A Volatile But Winning First Quarter Sees Dow Gaining 200 Points

A mini-financial panic triggered by Silicon Valley Bank's collapse spurred more Fed rate tightening and stock prices rose Friday as Wall Street wrapped up a volatile, but successful period, in which a number of Federal Reserve rates were tightened.

‍

During the session, the S&P 500 gained 0.8%, followed by the Nasdaq Composite advancing 1% and the Dow Jones Industrial Average making an advance of 242 points, or 0.7%, on the day.

‍

There was a slight boost for the stock market on Friday after a report from the Federal Reserve showed that prices had increased less than expected, as per its preferred inflation gauge. Dow Jones economists expected 0.4% growth in the Personal Consumption Expenditures Index in February, but it rose only 0.3%.

‍

Since Thursday's close, the S&P 500 has gained 5.5% and the Nasdaq Composite has gained 14.8% in the first quarter. There is a slight decline in the Dow. Nasdaq has gained 4.9% and S&P 500 has gained 2% for the month. In contrast, the Dow has gained 0.6% by Thursday's close.

‍

However, it hasn't been easy. After two regional banks failed, Credit Suisse was forced into bankruptcy and deposits fled from smaller institutions, stocks began to rise as the month came to an end. SVB's deposits were backed up by the government, as was Signature Bank's, and a special lending facility was set up for other banks.

‍

In the period from March 22-29, the Fed's new Bank Term Funding Program enabled banks to borrow $64.4 billion through primary lending of $88.2 billion. In the last week of the month, that total dropped slightly from $164 billion to $152.6 billion, another indication the crisis is stabilizing.

‍

A rebound from the contagion lows continued Friday in premarket trading for the SPDR Regional Banking ETF. Compared to its March low, the ETF has gained about 6%.

‍

This month, technology stocks have been the big winners, as investors have rotated away from financials. The Technology Select SPDR ETF is up 9% year-over-year, far more than the other ETFs in the market.

‍

As a result of the recent rally, market perceptions are confirming that the problems that caused a market crisis of confidence are likely to be contained, according to LPL Financial chief global strategist Quincy Krosby. 

‍

"The semiconductor market, which has now become regarded as a key bellwether for global economic growth, delivered a strong performance this quarter," Krosby said.