On Friday, Wall Street's main indexes gained ground, buoyed by data showing a slowdown in inflation in February. The Commerce Department's report revealed that the personal consumption expenditure (PCE) index, which is the Federal Reserve's preferred inflation gauge, increased by 0.3% on a monthly basis, compared with a 0.6% rise in January. The news supports hopes of a softer monetary policy approach from the Federal Reserve, leading to gains in the stock market.
The report also revealed that bets of a 25-basis-point rate hike in May stood at 52.5%, with odds of a pause at 47.5%, according to CME Group's Fedwatch tool. However, Boston Fed President Susan Collins noted that it was still too early for the central bank to assess whether its rate hikes have gone far enough to bring inflation back to the Fed's 2% target.
According to Brandon Pizzurro, director of public investments at Guidestone Capital Management, "As the Fed rate hikes are now kind of starting to take hold right about a year later since they first began, perhaps it is a sign that their hikes are starting to cool inflation. But in terms of the Fed's calculus, they'll have to have more confirmation that disinflation is really taking hold beyond just a few data points here and there."
Consumer discretionary and real estate were the top sector index performers, with around 0.9% gains each. Major growth names like Apple Inc, Meta Platforms, and Amazon.com also saw gains between 0.3% and 0.8%. However, Micron Technology dropped 3.0% after news that China was set to review the chipmaker's products sold in the country. The broader Philadelphia semiconductor index fell 0.5%.
The first quarter of 2023 has been a turbulent one for stocks, marked by sticky inflation, shockwaves from the collapse of two regional U.S. banks, signs of trouble in some European banks, as well as a repricing of interest rate expectations from the Fed. The Nasdaq is set for its biggest quarterly percentage gain since the end of 2020 as investors shifted towards major technology and growth stocks from financial stocks amid fears of a bank contagion. Meanwhile, the cyclicals-heavy Dow Jones is in the red.
The benchmark S&P 500 has gained nearly 6% so far in the first quarter, with the technology sector up about 20%, while the financials index is set for its worst quarter since June. Companies linked to Donald Trump, such as Digital World Acquisition Corp and Phunware Inc, jumped 10.2% and 3.4%, respectively, amid retail investor interest, a day after the former president was indicted in a historic first.