S&P 500 Reclaims 4,000, Stocks Gain Momentum – Real Estate And Tech Rally As Banking Crisis Concerns Ease

The U.S. stock market traded higher on Wednesday, with technology and real estate firms shares leading the way, as risk appetite returned in response to easing banking fears and lower Treasury yields. Rate-sensitive names, including Microsoft Corp MSFT, Apple Inc. AAPL, Alphabet Inc. (NASDAQ: GOOGL), Amazon Inc. AMZN, and Tesla Inc. TSLA, rallied between 1.5% and 2.5%.

Cues From Wenesday Trading:

All U.S. major equity indices were in the green, with the Nasdaq Composite index up 1.4%, the S&P 500 up 1.1% above 4,000 points and the Dow Jones Industrial Average up 0.7%. The Russell 2000 also edged 0.6% higher.  

U.S. Indices' Performance On Wednesday

Index	Performance (+/-)		Value
Nasdaq Composite	+1.4%		11,882.76
S&P 500 Index	+1.11%		4,015.65
Dow Industrials	+0.7%		32,632.25

Analyst Color:

“While higher rates have already wreaked havoc on an overheated housing market and an overextended banking sector, corporate borrowers are going to continue to feel the sting,” said Daniel Berkowitz, investment director at Prudent Management Associates.

The analyst said the pandemic allowed companies to enjoy debt on extremely favorable terms. As this debt matures over the next few years, companies will likely have to refinance at potentially materially higher rates, he said. Higher interest expense, the analyst said, might drag down corporate earnings and put pressure on market prices.

If the jobless claims data and the consumer price consumption expenditure index come in stronger than expected, “the market may need to recheck expectations for a much less aggressive Fed,” Berkowitz said.

“We know that the FOMC is watching these closely as well.”

Major US Equity ETFs:

As of midday trading on Tuesday, the SPDR S&P 500 ETF Trust SPY was 1.1% higher to $400.08, the SPDR Dow Jones Industrial Average ETF DIA was 0.8% up to $326.24 and the Invesco QQQ Trust QQQ rose 1.6% to 311.84, according to Benzinga Pro data.

US Sectors:

The Real Estate Select Sector SPDR Fund XLRE gained 2% following encouraging housing market data. The Technology Select Sector SPDR Fund XLE rose 1.7% and the Consumer Discretionary Select Sector SPDR Fund XLY gained 1.5%. Defensive sectors, such as the Health Care Select Sector SPDR Fund XLV and the Consumer Staples Select Sector SPDR Fund XLP underperformed.

Latest Economic Data:

• Data from the Mortgage Bankers Association reported that mortgage application volume in the United States increased for the fourth straight week by 2.9% in the week ending March 24, 2023, marking the longest winning streak in four years.
• The National Association of Realtors reported that pending home sales in the United States rose 0.8% in February 2023 from the previous month, hitting the highest level since August and defying market expectations of a 2.3% decline.
• The latest U.S. Energy Information Administration report showed that U.S. crude oil inventories declined by 7.489 million barrels in the week ended March 24, 2023, marking the largest weekly drop since November 2022, and in sharp contrast with market expectations of a 0.092-million-barrel increase. 

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Stocks In Focus:

• First Republic Bank FRC gained 3.5% as smaller banks attracted buying-on-dip activities in response to diminishing banking crisis worries.
• Carnival Corp CCL stock rose 4.5% after Susquehanna upgraded the cruiser from Neutral to Positive and kept the price target at $11.
• Intel Corp INTC soared 5.7% as company executives detailed strategies for its next generation of central processing units for servers. 
• lululemon Athletica, Inc. LULU climbed about 13% following its quarterly earnings beat.
• Micron Technology, Inc. MU rose about 6.4% despite the memory chipmaker’s negative quarterly results.
• UBS Group, Inc. UBS added over 4% after the Swiss investment bank brought back former CEO Sergio Ermotti as its group CEO to assist with the Credit Suisse CS takeover.
• Paychex, Inc. PYX, H.B. Fuller Company FUL and Semtech Corp. SMTC are among the important companies due to announce their quarterly results on Wednesday.

Commodities, Bonds, Forex And Other Global Equity Markets:

Crude oil paused after three straight sessions of gains, with a barrel of WTI-grade crude trading at $73, down 0.7% on the day. 

The benchmark 10-year Treasury yield held broadly steady at 3.56%. The yield on the two-year yield Treasury Note was also unchanged at 4.07%. 

The dollar was flat against the euro, while it gained 1.4% against the Japanese yen amid dovish remarks from the BoJ. 

Major European equity indices closed in the green. The iShares MSCI Eurozone ETF EZU rose 1.5%. 

Gold slipped 0.4% to $1,964/oz, with the SPDR Gold Trust GLD down 0.4%. Silver gained 0.2% to $23.33, with the iShares Silver Trust SLV up 0.1%. Bitcoin rose 3.9% to $28,325. 

Read Next: ETF Analysis: Is The Energy Sector (XLE) Still A Long-Term Buying Opportunity?

Staff writer Piero Cingari updated this story midday Wednesday.