Wall Street closed mixed on Friday as investors continued to assess future policy changes of Fed to counter mounting inflation. Development on Russia-Ukraine geopolitical conflict and movement of crude oil prices were other concerns. The Dow and the S&P 500 ended in positive territory while the Nasdaq Composite finished in red. However, all three major stock indexes posted back-to-back weekly gains.
How Did The Benchmarks Perform?
The Dow Jones Industrial Average (DJI) gained 0.4% or 153.30 points to close at 34,861.24. Notably, 25 component of the 30-stock index ended in green while 5 finished in negative zone. However, the tech-heavy Nasdaq Composite finished at 14,169.30, dropping 0.2% due to the weak performance of large-cap technology stocks.
Meanwhile, the S&P 500 rose 0.5% to end at 4,543.06. Nine out of 11 broad sectors of the benchmark index closed in positive zone while two in red. The Energy Select Sector SPDR (XLE) and the Utilities Select Sector SPDR (XLU) rallied 2.2% and 1.5%, respectively.
The fear-gauge CBOE Volatility Index (VIX) was down 4% to 20.81. A total of 11.92 billion shares were traded Friday, lower than the last 20-session average of 14.28 billion. Advancers outnumbered decliners on the NYSE by a 1.08-to-1 ratio. On Nasdaq, a 1.04-to-1 ratio favored declining issues.
Spike in U.S. Government Bond Yield
On Mar 25, the yield on the 10-Year U.S. Treasury Bond surged 15.1 basis points to 2.491% after touching more than 2.5% on the same day, marking its highest since May 2019. On Mar 16, the Fed announced after the completion of its 2-day FOMC meeting that it would raise the benchmark interest rate by 25 basis points effective immediately.
Fed’s dot-plot, a graphic representation of the views of Fed officials, indicated that six more rate hike of the same magnitude would come this year, followed by another three in next year. The Fed projected that the benchmark interest rate would be around 1.9% by this year-end.
Moreover, the quantitative easing program of buying $120 billion of bonds per month will terminate this month. Additionally, Fed Chairman Jerome Powell indicated that the central bank would start shrinking its $9 trillion balance sheet, mostly consisting of U.S. Treasury Notes and mortgage-backed securities from May 2022. This will result in another form of rate hike.
Fed Chairman Jerome Powell said that the central bank will not hesitate to take further harsh measures if its proposed interest rate hike failed to control inflation. Several economists and financial researchers have said that in next two FOMC meeting, the Fed may increase interest rate by 50 basis point as inflation is likely to be elevated due to ongoing Russia-Ukraine war.
Consequently, shares of banking bigwigs like Bank of America Corp. (
BAC Quick Quote BAC - Free Report) and Wells Fargo & Co. ( WFC Quick Quote WFC - Free Report) advanced 1.5% and 2.4%, respectively. On the other hand, shares of technology stocks like Zoom Video Communications Inc. ( ZM Quick Quote ZM - Free Report) and DocuSign Inc. ( DOCU Quick Quote DOCU - Free Report) tumbled 3.2% and 3.9%, respectively. Bank of America, Wells Fargo and DocuSign 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 University of Michigan reported that the consumer sentiment index for the final reading of March, fell slightly to 59.4% from 59.7% reported in the preliminary reading. The consensus estimate was 59.7%. The final reading of March marked the lowest reading in 11 years.
The current financial situation sub-index slid to 67.2% in final reading from a preliminary reading of 67.8%, marking its 13 years low. The sub-index of expectations for next six months fell to 54.3% in final reading of March from an initial reading of 54.4%, marking its 11 years low.
The National Association of Realtors reported that pending home sales fell 4.1% in February, marking the lowest reading in two years. The consensus estimate was for an increase of 1%. January’s reading was revised downward from a decline of 5.7% reported earlier to a decline of 5.8%. Year over year, pending home sales were down 5.4% in February.
Last week was a good one for Wall Street. The three major stock indexes – the Dow, the S&P 500 and the Nasdaq Composite – gained 0.3%, 1.8% and 2%, respectively, reflecting back-to-back weekly gains. Investors’ confidence on risky assets like equities grew despite a hawkish Fed and prolonged war between Russia and Ukraine.