Closing Market Summary: Stocks Post Best Q1 Since 2013The stock market secured its best first quarter performance in four years on Friday, but it did so in a rather spiritless manner as the major averages held close to their unchanged marks from start to finish. The S&P 500 (-0.2%) and the Dow (-0.3%) settled with modest losses while the Nasdaq finished flat. For the quarter, the S&P 500 increased 5.5%.
Seven sectors settled within 0.3% of their respective flat lines. The remaining groups--financials (-0.7%), energy (-0.4%), telecom services (-0.5%), and real estate (+0.5%)--didn't do much to distinguish themselves from the pack, but in a day light on activity they're worth noting.
The rate-sensitive utilities (+0.3%) and real estate (+0.5%) spaces settled atop the day's leaderboard as comments from several Fed presidents increased buying interest in the Treasury market, which left yields modestly lower. New York Fed President William Dudley (FOMC voter), Minneapolis Fed President Neel Kashkari (FOMC voter), and St. Louis Fed President James Bullard (non-FOMC voter) laid the groundwork for the Federal Reserve to shift its focus from rate hikes to reducing its balance sheet. Specifically, Mr. Dudley said that the Fed could pause rate hikes while running off its balance sheet.
Shorter-dated issues saw the biggest increase in demand with the 2-yr yield (1.25%) closing four basis points lower while the benchmark 10-yr yield (2.40%) lost only two basis points. The buying steepened the yield curve, but that did little to help the financial sector (-0.7%) as the group closed with the telecom services space (-0.5%) at the back of the pack.
Crude oil achieved its fourth consecutive advance, rising 0.5% to $50.56/bbl. However, the energy sector (-0.4%) failed to capitalize on the positive performance, extending its first quarter loss to 7.3%.
On the corporate front, Amazon (AMZN 886.54, +10.20) put together another solid performance, climbing 1.2% to another fresh record high and extending its weekly gain to 4.8%. However, its peers failed to respond, evidenced by the 0.8% decrease in the SPDR S&P Retail ETF (XRT 42.24, -0.35).
On the data front, investors received a slew of economic reports, including February Personal Income, February Personal Spending, February Core PCE Prices, March Chicago PMI, and the final University of Michigan Consumer Sentiment reading for March:
- February personal income rose 0.4%, which is in line with the consensus of 0.4%. Meanwhile, February personal spending increased 0.1% while the consensus expected a reading of 0.2%. January Personal Income was revised to 0.5% (from 0.4%) while January Personal Spending was left unrevised at 0.2%. Separately, Core PCE prices for February rose 0.2% (consensus 0.2%). The January reading was left unrevised at 0.3%.
- While the report showed income growth, the uptick in the personal savings rate suggests that consumers have a somewhat cautious outlook. Furthermore, the decline in real PCE underscores the fact that overall economic growth remains subdued.
- Chicago PMI for March increased to 57.7 from 57.4 in February while the consensus expected a reading of 55.8.
- The key takeaway from the report is that four of five components showed improvement while Employment receded.
- The final reading of the University of Michigan Consumer Sentiment Index for March declined to 96.9 (consensus 97.6) from 97.6 in the preliminary reading.
- The key takeaway from this report is that a sharp partisan divide that was visible in the preliminary reading, remains in place. Respondents who identified as Democrat expect an imminent recession, higher unemployment, lower income gains, and faster inflation. Conversely, Republicans expect strong growth in incomes and job prospects, coupled with lower inflation.
On Monday, investors will receive March ISM Index (consensus 57.0) and February Construction Spending (consensus 1.0%) at 10:00 ET. Also of note, March auto & truck sales will be released throughout the day.
- Nasdaq Composite +9.8% YTD
- S&P 500 +5.5% YTD
- Dow Jones Industrial Average +4.6% YTD
- Russell 2000 +2.1% YTD