U.S. equities finished mixed on Friday in light trading, with the Dow Jones Industrial Average stalled in the doldrums between its 20-day and 50-day moving averages.
The Federal Reserve remains in focus, with the PCE inflation rate topping 2% for the first time in almost five years, increasing the odds of an aggressive pace of rate hikes through the end of the year. And the political headwinds remained focused on the gridlock in Washington threatening to stall any tax reform efforts.
In the end, the Dow lost 0.3%, the S&P 500 lost 0.2%, the Nasdaq Composite lost a fraction and the Russell 2000 gained 0.3%. Treasury bonds were stronger, the dollar climbed, gold gained 0.3% and crude oil added 0.5%.
But after a relatively subdued March, by many measures, stocks have worked off some of the speculative excess seen at the end of February. As a result, a number of stocks in key leading sector groups like industries, financials and technology are pushing higher.
This was helped by some dovish comments from NY Fed President Dudley, who after noting upside risks to growth and inflation last night, today discussed the recent divergence between “soft” sentiment-based economic measures and the “hard” activity-based economic data.
Yield-sensitive REITs led the way with a 0.5% gain while financials were the laggards, down 0.7%. Alcoa Corp (NYSE:AA) gained 2.7% on an upgrade from analysts at BMO Capital Markets noting a disconnect between higher aluminum prices and a lower share price has created a compelling buying opportunity. Smartphone glass maker Corning Incorporated (NYSE:GLW) fell 2% on a downgrade at Citi.
Looking ahead, next week will have a full economic calendar featuring updates on manufacturing activity, construction spending, motor vehicle sales, and international trade. The first-quarter earnings reporting season will kick off with the big banks: Bank of America Corp (NYSE:BAC) will report on April 18. According to FactSet, there has been a below average decline in earnings per share expectations as the first quarter has played out, suggesting expectations for profit growth is high.
Overall, the day marked a very quiet end to an impressive quarter: The Dow gained 4.6% while the Nasdaq climbed a whopping 9.8%, the best three-month stretch for the tech-heavy index since 2013. This also marks the sixth consecutive quarter of gains for the Dow, the longest run since 2006.
Anthony Mirhaydari is founder of the Edge (ETFs) and Edge Pro (Options) investment advisory newsletters. A two-week and four-week free trial offer has been extended to Investorplace readers. Redeem by clicking the links above.