Market Insights

Stocks just had their best week of the year, thanks to a dovish Federal Reserve and strong earnings.

The S&P 500 rose 2.3 percent between Friday, March 15, and Friday, March 22. It was the biggest gain since mid-December and followed two weeks of modest declines. About four-fifths of the index advanced, including 10 of the 11 major sectors. The S&P 500, Nasdaq-100 and Dow Jones Industrial Average all made new record highs.

The Federal Reserve confirmed expectations it will likely cut interest rates by 75 basis points this year. The announcement came despite higher-than-expected inflation in January and February. Policymakers also sharply hiked their estimate for economic growth from 1.4 percent to 2.1 percent.

That maintains potentially favorable conditions for investors, with interest rates moderating despite a strong economy.

Other events were supportive. Leading economic indicators unexpectedly turned positive for the first time in two years. Homebuilder sentiment, housing starts, building permits and existing home sales beat forecasts. Initial jobless claims were lower than feared.

Alphabet (GOOGL), which lagged earlier in the year, rallied after Bloomberg reported Apple (AAPL) might use its Gemini AI model on iPhones. That could be an important victory for the search giant, which has mostly lagged in the Artificial Intelligence race.

Reddit (RDDT) also priced its initial public offering (IPO) at $34, the high end of its range. (The social-media company spiked as high as $57.80 and ended the week at $46.) AI-chip designer Astera Labs (ALAB) priced above its range and ended the week up an additional 94 percent. Do those strong deals suggest demand is returning for tech IPOs?

Apple (AAPL), on the other hand, fell after getting hit with an anti-trust lawsuit. The Justice Department alleges the smart-phone giant has used its dominant position to control other areas like payments. AAPL rejected the claim and pledged to fight against it.

Homebuilders, Chips Rally

Homebuilders and semiconductors, the leading industries in the past year, were the top performers last week.

Strong data and lower bond yields lifted housing. Chips rallied after Micron Technology (MU) beat estimates and raised guidance. The company emerged as the newest beneficiary of the AI boom thanks to high bandwidth memory. It had the biggest gain in the S&P 500 last week, and its biggest weekly gain since March 2020.

FedEx (FDX) rallied after its Express business increased profitability much more than expected. Both MU and FDX showed significant margin expansion, following a broader pattern last earnings season. Continuation of the trend could potentially be another positive catalyst for stocks.

Cannabis stocks including Tilray (TLRY) and Canopy Growth (CGC) rallied after Vice President Kamala Harris and Senate Majority Leader Chuck Schumer pushed separate measures toward legalization.

Real-estate investment trusts were the only major sector to lose value last week. Precious metals and biotechnology also struggled.

Lululemon Athletica (LULU) fell the most in the S&P 500 after issuing weak guidance. Nike (NKE) also dropped after predicting sales would slow before new products are launched.

Charting the Market

The S&P 500 ended last week above 5200 for the first time, and is up 9.7 percent so far this year. Most indicators seemed to confirm the bullish trend.

For example, the Advance / Decline line climbed to a new record. TradeStation data also showed 114 index members hitting new 52-week highs, the most since May 2021. Those points indicate a broad number of companies are participating in the rally.

Wilder’s Relative Strength Index (RSI) also remained above 50, where it’s been since November. That can reflect a tight and steady uptrend. A rising price channel has also emerged.

Will the upward momentum continue? Some traders may think it will given the relatively quiet calendar in the next few weeks and the approach of earnings season in about a month.

The Week Ahead

This week is relatively uneventful. It’s also cut short by Good Friday.

New home sales are due today, followed by durable-goods orders on Tuesday.

Crude-oil inventories are on Wednesday, along with results from Carnival (CCL).

Thursday brings initial jobless claims and results from Walgreen Boots Alliance (WBA).

Friday also has the Personal Consumptions Expenditure (PCE) deflator despite the holiday. Personal income and spending accompany that PCE, a potentially important measure of inflation.