To The Moon

Market Recap | Stocks Head Higher in Last Session of Turbulent Quarter

Stocks looked set to end the quarter on a positive note, after a stormy three months in which markets have been whipsawed by strains in the banking system as well as shifting outlooks for inflation and interest rates.

Government data early Friday showed the Federal Reserve’s preferred measure of inflation, known as the core personal-consumption expenditures price index, slowed in February, lifting hopes the central bank could limit its campaign to curb inflation sooner than originally expected.

$S&P 500(.SPX)$ ended the day up 1.4%, while $DJIA(.DJI)$  added 1.3%. $NASDAQ(.IXIC)$  increased 1.7%.

Markets shook off the Thursday indictment of former President Donald Trump related to his role in hush money payments to a former porn star on the eve of the 2016 election.

“Political headlines have had less and less impact,” said Brad McMillan, chief investment officer at Commonwealth Financial Network. “We have learned to live with a much higher level of chaos than we were used to a few years ago.”

Shares of companies with ties to Mr. Trump rose, even though broader market reactions were muted. $Digital World Acquisition Corp(DWAC)$, the blank-check company that plans to merge with Mr. Trump’s social-media company, gained 7.6%. $Phunware, Inc.(PHUN)$, an enterprise software company that worked on apps for Mr. Trump’s 2020 presidential campaign, jumped 10%.

Investors are recalibrating after a tumultuous few weeks in global markets, which were upended early in March when the sudden collapse of several banks raised concerns about the health of the overall financial system. The Fed signaled it could ease up on interest-rate increases, partly because the banking turmoil is expected to lead to a pullback in credit growth.

Bank stocks have staged a partial recovery recently, helped in part by regulators stepping in with emergency measures to protect depositors and offer banks more liquidity. But many remain below where they were before the recent crisis.

The KBW Nasdaq bank index is up nearly 4% this week but down 25% in March. It is headed for its worst month since March 2020, when the Covid pandemic spread. Bank of America Corp., Wells Fargo & Co. and PNC Financial Services Group Inc. are also on pace for their worst monthly performance since March 2020, according to Dow Jones Market Data.

The troubled lender$First Republic Bank(FRC)$  is set to close out its largest quarterly drop on record, according to Dow Jones Market Data. Charles Schwab Corp. is on track for its worst three months since 2008.

Still, the major indexes are poised to end the quarter higher. The S&P 500 is up more than 6% since the start of the year, putting it on track for a second straight quarterly gain. The Nasdaq Composite Index is up about 15%, which would be its largest quarterly gain since 2020.

“The market seems intent on closing the book on the banking problems that caused the market to expect the end of the Fed’s rate hike campaign,” said Quincy Krosby, chief global strategist at LPL Financial.

Bonds have been volatile as interest-rate expectations have twisted and turned.

The 10-year yield fell Friday to 3.491%. The 2-year yield, which more closely reflects investor expectations for short-term rates, slid to 4.060%. Both recorded their largest quarterly declines since March 2020.

Some investors have been too quick to conclude the Fed will cut interest rates later in the year in response to the banking upheaval, said Richard McGuire, head of rates strategy at Rabobank.

He said policy makers at the U.S. central bank, due to make their next rate decision in early May, remain laser-focused on slowing the economy through higher borrowing costs to curb inflation.

That could put pressure back on stocks and short-term government bonds. “The banking-sector troubles we have been seeing will not shift them off course,” Mr. McGuire said.

Oil prices ticked up. Brent crude futures rose 0.63% to $79.77 a barrel. Prices have fallen this quarter as Russian oil kept flowing and investors say a likely recession could curb fuel demand. But an Iraqi pipeline dispute could tighten global supplies if it isn’t resolved soon.

Overseas, the Stoxx Europe 600 added 0.7% Friday. China’s Shanghai Composite Index rose 0.4% and Japan’s Nikkei 225 gained 0.9%.

@TigerStars  @Daily_Discussion  @CaptainTiger