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Stocks Keep Climbing Thursday          03/30 09:08

   Stocks are rising again on Thursday as a bit more fear evaporates from Wall 

   NEW YORK (AP) -- Stocks are rising again on Thursday as a bit more fear 
evaporates from Wall Street.

   The S&P 500 was 0.6% higher in early trading. It's on pace for its fifth 
gain in the last six days, and its recent roll has it up for the month after 
struggling in earlier weeks on worries about whether the banking system was 
cracking under the weight of higher interest rates.

   The Dow Jones Industrial Average was up 152 points, or 0.5%, at 32,870, as 
of 9:40 a.m. Eastern time, while the Nasdaq composite was 0.7% higher.

   Forceful actions by regulators worldwide have helped build confidence that 
the current trouble for banks won't torpedo the economy like the 2008 financial 
crisis did. Traders have also begun betting heavily that the Federal Reserve 
will have to cut interest rates soon. Such cuts could offer huge relief after a 
year of relentless hikes to rates, and they also tend to act like steroids for 

   To be sure, all the recent ebullience has some professionals on Wall Street 

   "Markets are pricing the best of both worlds: a recession that brings 
inflation down rapidly and keeps rates low, yet one where corporate earnings do 
not fall sharply," according to analysts at Barclays led by Ajay Rajadhyaksha, 
global chairman of research.

   They are skeptical and think both bonds and U.S. stocks look too expensive.

   Since Silicon Valley Bank earlier this month became history's second-biggest 
U.S. bank failure, Treasury yields in the bond market have tumbled as traders 
built bets the Federal Reserve would have to take it easier on interest rates.

   The Fed has pulled its key overnight rate to a range of 4.75% to 5%, up from 
virtually zero at the start of last year, to drive down inflation. High rates 
can do that, but only by taking a blunt hammer to the entire economy. They also 
drag down prices for stocks and other investments.

   The bet on Wall Street has been that the Fed may cut rates as soon as this 
summer, to release some of the pressure built up on the economy and banks. That 
has caused the price to soar and the yield to tumble for the two-year Treasury, 
which tends to move on expectations for Fed action.

   Its yield plunged from above 5% earlier this month, when it was at its 
highest level since 2007, back below 3.60% last week. That's a massive move for 
the bond market. It rose Thursday to 4.15% from 4.11% late Wednesday.

   Expectations for easier rates in turn have helped to buoy the Big Tech 
stocks that dominate the S&P 500 and other indexes. That's because tech and 
high-growth stocks are seen as some of the biggest beneficiaries of low rates.

   But many professionals on Wall Street are saying the Fed would likely cut 
rates only if a more serious recession for the economy were on the way, one 
that would pull down corporate earnings more sharply than what's already 

   The Fed has indicated it plans to raise rates one more time before holding 
steady through the end of this year. While it's acknowledged that the turmoil 
for banks could almost act like a rate hike on its own, inflation is still too 
high for comfort.

   "In sharp recessions -- which seems to us the only way to justify bond 
market pricing, given how high US inflation is -- corporate earnings easily 
drop 30-35%," Rajadhyaksha and his Barclays colleagues wrote in a report. They 
added that Big Tech stocks would not be immune from such a downturn.

   Nevertheless, the increasingly dominant force on Wall Street seems to be 

   A measure of nervousness among stock investors on Wall Street on Thursday 
touched its lowest level since before a mad dash by Silicon Valley Bank 
customers earlier this month caused its failure and sparked the harsher 
scrutiny on banks globally.

   Almost all of the financial stocks in the S&P 500 rose, as well as some of 
the banks recently seen as most at risk of seeing an exodus of depositors 
similar to Silicon Valley Bank's.

   A report on Thursday showed that slightly more U.S. workers applied for 
unemployment benefits last week than expected. That could be a sign of 
increased layoffs, but the number still remains very low compared with history.

   In a separate report, the government revised down its estimate for how much 
the U.S. economy grew during the last three months of 2022. But it also still 
showed growth.

   "Today's data may have some investors more willing to see the light at the 
end of the tunnel for rate hikes but remember a multitude of data will be 
released before the Fed's next decision," said Mike Loewengart, head of model 
portfolio construction at Morgan Stanley Global Investment Office.

   On Friday, the Commerce Department issues its February report on consumer 
spending. That's the heart of the U.S. economy. Perhaps more importantly, the 
report will also give the latest update on the measure of inflation that Fed 
policymakers prefer to use.

   "And we have just seen how quickly the market can be disrupted by unplanned 
turmoil," Loewengart said, "so investors should remain alert."

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