Hoshiko)
Credit: ASSOCIATED PRESS

(AP Photo/Eugene Hoshiko)

NEW YORK (AP) — Stocks rallied Friday to close out a winning March and first quarter of the year, feats that looked questionable just a couple weeks ago when Wall Street was tumbling in turmoil.

The S&P 500 rose 1.4% to cap a 3.5% gain for the month. It also locked in a second winning quarter in a row after falling sharply most of last year on worries about high interest rates meant to get inflation under control.

The Dow Jones Industrial Average rose 415 points, or 1.3%, while the Nasdaq composite climbed 1.7%. For the Nasdaq, big leaps for technology stocks drove a gain of 16.8% for the quarter, its best since the surge out of the coronavirus-caused crash in the spring of 2020.

Friday’s gains came after a report showed inflation across the United States jacking them higher at a furious pace over the last year.

The threat of higher rates has been behind the stock market’s struggles since it peaked in early 2022. High rates can undercut inflation but only by bluntly slowing the entire economy, which raises the risk of a recession. They also drag down prices for stocks, bonds and other investments.

A blitz of economic reports earlier in the year suggesting stubbornly high inflation raised worries the Fed would have to keep rates even higher than feared for longer.

A recession hasn’t hit the economy, at least not yet, but the pressure of higher interest rates helped cause the banking industry to crack earlier this month.

The second- and third-largest U.S. pull their money out of Silicon Valley Bank and Signature Bank. The runs pushed investors to cast harsher scrutiny on banks globally in the hunt for seemingly weak links.

Forceful actions by regulators have since helped to rebuild some confidence. Almost as importantly, traders have also built bets that the banking system’s woes will force the Fed to stop hiking rates soon and even to begin cutting rates later this year.

The overriding mood in the market seems to be that the “Fed blinked and off we rally into April” before waiting to see if a recession or new panics around commercial real estate or something else awaits in the second half of the year, investment strategist Michael Hartnett wrote in a BofA Global Research report.

Expectations for an easier Fed have helped Big Tech stocks in particular because high-growth stocks are seen as some of the biggest beneficiaries of lower rates. That’s helped to prop up the S&P 500, where Big Tech stocks play an outsized role because of their massive size. Apple, Microsoft and Google’s parent Alphabet each posted double-digit gains for March.

Strength in tech has helped to mask weakness for other parts of the market that are still down for the month but play smaller roles in indexes, such as smaller-sized stocks or financial companies.

Some professional investors on Wall Street say the expectations for rate cuts are premature and could be setting the market up for disappointment. Cuts can act like steroids for markets, but they’re likely coming only if the economy looks to be in serious trouble.

The Fed, meanwhile, has hinted it envisions raising rates one more time before keeping them steady through this year. Friday’s data suggests that could still be the case, economists said.

“Elevated price pressures coupled with strong job growth that is restoring incomes and is supporting demand should keep the Fed on track to hike rates further over coming meetings,” said Rubeela Farooqi, chief U.S. economist at High Frequency Economics.

What makes the Fed’s upcoming decisions particularly tricky is that the banking industry’s troubles could act like hikes to interest rates on their own if they cause banks to pull back on lending. That in turn could stifle hiring and growth for the economy.

All the drastically changing expectations for what the Fed will do have meant historic-sized moves for Treasury yields in the bond market.

The yield on the two-year Treasury zoomed through particularly rattling moves. It was sitting above 5% at its highest level since 2007 earlier this month, when investors were bracing for the Fed to keep rates higher for longer.

It then quickly plunged below 3.60% as bets built for the Fed to ease up because of the banking industry’s troubles. Analysts said the moves were so violent because so many bets had piled up on the same side: for yields only to climb higher.

The yield has since steadied somewhat. It fell to 4.04% Friday from 4.12% late Thursday.

The 10-year yield, which helps set rates for mortgages and other important loans, fell to 3.48% from 3.55%. It also swung sharply through the quarter, but not by as much as the two-year yield. It was sitting above 4% earlier in the month.

All told, the S&P 500 rose 58.48 points to 4,109.31 Friday. The Dow gained 415.12 to 33,274.15, and the Nasdaq jumped 208.44 to 12,221.91.

In markets abroad, stocks across Europe rose modestly after a report showed inflation in the 20 countries that use the euro currency slowed to the slowest level in a year, though food costs were still on the rise.

Stocks rose modestly in Shanghai after a report said China’s factory activity was stronger in March than expected. They also gained across much of the rest of Asia.

___

AP Business Writers Joe McDonald and Matt Ott contributed.

World

Associated Press

Microsoft users worldwide report widespread outages affecting banks, airlines and broadcasters

WELLINGTON, New Zealand (AP) — Microsoft users worldwide, including banks and airlines, reported widespread outages on Friday, hours after the technology company said it was gradually fixing an issue affecting access to Microsoft 365 apps and services. The cause, exact nature and scale of the outage was unclear. Microsoft appeared to suggest in its X […]

52 minutes ago

Associated Press

Espionage trial of US journalist Evan Gershkovich in Russia reaches closing arguments

YEKATERINBURG, Russia (AP) — Court officials said closing arguments began Friday in the trial of Wall Street Journal reporter Evan Gershkovich, who faces charges of spying that he, the Journal and the U.S. government have vehemently denied. U.S. officials and The Wall Street Journal have denounced the trial that began last month as a sham […]

3 hours ago

FILE - President Alexander Lukashenko of Belarus gives a speech during a military parade in Minsk, ...

Associated Press

Leader of Belarus marks 30 years in power after crushing all dissent and cozying up to Moscow

TALLINN, Estonia (AP) — For three decades, European leaders have come and gone by the dozens, but Alexander Lukashenko remains in absolute control of Belarus. His longevity is due to a mixture of harshly silencing all dissent, reverting to Soviet-style economic controls and methods, and cozying up to Russia, even as he sometimes flirted with […]

4 hours ago

Associated Press

US Treasury sanctions Sierra Leone man for allegedly smuggling migrants into the United States

MEXICO CITY (AP) — The U.S. Treasury Department announced sanctions Thursday on a man from Sierra Leone for allegedly smuggling thousands of migrants from Asia and Africa into the United States. The ring allegedly run by Abdul Karim Conteh provided false documents and drove migrants to the border and offered advice on how to cross, […]

15 hours ago

Rory McIlroy of Northern Ireland reacts as he walks from the 18th green following his opening round...

Associated Press

McIlroy, DeChambeau stumble badly out of the gates at British Open

TROON, Scotland (AP) — So much for the British Open being one last stand for Rory McIlroy in the majors this year. His best hope now is getting beyond one more day. And he has company from U.S. Open champion Bryson DeChambeau. The protagonists from Pinehurst No. 2 were no match for a wind that […]

16 hours ago

FILE - A brigade from the Electric Power Authority repairs distribution lines damaged by Hurricane ...

Associated Press

US announces $325 million in funding to boost Puerto Rico solar projects as power outages persist

SAN JUAN, Puerto Rico (AP) — The U.S. government announced Thursday that $325 million in federal funds will be available for solar and battery storage installations across Puerto Rico as the U.S. territory struggles with chronic power outages. The program, funded by the U.S. Department of Energy, will target community centers and healthcare facilities, as […]

16 hours ago

Stocks rally to cap a winning month, quarter for Wall Street