US Market Report|Dollar gains as inflation worries resurface after OPEC+ surprise.

US Market Report|Dollar gains as inflation worries resurface after OPEC+ surprise.

Ira Singh

4 April’23

After a stormy 2022, US stocks gained during the first quarter of 2023 in a surprise show of resilience despite a banking crisis, cryptocurrency meltdowns and uncertainty about what’s ahead for the economy.

Still, nothing about the first quarter’s performance was linear. The broad-based S&P 500 seesawed throughout the quarter, ending January on a high note before tumbling in February, rising again in March and ultimately ending the quarter up about 7%.

The tech-heavy Nasdaq made a remarkable resurgence, soaring nearly 17% in its best quarterly gain since the fourth quarter of 2020. That comes after a tough 2022 for tech stocks, as investors sought out less risky avenues to ride out turbulence from the Fed’s interest rate hike campaign. The Dow Jones rose about 0.4%.

Despite the first quarter’s strong performance, investors say that celebrating a Fed victory against inflation would be premature. Rising prices remain a key factor driving markets and could cause turbulence ahead, even if it’s not cataclysmic.

In early March’23, the collapse of three financial institutions — Silicon Valley Bank, Signature Bank and Credit Suisse — set off a banking meltdown that sent markets teetering.Wall Street largely shrugged it all off, however, with stocks recouping their losses — and then some — as investors started snapping up tech stocks, boosting the broader equity market. Shares of Apple surged about 27%. Microsoft stock soared about 20%.

On Wall Street, US stocks rose, with the S&P 500 set to notch its second straight quarterly advance as it closed at its highest level since February 15, after advancing for three straight weeks to close out the month.The Nasdaq Composite, up 16.8 percent in the first quarter, snapped a streak of four straight quarterly declines.
On the session, the Dow Jones Industrial Average rose 415.12 points, or 1.26 percent, to 33,274.15, the S&P 500 gained 58.48 points, or 1.44 percent, to 4,109.31 and the Nasdaq Composite added 208.44 points, or 1.74 percent, to 12,221.91.

Expectations the Fed may be nearing the end of its rate hiking cycle have helped send US Treasury yields lower recently. The two-year US Treasury yield, which typically moves in step with interest rate expectations, was down 4.7 basis points at 4.052 percent on the day, after touching a low of 4.023 percent.

The two-year yield is set to decline for the first time in nine quarters after a drop of about 75 basis points in March, the biggest monthly drop since January 2008 during the financial crisis then.

Benchmark 10-year notes were down 7 basis points to 3.481 percent, from 3.551 percent late on Thursday. The 10-year yield is down more than 40 basis points for the month.

Currency Market

The U.S. dollar started the week higher as fears over inflation resurfaced after a surprise announcement by major oil producers to cut production further, with traders wagering the Federal Reserve may need to increase interest rates
The dollar index rose 0.342 percent, with the euro down 0.53 percent to $1.0843. The dollar index is on pace for its second straight quarterly decline.

Commodity Market

Oil prices were higher on the session to record their second straight weekly advance. US crude recently settled up 1.75 percent at $75.67 per barrel and Brent settled at $79.77, up 0.63 percent on the day.