Stocks started Friday on a high note thanks to encouraging inflation data. The buying power only strengthened as the session wore on, with all three major indexes extending their weekly and monthly gains.
Tech and communication services stocks once again helped lead markets higher – and propelled the Nasdaq Composite to its biggest quarterly gain in nearly three years.
The Bureau of Economic Analysis said this morning that its personal consumption expenditures (PCE) price index, the Fed's preferred measure of inflation that tracks consumer spending, rose 0.3% month-over-month in February, and was up 5% year-over-year. This was lower than the increases seen in January. Core PCE, which excludes volatile food and energy prices, also rose at a slower pace, on both a monthly and annual basis.
Sign up for Kiplinger’s Free E-Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
As for what this means for the next Fed meeting? It's a near-tossup, says Bill Adams, chief economist for Comerica Bank. "Forward-looking information like layoff announcements and recent banking headlines suggest a pause in rate hikes may be appropriate, while backward-looking information like recent jobs, consumer spending, and inflation data support another hike."
Also in economic news, the University of Michigan downwardly revised its March consumer sentiment index (62.0 vs preliminary reading of 63.4), which was markedly lower than February's reading of 67.0. This was also the fourth straight monthly decline for the index.
"This month's turmoil in the banking sector had limited impact on consumer sentiment, which was already exhibiting downward momentum prior to the collapse of Silicon Valley Bank," the report stated. "Overall, our data revealed multiple signs that consumers increasingly expect a recession ahead."
Looking at today's single-stock movers, right-wing media platforms Rumble (RUM, +7.1%) and Digital World Acquisition (DWAC, +7.6%) were two notable gainers after last night's news that former President Donald Trump was indicted by a grand jury in Manhattan. Rumble also reported fourth-quarter results that included a sharp year-over-year rise in revenue (to $19.9 million from $2.9 million) and a monthly active user count that more than doubled from the year-ago period.
At the close, the Nasdaq was up 1.7% at 12,221, the S&P 500 rose 1.4% to 4,109, and the Dow Jones Industrial Average gained 1.3% to 33,274. All three benchmarks scored impressive weekly and monthly gains too. As for their Q1 performances, the Nasdaq finished the quarter up 16.8% – its biggest quarterly gain since Q2 2020, when it jumped 30.6% – the S&P 500 was 7.0% higher, and the Dow added 0.4%.
Don't give up on stocks
It was a wild first quarter for the equities market. "An early year stock rally fueled by hopes of a Fed pause proved short-lived," says Tony DeSpirito, chief investment officer at BlackRock's U.S. Fundamental Active Equities. "The first spoiler – hotter-than-expected inflation data – was followed by signs that rate hikes are having an economic impact as cracks emerged in the banking system." Going forward, those two counterforces "make the Fed's job more complicated as it becomes increasingly clear that taming inflation might not only incite recession but could also rock financial stability."
So what does this mean for investors? Don't give up on stocks, DeSpirito says, as they "continue to play a critical role in a long-term investment plan." Picking the best stocks to buy must include a focus on quality companies, like the best dividend growth stocks that are "built to weather diverse markets," he adds. Stable sectors are also solid additions to portfolios, DeSpirito says, with healthcare stocks in particular known for being recession resilient.
-
Trump’s Tax Bill Could Kill Chance at ERC RefundsTax Credits Millions of small-to-mid-size businesses could be denied the pandemic-era Employee Retention Tax Credit under Trump’s tax agenda.
-
Best Places For Living Single In RetirementFrom cost of living to health care access, here are three states you may want to consider if you are single and retired.
-
My Three-Day Rule for Investing: And If it Applies NowStock Market I've seen a lot in my career. Here's what I see now in the stock market.
-
Is It Time to Invest in Europe?Stock Market Europe is being shaken out of its lethargy, militarily and otherwise, by Donald Trump's changes in U.S. policy. Should investors start buying?
-
Fed Leaves Rates Unchanged: What the Experts Are SayingFederal Reserve As widely expected, the Federal Open Market Committee took a 'wait-and-see' approach toward borrowing costs.
-
Fed Sees Fewer Rate Cuts in 2025: What the Experts Are Saying
Federal Reserve The Federal Reserve cut interest rates as expected, but the future path of borrowing costs became more opaque.
-
Why Is Warren Buffett Selling So Much Stock?Berkshire Hathaway is dumping equities, hoarding cash and making market participants nervous.
-
Fed Cuts Rates Again: What the Experts Are Saying
Federal Reserve The central bank continued to ease, but a new administration in Washington clouds the outlook for future policy moves.
-
If You'd Put $1,000 Into Google Stock 20 Years Ago, Here's What You'd Have TodayGoogle parent Alphabet has been a market-beating machine for ages.
-
Fed Goes Big With First Rate Cut: What the Experts Are Saying
Federal Reserve A slowing labor market prompted the Fed to start with a jumbo-sized reduction to borrowing costs.
