U.S. stocks surge on tech optimism, regional bank shares decline

U.S. stocks continued to climb on Thursday as technology-related shares extended their strong performance. However, regional U.S. bank shares declined as the Biden administration put forward stricter measures to decrease risk in the banking industry.

The Dow Jones Industrial Average increased by 0.43 percent to 32,859.03. Meanwhile, the S&P 500 rose 0.57 percent to 4,050.83, and the Nasdaq Composite went up by 0.73 percent to 12,013.47.

More stocks rose than fell, with a ratio of 2.70-to-1. On Nasdaq, the ratio was 1.18-to-1 in favor of rising stocks. The S&P 500 had eight stocks reach their highest price in a year and none hit a new low, while the tech-leaning Nasdaq saw 63 new highs as well as 151 new lows.

Previously on Wednesday, the S&P 500 technology index increased by 1.1 percent, giving the S&P 500 its biggest increase. At the same time, the Philadelphia semiconductor index reached its highest point in almost a year.

These gains are mainly due to optimism that the decline in chip sales has ended. Regional bank shares, on the other hand, decreased after the Biden administration proposed new rules to strengthen mid-sized banks without going to Congress.

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The KBW regional bank index decreased by two percent, and the S&P 500 financial index was down by 0.3 percent, making it the only S&P 500 sector that showed negative results for the day.

“Tech is probably the furthest sector removed from financials, so there has been a rotation away from financials.”

Jack Ablin, chief investment officer at Cresset Capital in Chicago

Earlier this month, the collapse of two regional U.S. banks created fears of a wider financial crisis.

As the year’s first quarter draws to a close, the technology and communication sectors have seen gains of around 20 percent and 18 percent, respectively, making them the leading sectors. The Nasdaq is set to achieve its largest percentage gain in a quarter since the end of 2020.

Investors were also anticipating the release of the February personal consumption expenditures (PCE) price index due Friday after seeing a rapid increase in consumer spending from the January figures.

Three Federal Reserve officials said Thursday that they were considering raising interest rates to combat inflation. Two officials mentioned that issues in the banking sector could also affect the economy negatively.

"Inflation remains too high, and recent indicators reinforce my view that there is more work to do to bring inflation down to the 2 percent target associated with price stability," Federal Reserve Bank of Boston leader Susan Collins said at a gathering of the National Association for Business Economics.

Collins also mentioned that “the central bank is likely close to done on rate rises” after the recent quarter-percentage-point hike.

Market overview

According to Fed funds futures traders, there is a 55 percent chance of a 25-basis-point rate increase at the Federal Reserve’s meeting on May 2-3.

Recent data reveal that the number of people filing for unemployment benefits increased more than anticipated last week, signaling a slowdown in the job market.

The economic growth fourth-quarter GDP was slightly lower than previously estimated — at 2.6 percent instead of 2.7 percent. This could suggest that the Fed may implement a less strict monetary policy.

Meanwhile, the Commerce Department has released a report indicating that the economy grew at a healthy rate during the fourth quarter. However, a significant portion of the increase in output can be attributed to inventory accumulation.