Wall Street Extends Gains on Positive Economic Indicators and Hopes of an End to Fed's Rate-Tightening Cycle 

Wall Street closed higher on Friday, the final day of March and the first quarter, extending gains for the third consecutive session. The Dow surged more than 400 points, while the S&P 500 and Nasdaq rose 1.4% and 1.7%, respectively. The strong performance was attributed to positive economic indicators and hopes of an end to the Fed's rate-tightening cycle.  

One of the key economic indicators that contributed to the positive market sentiment was the US core personal consumption expenditures price index, which came in below expectations at 4.6%. This signaled that inflation may have peaked and raised speculation that the Fed's rate-tightening cycle could soon come to an end. However, some Fed policymakers still believe that more monetary tightening will be necessary to control inflation, despite the recent turmoil in the banking sector. The ongoing banking crisis is also expected to play a role in the Fed's rate decisions. As banks face increased scrutiny and regulation, there may be greater pressure on the Fed to maintain a tight monetary policy to avoid any potential financial instability. 

The tech sector emerged as the top performer in the first quarter, with the Nasdaq jumping an impressive 17.6%. The Dow and S&P 500 also saw gains of 0.4% and 7.4%, respectively. The strong performance of tech shares was largely driven by the continued growth of the digital economy and the increasing reliance on technology amid the COVID-19 pandemic. 

The positive market performance in March and the first quarter of 2022 is a welcome sign of economic recovery and stability. However, there are still concerns about inflation and the ongoing banking crisis, which will likely impact the Fed's future rate decisions and the overall market outlook. Investors will need to remain vigilant and closely monitor economic indicators and policy decisions to make informed investment decisions.

Chart Comments:

1. The RSI indicator on a 4 hourly of S&P 500 has crossed above 70 points and the signal line is still moving upwards while making a 3 white soldier pattern on candles over the past 3 sessions. This suggests that the S&P 500 is in a strong bullish trend, as the RSI has moved into overbought territory. 
2. The fact that the RSI has crossed above the 70-point level indicates that the stock is in overbought territory, which means that it may be due for a correction soon. 
3. The 3 white soldier pattern is a bullish candlestick pattern that indicates a strong uptrend, where three consecutive long white candles appear on the chart. This pattern is often seen as a sign of bullish market sentiment and can suggest that there is strong buying pressure in the market. 

Week Ahead March 27^th

The upcoming week is expected to be bustling in the US as nonfarm payrolls, JOLTS job openings, ISM services and manufacturing PMI, and external trade data will be in the spotlight. In addition, inflation rates for South Korea, Switzerland, Mexico, Philippines, Indonesia, and Turkey will be unveiled, while central banks in India, Australia, New Zealand, Poland, and Israel will determine their monetary policy. Finally, PMI figures will reveal the status of the manufacturing sector in China, India, Russia, South Korea, Canada, Spain, and Italy. 

XAU/USD – Gold Holds Steady at $1,980 an Ounce, Set to Gain Over 8% in March as Investors Bet on Near-Peak Interest Rates

In the last week, gold steadied around $1,980 an ounce on Friday but today it is trading at $1,960, indicating a 1% decline. However, gold had a successful month of March, with gains of over 8%, as investors believed that interest rates have likely reached near their peak in this tightening cycle. This belief was reinforced by the US Federal Reserve's expected 25 basis point rate hike at its March meeting, along with hints of just one more rate increase.  

The recent banking turmoil that started with the collapse of two regional lenders in the US also spurred safe-haven demand for gold this month. This trend is expected to continue as traders look ahead to core US PCE data for clues on the Fed’s next move, as well as remarks from several Fed officials. It is essential to note that gold is a traditional safe-haven asset, and investors tend to buy it during times of economic uncertainty and financial instability. 

As we know, gold has been a stable investment for centuries and has recently seen a rise in value due to global inflationary pressures easing and major central banks working to avoid a banking crisis. The recent banking turmoil has also spurred safe-haven demand for gold, making it an attractive investment option for traders. As the market continues to watch for clues on the Fed’s next move, gold remains an asset to watch closely. 

On the monetary policy front, the US Federal Reserve raised interest rates by 25 basis points at its March meeting, as expected, and indicated that there would only be one more rate hike. Currently, the money markets are pricing in a 40% chance that the central bank will pause its rate hikes in May, with rate cuts expected by the end of the year. Traders are now anticipating the release of core US PCE data for indications of the Fed's next move, as well as statements from several Fed officials.