WEEKLY SUMMARY: Stocks shook off latest bank fears
US equity returns varied widely over the week as banking industry and recession worries weighed on value stocks and small-caps, while large-cap growth stocks benefited from falling interest rates. Financials underperformed for a third consecutive week while the average stock remained significantly weaker than the S&P 500 Index’s return suggests. As was widely expected, the Fed raised rates by 25 basis points and the “dot plot” indicated that officials expected to stop raising rates after one more hike in May. References to ongoing rate increases were also removed from the official statement. On the macro side, the S&P Global’s Composite Index of both current services and manufacturing activity jumped from 50.1 to 53.3, indicating the fastest pace of private sector growth since last May, with new orders turning higher for the first time since September. The upside data surprises appeared to lift the yield on the benchmark 10-year U.S. Treasury note from a six-month intraday low on Friday morning, but the yield still finished modestly lower for the week. Shares in Europe gained ground, despite weakness in bank stocks. Chinese stocks rose on hopes that the country’s central bank will maintain an accommodative stance amid the global banking turmoil. Despite gold's appeal, it ended the week basically unchanged, rebounding from the early week losses and topping $2000 twice intraweek. WTI oil could not hold above $70. Cryptos were volatile.
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Stocks were volatile this week with continued rotation in market leadership to small-cap and value shares. U.S. markets initially rallied to new-highs but faded toward week's end, led by weakness in the tech sector. The S&P 500 and Nasdaq closed lower on the week, while the Dow posted a solid gain. Value stocks outpaced growth stocks by 477 basis, as measured by Russell indexes—the largest divergence since March 2023. The week was also notable for a widespread global disruption to computer systems early Friday due to an error in a vendor’s security update to some users of the Microsoft operating system.