The S&P 500 (SP500) Friday advanced 3.48% for the week to close at 4,109.31 points, posting gains in four of five sessions. Its SPDR S&P 500 Trust ETF (NYSEARC:TO SPY) increased by 3.45% for the week.
The weekly performance was the benchmark’s best since early November last year. Sentiment was helped by a combination of factors: receding fears of financial contagion after the lack of news on the banking crisis; renewed purchases 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 hike campaign.
With financial regulators and other lenders to intervene With measures to stem the fallout from the worst banking crisis in 14½ years, investors appeared to regain their appetite for risk during the week. The Senate Banking Committee also held a audience on the recent bank closures, which have highlighted the failings of the global regulatory system.
During the week, the focus shifted from financial stability to the policy direction of the Fed. Market participants bet that the central bank would be unwilling to raise rates further amid the banking crisis. In addition, economic data in the form of a rise in weekly jobless claims with moderation in the march core personal consumption expenditure index – which is the Fed’s favorite inflation gauge – strengthened the case for an end to interest rate hikes.
Fed speakers during the week, however, continued to remain cautious, signaling that inflationary pressures were still very high and that the central bank was keeping the door open for further rate hikes.
Markets are now pricing in a roughly 52% chance of no hike at the central bank’s monetary policy committee meeting in May, according to CME tool FedWatch, while the odds of a 25 basis points are around 48%. More importantly, the markets seem to believe that the maximum interest rate would now reach 5.00% to 5.25% from the current level of 4.75% to 5.00%.
The risky mood over the week led traders to snap up tech stocks – which had been shunned for most of the past year. In addition to the FAANG Group, chip and semiconductor companies also saw strong purchases. A surge in shares of Micron Technology (MU) and Intel (INTC) helped the markets make solid gains on Wednesday. Meanwhile, NVIDIA (NVDA) To skyrockets more than 80% this year, thanks in part to growing interest in the field of artificial intelligence.
Renewed interest in tech stocks helped the Nasdaq 100 repel bullish territory, with the index up more than 20% from its closing low in December last year. The tech-heavy average also posted its best quarterly performance on Friday since June 2020.
In other economic data during the week, major concerns for the housing sector failed to materialize, with pending home sales up for a third consecutive month in February and mortgage applications increased over the past week.
Regarding the weekly performance of the S&P 500 (SP500) sectors, it was a sea of green, with all 11 gains posted. Energy leads the ranking, adding more than 6%. Consumer discretionary and real estate complete the top three with growth of more than 5% each. Financials rebounded north of 3%. See below for a breakdown of the weekly performance of the sectors as well as their accompanying SPDR Select Sector ETFs from March 24 to the March 31 close:
#1: Energy +6.17%and Energy Select Sector SPDR ETF (XLE) +6.34%.
#2: Discretionary consumption +5.58%and the SPDR ETF Consumer Discretionary Select Sector (XLY) +5.62%.
#3: Real Estate +5.16%and SPDR Real Estate Select Sector ETF (XLRE) +5.27%.
#4: Materials +4.93%and Materials Select Sector SPDR ETF (XLB) +5.01%.
#5: Industrials +4.40%and the selected industrial sector SPDR ETF (XLI) +4.41%.
#6: Finances +3.74%and the selected SPDR Financial Sector ETF (XLF) +3.74%.
#7: Information Technology +3.41%and the Technology Select Sector SPDR ETF (XLK) +3.46%.
#8: Utilities +3.05%and SPDR Utilities Select Sector ETF (XLU) +3.04%.
#9: Basic consumption +2.50%and the Consumer Staples Select Sector SPDR ETF (XLP) +2.38%.
#10: Healthcare +1.76%and the SPDR Healthcare Sector ETF (XLV) +1.70%.
#11: Communications Services +1.46%and the Communication Services Sector SPDR Fund (XLC) +2.33%.
Below is a chart of the cumulative performance of the 11 sectors and how they have moved against the S&P 500. For investors looking ahead to what is happening, take a look at the Looking to Alpha Catalyst Watch to see next week’s breakdown of standout exploitable events.