On the other hand, Craig said weaker-than-expected purchasing managers index numbers out of China dampened optimism in the materials sector. “The PMI is very closely watched as a barometer of the economy, and it was down on the month, suggesting signs of weakness in the Chinese economy and demand for resources,” he said.

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Craig is also keeping an eye on the Reserve Bank’s interest rates stance on Tuesday, which he said was one of the biggest factors at the moment, with rate cuts “a little too aggressively priced in” by investors.

Meanwhile, US stocks rallied to close out a winning March and first quarter of the year, feats that looked questionable just a couple of weeks ago when Wall Street was tumbling in turmoil.

The S&P 500 rose 1.4 per cent to cap a 3.5 per cent 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 that are meant to get inflation under control.

The Dow Jones Industrial Average rose 415 points, or 1.3 per cent, while the Nasdaq composite climbed 1.7 per cent. For the Nasdaq, big leaps for technology stocks drove a gain of 16.8 per cent for the quarter, its best since the surge out of the coronavirus-caused crash in the spring of 2020.

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Friday’s gains came after a report showed inflation across the US 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 past 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 size. Apple, Microsoft and Google’s parent Alphabet each posted double-digit gains for March.

Strength in tech has helped to mask weakness in other parts of the market that are still down for the month but play smaller roles in indexes, such as smaller-sized stocks or financial companies.

Some professional investors on Wall Street say the expectations for rate cuts are premature and could be setting the market up for disappointment. Cuts can act like steroids for markets, but they’re likely coming only if the economy looks to be in serious trouble.

The Fed, meanwhile, has hinted it envisions raising rates one more time before keeping them steady through this year. Friday’s data suggests that could still be the case, economists said.

“Elevated price pressures coupled with strong job growth that is restoring incomes and is supporting demand should keep the Fed on track to hike rates further over coming meetings,” said Rubeela Farooqi, chief US economist at High Frequency Economics.

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With AP

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