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NEW YORK (AP) — Stocks rallied Friday to close out a winning March and first quarter of the year, feats that looked questionable just a couple weeks ago when Wall Street was tumbling in turmoil.
The S&P 500 rose 1.4% to cap a 3.5% gain for the month. It also locked in a second winning quarter in a row after falling sharply most of last year on worries about high interest rates meant to get inflation under control.
The Dow Jones Industrial Average rose 415 points, or 1.3%, while the Nasdaq composite climbed 1.7%. For the Nasdaq, big leaps for technology stocks drove a gain of 16.8% for the quarter, its best since the surge out of the coronavirus-caused crash in the spring of 2020.
Friday’s gains came after a report showed inflation across the United States slowed in February, though it was still high relative to history. A continued slowdown could give the Federal Reserve more leeway to take it easier on interest rates after jacking them higher at a furious pace over the last year.
The threat of higher rates has been behind the stock market’s struggles since it peaked in early 2022. High rates can undercut inflation but only by bluntly slowing the entire economy, which raises the risk of a recession. They also drag down prices for stocks, bonds and other investments.
A blitz of economic reports earlier in the year suggesting stubbornly high inflation raised worries the Fed would have to keep rates even higher than feared for longer.
A recession hasn’t hit the economy, at least not yet, but the pressure of higher interest rates helped cause the banking industry to crack earlier this month.
The second- and third-largest U.S. bank failures in history rocked markets after depositors rushed to pull their money out of Silicon Valley Bank and Signature Bank. The runs pushed investors to cast harsher scrutiny on banks globally in the hunt for seemingly weak links.
Forceful actions by regulators have since helped to rebuild some confidence. Almost as importantly, traders have also built bets that the banking system’s woes will force the Fed to stop hiking rates soon and even to begin cutting rates later this year.
The overriding mood in the market seems to be that the “Fed blinked and off we rally into April” before waiting to see if a recession or new panics around commercial real estate or something else awaits in the second half of the year, investment strategist Michael Hartnett wrote in a BofA Global Research report.
Expectations for an easier Fed have helped Big Tech stocks in particular because high-growth stocks are seen as some of the biggest beneficiaries of lower rates. That's helped to prop up the S&P 500, where Big Tech stocks play an outsized role because of their massive size. Apple, Microsoft and Google's parent Alphabet each posted double-digit gains for March.