Stock Market News for Mar 24, 2023

·5-min read

Wall Street closed higher on Thursday, led by tech stocks. Investors priced in that the Fed might be nearing the end of its rate-tightening cycle and were upbeat on comments from the treasury secretary about the government safe-guarding bank deposits. Treasury yields fell on the day, giving a boost to trade. All three major indexes ended in the green.

How Did the Benchmarks Perform?

The Dow Jones Industrial Average (DJI) rose 0.2%, or 75.14 points, to close at 32,105.25. Eighteen components of the 30-stock index ended in positive territory, while 12 ended in negative.

The S&P 500 added 0.3% or 11.75 points to close at 3,948.72. Nine of the 11 broad sectors of the benchmark index ended in negative territory. The Energy Select Sector SPDR (XLE), the Utilities Select Sector SPDR (XLU) and the Financials Select Sector SPDR (XLF) fell 1.4%, 1% and 0.7%, respectively, while the Technology Select Sector SPDR (XLK) advanced 1.6%.

The tech-heavy Nasdaq gained 1% or 117.44 points to finish at 11,787.40.

The fear-gauge CBOE Volatility Index (VIX) was up 1.6% to 22.61. A total of 12.4 billion shares were traded on Thursday, lower than the last 20-session average of 12.8 billion. Decliners outnumbered advancers on the NYSE by a 1.59-to-1 ratio. On Nasdaq, a 1.12-to-1 ratio favored declining issues.

Market Pricing in Possible End of Rate-Hike Cycle

Even as the market fell in the previous session in apprehension that the Fed would continue to tackle inflation with an iron fist, comments from Fed Chair Jerome Powell helped calm down investor nerves. On Thursday, markets started pricing in the fact that the end of the rate-hike cycle might be in sight. Powell said that the FOMC had even considered a pause in rate hikes in light of the ongoing banking crisis.

“We are committed to restoring price stability and all of the evidence says that the public has confidence that we will do so, that will bring inflation down to 2% over time. It is important that we sustain that confidence with our actions, as well as our words,” Powell said.

Also, a 5.1% peak was indicated by the projections released alongside the rate-hike decision, which remains unchanged from the last estimate in December. This suggests that Fed officials expect only one more rate hike ahead, with the current level at 4.75-5%. Market participants are currently considering this as a clear hint of the end of the rate-hike cycle in the months ahead. Comments coming in from the Bank of England stating that it sees inflation quickly fading also boosted investor morale.

Treasury Secretary’s Comments Turn Reassuring

Even as treasury secretary Janet Yellen had said in her congressional deposition the day before that the government was not considering "blanket insurance" for deposits arising from recent problems faced in the banking sector, her comments on Thursday were far more reassuring.

Yellen clearly indicated that further guarantees for uninsured deposits would come in the form of rescues from the government for depositors of individual failing banks so that further bank runs may be avoided.

"These are tools we could use again, for an institution of any size, if we judge that its failure would pose a contagion risk," she said. Throughout the week, Yellen’s comments have taken the markets on a rollercoaster ride, depending on the amount of caution or assurance she has laced her words with. On Thursday, however, broad market indexes rejoiced at her words, even as regional banks continued to slide.

Fall in Treasury Yields Boosts Growth Stocks

Keeping in line with moderate rate expectations and a probable rate pause in the near future, the 2-year treasury yield retreated to 3.8267% compared with Wednesday's close of 3.981%. The yield on benchmark 10-year Treasury notes also fell to 3.4173% compared with 3.5% the previous day. Falling yields on government bonds have a positive impact on mega-cap growth stocks like tech, as their valuation seems lucrative in the future. Tech stocks, thus, drove markets on Thursday.

Consequently, shares of NVIDIA Corporation NVDA and Microsoft Corporation MSFT gained 2.7% and 2%, respectively. Both carry a Zacks Rank #3 (Hold). You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.

Economic Data

The Labor Department said on Thursday that initial jobless claims fell to 191,000, decreasing 1,000 for the week ending Mar 18, from the previous week's unrevised level. The four-week moving average decreased to 196,250, marking a fall of 250 from the previous week’s unrevised average of 196,500.

Continuing claims came in at 1,694,000 for the week ending Mar 11, increasing 14,000 from the previous week’s revised level. The previous week's numbers were revised down by 4,000 from 1,684,000 to 1,680,000. The 4-week moving average came in at 1,684,000, an increase of 8,500 from the previous week's revised average. The previous week's average was revised down by 1,000 from 1,676,500 to 1,675,500.

The U.S. Census Bureau and the U.S. Department of Housing and Urban Development reported that new home sales for February had come in at 640,000. The number for January has been revised down to 633,000 from the previously reported 670,000.

The trade deficit for fourth-quarter 2022 was $206.8 billion, decreasing from the previous quarter. For the third-quarter 2022, the deficit was revised up to $219 billion from the previously reported $217.1 billion.

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