Market Snapshot: U.S. stocks climb after inflation report as Nasdaq heads for best quarter in two years

The S&P 500 is on track to rise for the eighth trading session in 10, according to FactSet data.

What’s driving markets

U.S. stocks opened higher following the release of the personal consumption expenditures, or PCE, price index for February, as the Federal Reserve’s preferred inflation gauge showed that price pressures eased last month.

See: Inflation softens in February, PCE finds, and gives ammo for Fed rate-hike pause

The cost of U.S. goods and services rose by 0.3% in February, compared with an increase of 0.6% in January, according to the index. Economists polled by the Wall Street Journal had expected an increase of 0.4%.

Analysts said the softer-than-expected inflation gauge would give the Federal Reserve more leeway to stop its campaign of interest-rate hikes. Median projections from the Fed’s “dot plot” forecast released earlier this month suggested one more rate hike might arrive in May or June.

However, futures traders are betting that rates have already peaked and that the Fed will likely reverse course and cut rates at least a couple of times before the end of the year, according to the CME’s FedWatch tool.

Ultimately, Friday’s data “gives the Fed more flexibility,” said Kim Caughey Forrest, founder and chief investment officer of Bokeh Capital Partners.

While the PCE data showed “inflation is moving in the right direction,” it’s also a bit stale, said Callie Cox, U.S. equity strategist at eToro.

Stocks traded at session highs following the release of the final reading on U.S. consumer sentiment for March from the University of Michigan. While confidence ticked lower compared with earlier estimates, inflation expectations moderated.

Since the end of February, the U.S. economy has been roiled by a mini banking crisis that has spurred fears of a worsening credit crunch as banks continue to tighten lending standards, she said.

Looking ahead, New York Fed President John Williams will be speaking at 3:05 p.m. Eastern time.

U.S. stocks have held up relatively well this quarter, shrugging off Federal Reserve rate hikes, renewed recession fears and souring expectations for corporate profits, according to FactSet estimates.

But since hitting its highest level of the year in early February, the S&P 500 has been trading in an increasingly narrow range, leaving market analysts divided about where the market might be heading next.

“We need to see what the overall economy does,” said Caughey Forrest. “I think GDP matters, and if GDP holds up while inflation comes down, that could be good for stocks.”

The Nasdaq Composite has risen 15% since the start of the year, leaving it on track for its best quarterly gain since at least the fourth quarter of 2020, when the index rose 15.4%, according to FactSet. Beyond that, the index rose more than 30% in the quarter ending June 2020, as stocks rebounded from the March 2020 global market rout due to COVID-19.

The S&P 500, meanwhile, is on track to rise for the second month in three. The Dow is the only one of the main indexes that’s on track to book a quarterly loss — it was down 0.5% since Jan. 1 in recent trading. However, the blue-chip index has risen 2.4% so far this week, which would be its biggest such gain since Nov. 11, per FactSet.

Companies in focus

• Right-wing media platforms Rumble
  RUM,
  +8.95%
  and Digital World Acquisition
  DWAC,
  +5.51%
  traded sharply higher on the Donald Trump indictment news.

• Metropolitan Bank Holding Corp.
  MCB,
  +23.11%
  shares rallied after issuing a financial update assuring investors that it is well capitalized. The regional lender closed 27% down on Thursday.

• Palisade Bio’s
  PALI,
  +27.55%
  stock soared, continuing a Thursday rally after Maxim Group upgraded the stock from hold to buy.

• Spero Therapeutics
  SPRO,
  +2.08%
  saw sharp gains after the clinical-stage biopharmaceutical company posted fourth-quarter revenue of $47.4 million in 2022, higher than the $2.7 million in the same period of the previous year. The uplift was due to the company’s signings with GSK and Pfizer.

• Chicken Soup for the Soul Entertainment
  CSSE,
  -41.56%
  sank after the streaming-service parent company announced it would sell some stock and reported a fourth-quarter loss.

• Virgin Orbit Holdings’s
  VORB,
  -38.72%
  stock shed roughly half its value after the space-launch company said late Thursday that it would axe 675 – or 85% – of its staff and reportedly cease operations for the foreseeable future.

• Nikola Corp.
  NKLA,
  -13.21%
  slumped after the electric-vehicle maker said that it intends to sell stock at a 20% discount, for $1.12 per share.

• U.S.-listed shares of Chinese e-commerce giant JD.com
  JD,
  -0.38%
  were marginally lower after announcing late on Thursday that it intends to spin off two of its subsidiaries, following in the footsteps of Alibaba Group.