The S&P 500 (SP500) on Friday advanced 3.48% for the week to close at 4,109.31 points, posting gains in four out of five sessions. Its accompanying SPDR S&P 500 Trust ETF (NYSEARCA:SPY) rose 3.45% for the week.
The weekly performance was the benchmark index’s best since early November last year. Sentiment was helped by a combination of factors: receding fears over a financial contagion after no fresh news regarding the banking crisis; renewed buying in growth stocks such as consumer discretionary and technology; and favorable economic data that strengthened the case for the Federal Reserve to consider ending its rate-hiking campaign.
With financial regulators and other lenders stepping in with measures to stem a fallout from the worst banking crisis in 14 and a half years, investors appeared to regain their risk-on appetite during the week. The Senate Banking Committee also held a hearing on the recent bank closures, which shone a spotlight on failures in the overall regulatory system.
Focus during the week shifted back from financial stability to the Fed’s policy direction. Market participants made bets that the central bank would be unwilling to raise rates further amid the banking crisis. Moreover, economic data in the form of a rise in weekly jobless claims along with a moderation in March’s core personal consumption expenditures index – which is the Fed’s preferred inflation gauge – bolstered the case for an end to interest rate hikes.
Fed speakers during the week continued to remain cautious, however, signaling that inflationary pressures were still very high and that the central bank was keeping the door open for continued rate hikes.
According to the CME FedWatch tool, markets are now pricing in a ~52% probability of no hike at the central bank’s monetary policy committee meeting in May, while the chances of a 25 basis point hike is ~48%. More importantly, the markets appear to believe that the peak interest rate would now top out at 5.00% to 5.25% from the current level of 4.75% to 5.00%.
The risk-on mood during the week led to traders snapping up technology stocks – which had been shunned for most of last year. Aside from the FAANG group, chip and semiconductor companies also saw some major buying. A surge in shares of Micron Technology (MU) and Intel (INTC) helped markets make solid gains on Wednesday. Meanwhile, NVIDIA (NVDA) has rocketed more than 80% this year, helped partly due to the increasing interest in the artificial intelligence space.
The renewed interest in technology stocks helped the Nasdaq 100 push back into bull market territory, with the index having climbed more than 20% from its lowest closing level in December last year. The tech-heavy average also logged its best quarterly performance on Friday since June 2020.
In other economic data during the week, the big concerns for the housing sector failed to materialize, with pending home sales rising for a third straight month in February and mortgage applications increasing over the past week.
Turning to the weekly performance of the S&P 500 (SP500) sectors, it was a sea of green, with all 11 posting gains. Energy topped the leaderboard, adding more than 6%. Consumer Discretionary and Real Estate rounded out the top three with an advance of more than 5% each. Financials rebounded north of 3%. See below a breakdown of the weekly performance of the sectors as well as their accompanying SPDR Select Sector ETFs from March 24 close to March 31 close:
#1: Energy +6.17%, and the Energy Select Sector SPDR ETF (XLE) +6.34%.
#2: Consumer Discretionary +5.58%, and the Consumer Discretionary Select Sector SPDR ETF (XLY) +5.62%.
#3: Real Estate +5.16%, and the Real Estate Select Sector SPDR ETF (XLRE) +5.27%.
#4: Materials +4.93%, and the Materials Select Sector SPDR ETF (XLB) +5.01%.
#5: Industrials +4.40%, and the Industrial Select Sector SPDR ETF (XLI) +4.41%.
#6: Financials +3.74%, and the Financial Select Sector SPDR ETF (XLF) +3.74%.
#7: Information Technology +3.41%, and the Technology Select Sector SPDR ETF (XLK) +3.46%.
#8: Utilities +3.05%, and the Utilities Select Sector SPDR ETF (XLU) +3.04%.
#9: Consumer Staples +2.50%, and the Consumer Staples Select Sector SPDR ETF (XLP) +2.38%.
#10: Health Care +1.76%, and the Health Care Select Sector SPDR ETF (XLV) +1.70%.
#11: Communication Services +1.46%, and the Communication Services Select Sector SPDR Fund (XLC) +2.33%.
Below is a chart of the 11 sectors’ YTD performance and how they fared against the S&P 500. For investors looking into the future of what’s happening, take a look at the Seeking Alpha Catalyst Watch to see next week’s breakdown of actionable events that stand out.
