S&P Posts Second Straight Quarterly Gain

The S&P 500 finished higher for a third straight week as fears of bank contagion continued to ease.

April 03, 2023

Performance for Week Ending 3.31.2023:

The Dow Jones Industrial Average (Dow) finished up 3.22%, the Wilshire 5000 Total Market IndexSM (Wilshire 5000SM) added 3.69%, the Standard & Poor’s 500 Index (S&P 500) added 3.48% and the Nasdaq Composite Index (NASDAQ) tacked on 3.37%. Sector breadth was positive with all 11 of the S&P sector groups closing the week higher. The Energy sector (+6.17%) was the best performer followed by Consumer Discretionary (+5.58%) and Real Estate (+5.16%).

Index* Closing Price 3/31/2023 Percentage Change for Week Ending 3/31/2023 Year-to-Date Percentage Change Through 3/31/2023
Dow 33274.12 +3.22% +0.38%
Wilshire 5000 40708.47 +3.69% +6.92%
S&P 500 4109.31 +3.48% +7.03%
NASDAQ 12221.91 +3.37% +16.77%

*See below for Index Definitions

MARKET OBSERVATIONS: 3/27/23  – 3/31/23

The S&P 500 finished higher for a third straight week as fears of bank contagion continued to ease. Despite the recent gains, the S&P has been stuck in a trading range between 3800 and 4200 since last November as investors debate the path of monetary policy, the health of the broader banking system, and whether the economy is heading toward a mild or deep recession in the quarters ahead. In terms of the Fed, at the conclusion of the March FOMC meeting, officials made it clear that they intend to hike rates by another 25 basis points at the May FOMC meeting before pausing their rate hiking efforts. At that point, the Fed will become more data dependent and will monitor the lagged impact of higher rates. Last week’s release of the core personal consumption and expenditures price index—the Fed’s preferred measure of inflation—showed inflation pressure continued to ease but remained at elevated levels. After the recent swoon, the banking sector continued to stabilize, although it seemed to be driven more by a lack of fresh news around banking contagion than any positive developments. The Fed’s swift action by the Fed and other regulatory agencies, following the failures of Silicon Valley and Signature banks, seems to have calmed some nerves as the programs put in place are being viewed as a de facto ‘safety net’ under the banking system. While things have calmed down in the banking sector, the impact on the broader economy remains unknown. There has been a massive exodus of deposits from smaller and mid-sixed banks into the giants of the banking sector. In addition, lending standards are likely to tighten as banks refocus their attention on the quality of their loan portfolios. Overtime, this could impact lending activity and create an economic drag as small and mid-sized banks account for a large portion of consumer lending.

Q1 Wrap-up: The S&P 500 finished higher for a second straight quarter, posting a gain of 7.03% for the January through March period. The tech-heavy Nasdaq Composite fared even better, gaining 16.77%, its best quarterly performance since the second quarter 2020. The Dow finished the quarter modestly higher, gaining 0.38%. Sector breadth was mixed with 7 of the S&P sectors closing higher and 4 closing lower. Technology (+21.49%), Communication Services (+20.18%) and Consumer Discretionary (+15.76) led the charge higher while Financials (-6.05%) and Energy (-5.57%) were the biggest losers. Growth outperformed Value by a considerable clip with the Russell 1000 Growth Index gaining (+14.06%) compared to a fractional gain (+0.41%) for the Russell 1000 Value Index.

Fed Speak: Last week’s Fed speak suggested that Fed members are all following the same playbook, suggesting there is more work to be done to cool inflation. Boston Fed President Susan Collins said that the banking system is sound, and more interest-rate increases are needed to bring down inflation. “Inflation remains too high, and recent indicators reinforce my view that there is more work to do, to bring inflation down to the 2% target associated with price stability,” Collins said. Richmond Fed President Thomas Barkin said he still sees inflation risks, while noting policymakers will have to be nimble if a credit contraction slows the economy faster than they expect. Minneapolis Fed President Neel Kashkari, who votes on policy this year, said it was premature to judge what impact the banking turmoil will have on the economy, but the Fed also needs to focus on lowering inflation. Meanwhile, asked in a “private” meeting with lawmakers how much further rates will rise this year, Fed Chair Powell pointed to the FOMC’s latest forecasts showing they anticipate one more 25 basis point increase. During the meeting, the Fed chief essentially recapped what the central bank made clear recently when they released new interest-rate forecasts, known as the dot plot, following their two-day meeting. Despite the projection of one more rate hike, traders are currently putting roughly 50-50 odds that such a move will occur at the Fed’s May meeting.

The Week Ahead: The focal point of the holiday shortened week (Equity markets will be closed on Friday in observance of the Good Friday holiday) will be the release of the monthly payroll data on Friday. According to Bloomberg, nonfarm payrolls are forecast to grow by 240K while the unemployment rate is expected to hold steady at 3.6%. The report will be the last one before the next Fed meeting on May 3rd and investors will be looking signs of cooling in the labor market after 475bps of tightening from the Fed over the past year. Other data points of interest include the ISM manufacturing and services indices for March, the February job openings report, the March ADP employment change report, and weekly jobless claims. The Fed speaking calendar will be relatively light with just four Fed heads scheduled to present. The earnings calendar will remain on the backburner for another week until several banking bellwethers report results during the week of April 10.

— By Michael Schwager, Chief Market Strategist, Managing Director


The Dow Jones Industrial Average is a price-weighted average of 30 blue-chip stocks that are generally defined as the leaders in their industry. It has been a widely followed indicator of the stock market since October 1, 1928.

Wilshire 5000 Total Market IndexSM represents the broadest index for the U.S. equity market, measuring the performance of all U.S. equity securities with readily available price data. The index is comprised of virtually every stock that: the firm's headquarters are based in the U.S.; the stock is actively traded on a U.S. exchange; the stock has widely available pricing information (this disqualifies bulletin board, or over-the-counter stocks). The index is market cap weighted, meaning that the firms with the highest market value account for a larger portion of the index.

Standard and Poor's 500© Index is a capitalization-weighted index of 500 stocks. The index is designed to measure performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries.

The NASDAQ Composite Index is a broad-based capitalization-weighted index of stocks in all three NASDAQ tiers: Global Select, Global Market and Capital Market. The index was developed with a base level of 100 as of February 5, 1971.

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