Stock market on Friday: Dow ends March higher on easing inflation, tech rally

Stocks rose Friday as Wall Street wrapped up a volatile, but winning quarter that saw more Federal Reserve rate tightening and a mini-financial panic spurred on by the collapse of Silicon Valley Bank.

The Dow closed higher Friday, notching a monthly gain, led by growth stocks including tech as signs of cooling but still-elevated inflation pushed Treasury yields lower. The Dow Jones Industrial Average added 1.26%, or 415 points, to end the month up 1.9% but end the quarter just above flat. The Nasdaq gained 1.3% to end Q1 up nearly 20%. The S&P 500 rose 1.4%.

The core personal consumption expenditures price index, which excludes food and energy and is the Feds preferred inflation gauge, increased 0.3% in February just below the 0.4% expected.

A deeper dive into the data, meanwhile, showed the core services ex-rent component increased 0.27% in February, the “best since an out-of-the-blue dip in July last year,” Pantheon Macroeconomics said.

The U.S. 10-year Treasury yield fell five basis points to 3.51%, helping growth sectors of the market, though it is expected to remain range bound.

The 10-year TSY yield remains stuck in a broad trading range,“ Janney Montgomery Scott said. ”Continue to watch 3.30% as support on the 10-year; initial resistance remains at 3.60%, then closer to 4% in our view, it added.

Tesla (NASDAQ:TSLA) was the biggest gainer among consumer stocks, rising more than 6% followed by CarMax (NYSE:KMX) and Caesars Entertainment Corporation (NASDAQ:CZR).

Tech, which is on track for a 20% rise in Q1, was lifted by a rise in Alphabet (NASDAQ:GOOGL) and Apple (NASDAQ:AAPL), while semiconductor stocks also underpinned the broader move higher.

NVIDIA Corporation (NASDAQ:NVDA) rose more than 1% adding to the swashbuckling 89% gain seen in the quarter, with the chipmaker riding high on the coattails of a strong interest in generative AI that is expected to boost its chip demand.

On the earnings front, BlackBerry's (NYSE:BB) narrower than expected loss overshadowed revenue that missed Wall Street estimates, sending the share price more than 14% higher.

ELF Beauty (NYSE:ELF) jumped more than 4% after Morgan Stanley upgraded its price target on the cosmetic company to $94 from $75, citing favorable Q1 sales data.

In other news, Virgin Orbit Holdings Inc (NASDAQ:VORB) sank 41% as it announced it would be shutting down operations and cutting about 90% of staff after attempts to secure funding failed.

The relative underperformance in the Dow Jones Industrial Average for the quarter followed pressure from regional stocks following the collapse of SVB and Signature that led to a 25% drop in the banking sector.

Despite the broader market gains, some warn that equity valuations are still historically high at a time when bonds offer attractive returns.

With the market trading at 21 times earnings, which is “historically high, you would expect the scenario would be indicative to justify that kind of valuation but you don't have any of that,” Sean O'Hara, president of Pacer ETFs, told Investing.com's Yasin Ebrahim in an interview on Friday. “The Fed is non-accommodative, inflation is still a challenge, there is banking liquidity crisis, and a potential recession coming as well as earnings revisions to the downside.”

“But the biggest difference is that investors can park their money now in [Treasuries] and make 5% without any risk,” O'Hara added