Inflation Data Contributes To Rally On Wall Street

Stocks moved sharply higher over the course of the trading session on Friday, adding to the gains posted on Wednesday and Thursday. The tech-heavy Nasdaq showed a particularly strong upward move, reaching a six-month closing high.

The major averages saw further upside going into the close of trading, reaching new highs for the session. The Nasdaq surged 208.44 points or 1.7 percent to 12,221.91, the S&P 500 shot up 58.48 points or 1.4 percent to 4,109.31 and the Dow jumped 415.12 points or 1.3 percent at 33,274.15.

For the week, the Dow spiked by 3.2 percent, while the Nasdaq and the S&P 500 soared by 3.4 percent and 3.5 percent, respectively.

The Nasdaq and the S&P 500 also posted strong gains for the quarter despite continued interest rate hikes by the Federal Reserve and recent turmoil in the banking sector.

The rally on Wall Street came following the release of a Commerce Department report showing an unexpected slowdown in the annual rate of core consumer price growth.

The report said core consumer prices, which exclude food and energy prices, jumped 4.6 percent year-over-year in February.

Annual price growth remains elevated, but this represents a slowdown from the 4.7 percent year-over-year spike in January. Economists had expected the pace of growth to be unchanged.

Including food and energy prices, the annual rate of consumer price growth also slowed to 5.0 percent in February from 5.3 percent in January. The pace of overall growth was also expected to be unchanged.

The Commerce Department said consumer prices rose by 0.3 percent on a monthly basis in February following a 0.6 percent advance in January. Economists had expected prices to increase by 0.4 percent.

Core consumer prices also increased by 0.3 percent on a monthly basis in February after climbing by 0.5 percent in January. Core prices were expected to edge up by 0.2 percent.

With the inflation readings said to be preferred by the Fed, the data led to some optimism the central bank will hold off on raising interest rates at its next meeting in early May.

The Fed signaled last week that it expects just one more rate increase this year, leaving traders looking for clues about the timing of the final rate hike.

Sector News

Housing stocks showed a substantial move to the upside on the day, driving the Philadelphia Housing Sector Index up by 2.4 percent to its best closing level in almost a month.

Significant strength was also visible among networking stocks, as reflected by the 2.3 percent surge by the NYSE Arca Networking Index.

Transportation stocks also turned in a strong performance, resulting in a 2.2 percent jump by the Dow Jones Transportation Average.

Commercial real estate, software and computer hardware stocks also saw considerable strength, moving higher along with most of the other major sectors.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region moved mostly higher during trading on Friday. Japan’s Nikkei 225 Index jumped by 0.9 percent, while China’s Shanghai Composite Index rose by 0.4 percent.

The major European markets also moved to the upside on the day. While the French CAC 40 Index advanced by 0.8 percent, the German DAX Index climbed by 0.7 percent and the U.K.’s FTSE 100 Index edged up by 0.2 percent.

In the bond market, treasuries climbed firmly into positive territory over the course of the session. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, slid 5.7 basis points to 3.494 percent.

Looking Ahead

The monthly jobs report is likely to be in focus next week, although the data will be released while the markets are closed for Good Friday.

Ahead of the jobs report, traders are likely to keep an eye on reports on manufacturing and service sector activity, the U.S. trade deficit and private sector employment.

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