Markets rallied on Wednesday, reversing their three-day losing streak, with the S&P 500 (SPX) clocking in its 21st all-time high this year. The broad-market benchmark is poised to close March in the black, registering its fifth-straight monthly gain and the best first-quarter result since 2019.
Yesterday’s gains were broad-based, with all major indexes clocking in strong gains. The largest increases were seen in the small-cap benchmark Russell 2000, which was propelled by a surge in investor risk sentiment, and in the Dow Jones Industrial Average (DJIA), which was lifted by the jump in the shares of pharmaceutical giant Merck (MRK) following the FDA’s approval of its new drug.
During the first quarter, most financial assets including gold, cryptocurrencies, and others, rallied on investor enthusiasm strengthened by improving economic outlook, resilient profits at large companies, and the Artificial Intelligence (AI) frenzy. Most money managers don’t see an imminent recession in the next 12 months, a stark turnaround from the end of last year.
Fed Signals Move Markets
Markets rallied yesterday as Treasury yields declined ahead of a closely anticipated speech from Fed Governor Waller, one of the more hawkish Board members. Speaking after the markets had closed, Waller said the central bank is in no rush to lower interest rates, as the labor market remains tight, and inflation continues worrying policymakers.
Markets are pricing in three rate cuts this year, starting in June. However, Waller spilled some cold water on investor enthusiasm, saying that it may be “appropriate to reduce the overall number of rate cuts or push them further into the future in response to the recent data.” Investor sentiment took a hit, with all stock futures flashing red before the last trading day of the quarter.
Macro News in Focus
Several important economic reports are coming out today and tomorrow, including the weekly jobless claims and the final estimate of fourth-quarter GDP growth. The highlight of the data releases will be Friday’s Core PCE report, the Fed’s preferred inflation gauge. Investors will be especially tense as the markets will be closed for Good Friday, which will delay any market reaction.
However, barring extreme negative surprises, analysts expect the market rally to proceed, as any delays in the Fed’s rate-cut schedule will be caused by economic strength, benefiting corporate profits and far outweighing the effects of a “higher for longer” interest rate environment. Trading is expected to be volatile on Monday.
Notable Stock News
¤ Social media company Reddit (RDDT) skyrocketed post-IPO a week ago, but gave up a large part of its gains in the past two days as short interest surged.
¤ Trump Media & Technology Group (DJT) had a two-day melt-up as it began trading on the Nasdaq on Tuesday, underscoring overall risk-on sentiment.
¤ GameStop (GME) plunged after reporting a sales decline and announcing job cuts; analysts decreed the company’s financials as “unsustainable.”
¤ Paramount Global (PARA) is under pressure after its debt rating was cut to “junk” by S&P Ratings due to losses connected to its Pay-TV business.
