S&P 500 gains as indexes jump on inflation data

Wall Street has rallied more than one per cent and the Nasdaq has notched its biggest quarterly percentage gain in almost three years as signs of cooling inflation bolster hopes the Federal Reserve might soon end its aggressive interest rate hikes.

The S&P 500 closed on Friday at its highest level since February 15 and posted a second straight quarter of gains, led by the technology sector’s 21.5 per cent rise in the first quarter.

The quarterly gains came despite a sharp sell-off in bank stocks following the collapse of two regional banks earlier this month and worries about a potentially bigger financial crisis.

The S&P 500 financial sector was the quarter’s worst-performing sector, posting a 6.1 per cent drop, while the KBW regional bank index fell 18.6 per cent for the period.

The Commerce Department report on Friday showed United States consumer spending rose moderately in February while inflation cooled.

“The equity market seems to be delighted with the slight tick lower in inflation, as it should be,” said Quincy Krosby, chief global strategist at LPL Financial in Charlotte, North Carolina.

“It underscores that the Fed’s campaign is in fact working, albeit slowly.”

The Fed has been raising rates to cool inflation.

Expectations for a 25 basis point rate hike at its May meeting dipped to about 50 per cent, with no hike seen to be just as likely.

The Dow Jones Industrial Average rose 415.12 points, or 1.26 per cent, to 33,274.15, the S&P 500 gained 58.48 points, or 1.44 per cent, to 4,109.31 and the Nasdaq Composite added 208.44 points, or 1.74 per cent, to 12,221.91.

For the week and month, stocks also posted strong gains.

The Nasdaq was up 6.7 per cent for March.

For the quarter, the Nasdaq jumped 16.8 per cent in its biggest quarterly percentage increase since the three months ended June 2020.

The S&P 500 gained 7.0 per cent and the Dow rose 0.4 per cent in the quarter, based on the latest available data.

Semiconductors were among the quarter’s strongest-performing stocks, with the Philadelphia semiconductor index rising 27.6 per cent.

Shares of big tech gained as investors rotated out of banks and as US Treasury yields eased, with the two-year note yield posting on Friday its largest monthly drop since 2008.

Higher yields tend to be a negative for big tech companies.

Apple Inc shares ended up 1.6 per cent on Friday, rising along with other mega caps.

It also won its appeal against the decision by Britain’s antitrust regulator to launch an investigation into its mobile browser and cloud gaming services.

Also on Friday, Boston Fed President Susan Collins said wherever the US central bank stops with its rate rises, maintaining that level for some time will be critical in helping to lower high inflation back to the 2.0 per cent target.

Volume on US exchanges was 11.98 billion shares, compared with the 12.74 billion full-session average in the past 20 trading days.

Advancing issues outnumbered decliners on the NYSE by a 4.78-to-1 ratio; on Nasdaq, a 2.45-to-1 ratio favoured advancers.

The S&P 500 posted 19 new 52-week highs and no new lows; the Nasdaq Composite recorded 81 new highs and 131 new lows.