Wall Street rallied on Friday and the Nasdaq notched its biggest quarterly percentage gain since June 2020, as signs of cooling inflation bolstered hopes the Federal Reserve might soon end its aggressive interest rate hikes.
The S&P 500 posted a second straight quarter of gains, led by the technology sector’s (.SPLRCT) more than 20% rise.
The quarterly gains came despite a sharp sell-off in bank stocks following the collapse of two regional banks earlier this month and worries about a bigger financial crisis.
The Commerce Department report Friday showed U.S. consumer spending rose moderately in February while inflation cooled.
“The equity market seems to be delighted with the slight tick lower in inflation, as it should be. It underscores that the Fed’s campaign is, in fact, working, albeit slowly,” said Quincy Krosby, chief global strategist at LPL Financial in Charlotte, North Carolina.
The Fed has been raising rates to cool inflation, and traders’ bets of a 25-basis-point rate hike in May stood at 53.8% on Friday, according to CME Group’s Fedwatch tool.
According to preliminary data, the S&P 500 (.SPX) gained 58.07 points, or 1.43%, to end at 4,108.76 points, while the Nasdaq Composite (.IXIC) gained 208.44 points, or 1.74%, to 12,221.91. The Dow Jones Industrial Average (.DJI) rose 408.66 points, or 1.24%, to 33,267.69.
Semiconductors (.SOX) were among the quarter’s strongest performing groups.
Shares of big tech gained as investors rotated out of banks and as U.S. Treasury yields eased, with the two-year note yield posting on Friday its largest monthly drop since 2008. Higher yields tend to be a negative for big tech companies.
Also, Apple Inc (AAPL.O) shares rose Friday after it won its appeal against the decision by Britain’s antitrust regulator to launch an investigation into its mobile browser and cloud gaming services.
Boston Fed President Susan Collins said Friday that wherever the U.S. central bank stops with its rate rises, maintaining that level for some time will be critical in helping to lower high inflation back to the 2% target.