The S&P 500 (SP500) on Friday advanced 3.48% for the week to close at 4,109.31 points, registering gains in four out of five sessions. Your Companion SPDR S&P 500 Trust ETF (NYSEARCA:SPY) increased 3.45% for the week.
the weekly the performance was the benchmark’s best since early November of last year. Sentiment was helped by a combination of factors: fears of financial contagion subsided after there was no new news on 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-raising campaign.
With financial regulators and other lenders stepping in with measures to stem the fallout from the worst banking crisis in 14 1/2 years, investors appeared to regain their risk appetite over the week. The Senate Banking Committee also held a hearing on the recent bank closures, highlighting flaws in the overall regulatory system.
During the week, the focus shifted from financial stability to the Fed’s policy direction. Market participants bet the central bank would be unwilling to raise rates any further amid the banking crisis. In addition, economic data in the form of a rise in weekly jobless claims coupled with a moderation in the March Core Personal Consumption Expenditures Index, which is the Fed’s preferred inflation gauge, bolstered the case for an end to interest rate rises.
However, Fed speakers throughout the week continued to be cautious, noting that inflationary pressures were still very high and that the central bank was keeping the door open to continue rate hikes.
According to the CME FedWatch tool, markets are now pricing in a ~52% chance of no hike at the central bank’s MPC meeting in May, while chances of a 25 basis point hike are ~48%. More importantly, the markets seem to believe that the maximum interest rate would now peak at 5.00% to 5.25% from the current level of 4.75% to 5.00%.
The risk-on mood during the week led traders to buy technology stocks, which had been avoided for most of the past year. Aside from the FAANG group, chip and semiconductor companies also saw some major purchases. A rise in shares of Micron Technology (MU) and Intel (INTC) helped the markets post solid gains on Wednesday. Meanwhile, NVIDIA (NVDA) has soared more than 80% this year, partly due to growing interest in the AI space.
Renewed interest in technology stocks helped the Nasdaq 100 return to bull market territory, with the index rising more than 20% from its lowest closing level in December last year. The high-tech average also posted its best quarterly performance on Friday since June 2020.
In other economic data during the week, big concerns about the housing sector failed to materialize, as pending home sales rose for the third straight month in February and mortgage applications rose over the past week.
As for the weekly performance of the S&P 500 (SP500) sectors, it was a sea of green, with all 11 reporting gains. Energy topped the leaderboard, adding more than 6%. Consumer Discretionary and Real Estate completed the first three with an advance of more than 5% each. Finance recovered to north of 3%. See below for a breakdown of weekly sector performance, as well as the corresponding SPDR Select Sector ETFs from the March 24 close to the March 31 close:
#1: Energy +6.17%and the Energy Select Sector SPDR ETF (XLE) +6.34%.
#2: Consumer Discretionary +5.58%and the Select Sector Consumer Discretionary 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 SPDR Materials Select Sector ETF (XLB) +5.01%.
#5: Industrial +4.40%and the Select Industrial Sector SPDR ETF (XLI) +4.41%.
#6: Finances +3.74%and the SPDR Select Financials 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 SPDR (XLP) Select Consumer Staples Sector ETF +2.38%.
#10: Health Care +1.76%and the Select Health Care Sector SPDR ETF (XLV) +1.70%.
#11: Communication Services +1.46%and the Select Communication Services Sector (XLC) SPDR Fund +2.33%.
Below is a chart of the YTD performance of the 11 sectors and how they fared against the S&P 500. For investors looking ahead of what’s going on, take a look at Seeking Alpha Catalyst Watch for a breakdown of the actionable events of the coming week that stand out. .
