Markets ended an outstanding first quarter on a quiet note ahead of the long holiday weekend.
If stocks spent much of Thursday wavering, it was due in part to a speech given the night before by Fed Governor Christopher Waller. His insistence that "there's still no rush" to cut interest rates cast something of a hawkish pall over the session.
Perhaps it's just as well the stock and bond markets are closed in observance of Good Friday, which means they will be unable to react to tomorrow's release of the Personal Consumption Expenditures Price Index (PCE), which is the Federal Reserve's preferred inflation gauge.
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As of March 28, interest rate traders assigned a 61% probability to the Federal Open Market Committee (FOMC) enacting its first cut to the federal funds rate in June, down from 64% a day ago, according to CME Group's FedWatch Tool.
Exuberance over artificial intelligence (AI) stocks and market expectations for three quarter-point interest rate cuts before year-end have fueled a remarkable rally in stocks off their October lows. Indeed, all three main U.S. benchmarks produced robust gains for the first three months of the year.
The S&P 500 enjoyed its best first quarter in five years with a gain of more than 10% on a price basis. The tech-heavy Nasdaq Composite added more than 9% on a price basis, while the blue-chip Dow Jones Industrial Average rose almost 6%.
If there's a consensus among strategists in their second-quarter outlooks, the market appears to have plenty of room to run.
GDP revised up, jobless claims steady
In economic news, the U.S. economy grew at a faster pace than previously estimated in the fourth quarter. Inflation-adjusted gross domestic product (GDP) increased at an annual rate of 3.4% – up from 3.2% – in the final three months of 2023, the Bureau of Economic Analysis said Thursday.
Separately, initial unemployment claims fell to 210,000 for the week ended March 23, down from 212,000 the prior week. Economists were looking for claims to come in at 215,000.
"Employers have tempered their pace of layoffs, allowing tight labor conditions to persist," says José Torres, senior economist at Interactive Brokers. "Overall, these figures point to little stress in the labor market."
As for Thursday, stocks mostly struggled for direction on relatively light volume. The S&P 500 added 0.1% to finish at 5,254, while the Nasdaq slipped 0.1% to 16,379. The Dow gained 0.1% to close at 39,807.
GE slumps ahead of spinoff
General Electric (GE) was one of the S&P 500's biggest losers on Thursday, shedding 2.6% ahead of its spinoff of GE Vernova.
As we noted recently, venerable GE, once the longest-serving member of the Dow Jones Industrial Average, will officially split into two companies at the start of April.
GE will spin off GE Vernova on April 2, which will then start trading on the New York Stock Exchange (NYSE) under the ticker GEV. Holders of GE common stock will receive one share of GE Vernova common stock for every four shares of GE common stock held as of March 19.
GE stock has nearly doubled over the past 52 weeks as the company has shrunk in order to grow. Analysts remain bullish on GE's prospects, assigning it a consensus recommendation of Buy, according to S&P Global Market Intelligence.
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