[New York Stock Market] Tech Stocks Rally on Investor Sentiment Recovery... Nasdaq Up 1.79%

Major indices on the U.S. New York Stock Exchange closed higher on the 29th (local time) as concerns over the banking sector crisis eased and investor sentiment recovered. In particular, buying momentum centered on technology stocks led the overall market.

On the day at the New York Stock Exchange (NYSE), the Dow Jones Industrial Average closed at 32,717.60, up 323.35 points (1.0%) from the previous session. The large-cap S&P 500 index rose 56.54 points (1.42%) to 4,027.81, while the tech-heavy Nasdaq index gained 210.16 points (1.79%) to close at 11,926.24.

All 11 sectors in the S&P 500 showed gains. Notably, rallies in technology and real estate-related stocks stood out. Big tech leaders such as Amazon (+3.10%), Tesla (+2.48%), Meta Platforms (+2.33%), Apple (+1.98%), and Microsoft (+1.92%) all rose from the previous session. Micron, despite releasing quarterly results after the previous day's close that fell short of market expectations, surged over 7% on forecasts of improved performance due to inventory reductions. This boosted semiconductor sector stocks including Nvidia (+2.17%), Qualcomm (+3.09%), Intel (+7.61%), and AMD (+1.62%).

With easing concerns over the banking sector crisis, bank stocks also rose. First Republic Bank, identified as the "second Silicon Valley Bank (SVB)," closed up 5.63%. The SPDR S&P Regional Banking ETF showed gains in the 1% range. UBS Group jumped more than 4% following news that it rehired former CEO Sergio Ermotti ahead of its acquisition of Credit Suisse (CS). Ermotti, who led UBS from 2011 to 2020, is regarded as a crisis management expert, having successfully executed rigorous restructuring in the past. Additionally, Lululemon soared nearly 13% after releasing optimistic earnings guidance for the year.

Besides the easing of banking sector concerns, recent bargain hunting following price declines and the announcement of a major restructuring by Alibaba Group, China's largest e-commerce company, also helped boost investor sentiment. Ed Yardeni, head of Yardeni Research, noted that due to the recent SVB incident lowering stock prices, "it is a good time to invest in oversold sectors." The Chicago Board Options Exchange (CBOE) Volatility Index (VIX), known as Wall Street's "fear gauge," traded around 19, about 4% lower than the previous session. The Wall Street Journal (WSJ) commented, "The fear index had surpassed 30 a few weeks ago," and added, "Investors appear to be betting that the banking crisis is over."

[Image source=Reuters Yonhap News]

Investors seem eager to gain hints about the Federal Reserve's (Fed) interest rate path through the remaining key events this week. Michael Barr, Fed Vice Chair for Supervision, testified before the House following his appearance at the Senate Banking Committee hearing the day before, addressing the Silicon Valley Bank (SVB) collapse. Barr stated, "Every time there is a bank failure like this, bank management clearly failed, and supervision also failed," confirming that the regulatory system is under comprehensive review. He had previously cited management failures as the cause of SVB's collapse and indicated that "strengthening capital and liquidity regulations" is under consideration. The Federal Deposit Insurance Corporation (FDIC) confirmed it is exploring options to sell Signet, the real-time payment network operated by the closed Signature Bank.

This week, economic indicators such as the February Personal Consumption Expenditures (PCE) price index, a preferred inflation gauge of the Fed, and the final estimate of U.S. fourth-quarter GDP growth will be released. The PCE price index is expected to rise 4.7% year-over-year and 0.4% month-over-month. Speeches from Fed officials including Lisa Cook, John Williams (President of the New York Fed), Susan Collins (President of the Boston Fed), and Thomas Barkin (President of the Richmond Fed) are also scheduled.

According to the Chicago Mercantile Exchange (CME) FedWatch tool, as of the afternoon, federal funds futures markets reflect over a 58% probability that the Fed will hold rates steady at the May FOMC meeting. The chance of a 0.25 percentage point rate hike (a "baby step") stands at 41.2%. Futures markets are also betting on the possibility that the Fed will begin cutting rates in July or September. Chris Senyek of Wolfe Research commented, "The Fed is still in a difficult position," noting, "Inflation remains high, the labor market is strong, and the Fed needs to regain credibility." He added, "Fed Chair Jerome Powell does not like to surprise the market," supporting the May baby step.

In the New York bond market on the same day, Treasury yields remained near previous levels. The 2-year Treasury yield, sensitive to monetary policy, hovered around 4.09%, while the 10-year yield was near 3.57%. Recently, Treasury yields have risen as concerns over the banking sector crisis have eased. Art Hogan, Chief Market Strategist at B. Riley Wealth Management, said, "The important thing is that Treasury yields have temporarily stabilized," assessing that the bond market is supporting the stock market.

On the same day, BCA Research dismissed concerns that commercial real estate issues could trigger the next banking crisis. They explained that with remote work declining and occupancy rates rising, borrowers are currently able to repay debts, and losses are mostly on paper, meaning banks can maintain positions unless forced liquidations occur. BCA advised, "Investors should monitor the commercial real estate market," but also stated, "There is no need to be alarmed at this time."

Pending home sales in the U.S. for February increased 0.8% from the previous month but were down 21.1% compared to a year ago.

Crude oil prices fell for the first time in three trading days due to profit-taking. On the New York Mercantile Exchange, May West Texas Intermediate (WTI) crude closed at $72.97 per barrel, down 23 cents (0.31%) from the previous session.