Closing Comment — Friday, March 31, 2023
DJIA: 33,274.15, up 415.12
S&P 500: 4,109.31, up 58.48
NASDAQ: 12,221.91, up 208.44
Stocks end month on high note
U.S. equities finished higher Friday as investors digested the latest inflation data and what it may mean for the Federal Reserve’s (Fed) monetary policy path. Today also marked the end of the month and first quarter. The Dow added 415 points (1.3%) today and climbed 1.9% for the month, while the Nasdaq Composite gained 1.7% today and notched a 6.7% monthly gain. The S&P 500 advanced 1.4% and climbed 3.5% for the month. For the first quarter, all three major averages finished in positive territory.
On the data front, the Personal Consumption Expenditures (PCE) Deflator, which is the Fed’s preferred proxy for inflation, rose 0.3% month-over-month and 5.0% year-over-year in February, with both prints easing from January. Meanwhile, the core PCE deflator, which excludes the more volatile food and energy prices, came in at 0.3% month-over-month and 4.6% year-over-year. While the prints remain well above the Fed’s 2%, the data has bolstered hopes that inflation is coming down and the Fed may be able to end its rate hiking cycle.
Treasuries strengthened, with the yield on the 10-year note down seven basis points (0.07%) to 3.48%, while the 30-year bond yield fell eight basis points (0.08%) to 3.66%. The yield on the two-year note shed eight basis points (0.08%) to 4.03%. In commodities, West Texas Intermediate (WTI) crude climbed 1.6% to $75.55/barrel amid tight supply conditions. Despite this week’s rebound in prices, the domestic benchmark ended in negative territory for the month.
Opening Comment — Friday, March 31, 2023
DJIA: 32,859.03, up 141.43
S&P 500: 4,050.83, up 23.02
NASDAQ: 12,013.47, up 87.23
Stocks mixed on inflation data
U.S. equity futures are mixed as investors digest key inflation data and await the end of the first quarter and the month. Despite March being dominated by volatility and uncertainty amid a global banking crisis, the three major averages are on course to end the month on a high note. This morning, the Dow is up 0.3%, while the S&P 500 is climbing 0.2% in pre-market action. The Nasdaq 100 is trading 0.1% below fair value on the GLOBEX. Yesterday, stocks finished higher as investor sentiment continued to rebound. The Dow added 141 points (0.4%) while the Nasdaq Composite increased 0.7%. The S&P 500 gained 0.6%. Initial jobless claims came in higher than expected, though they still remain near historically low levels. Meanwhile, the finalized fourth quarter reading of Gross Domestic Product (GDP) ticked lower to 2.6% while personal consumption was downwardly revised to show 1% growth.
On the data front today, the Personal Consumption Expenditures (PCE) Deflator, the Federal Reserve’s (Fed) preferred proxy for inflation, eased from 5.3% year-over-year to 5% and from 0.6% month-over-month to 0.3% in February. The Core PCE Deflator, which excludes the more volatile food and energy prices, came in at 4.6% year-over-year and 0.3% month-over-month. The real personal spending component of the report showed spending fell 0.1% in February. Investors can also look for the final March reading from the University of Michigan Consumer Sentiment Index. In the central bank space, New York Fed President John Williams, Fed Governor Lisa Cook, and Fed Governor Christopher Waller are slated to speak today.
Over in the commodity pits, West Texas Intermediate (WTI) crude is up 0.6% to $74.81/barrel as tight supply conditions continue to outweigh concerns over the economic outlook. For the month, the domestic benchmark is on track to fall amid heightened concerns following the recent banking crisis. In the metals complex, spot gold is trading just below the flat line at $1979.50/ounce as the risk-on mood continues. The yellow metal is on course for a positive month and its second-straight quarter of gains as investors remain optimistic the Fed will adopt a less-aggressive policy moving forward.
Across the pond, the Eurozone’s Consumer Price Index (CPI) eased to 6.6% year-over-year in March from 8.5% in February, its largest fall on record. However, core CPI, which excludes food and energy prices, notched a record high at 5.7% year-over-year. Investors speculate the accelerating core CPI print may spur another interest rate hike at the next European Central Bank (ECB) meeting. Meanwhile, the U.K. reported their economy grew 0.1% in the fourth quarter, narrowly missing its second-straight quarter of contraction, which is an oft-cited definition of a recession. Overnight in Asia, China’s official manufacturing Purchasing Managers’ Index (PMI) came in at 51.9 in March, a slight decline from February’s print though it remains in expansionary territory. Meanwhile, Tokyo’s CPI continued to ease in March, coming off December’s peak. In FOREX trading, the U.S. Dollar Index is climbing 0.2% against a basket of major currencies. The greenback is on pace for a monthly decline and its second-straight quarterly loss amid hopes interest rates are peaking.