U.S. stocks advanced as risk appetite continued to recover from turmoil in the banking sector, led by gains in technology and financial shares.

The tech-heavy Nasdaq 100 entered a bull market, rising 20 per cent from a December low. The S&P 500 powered back above 4,000, with 92 per cent of components ending higher — the first time that has happened in 2023, according to Susquehanna. Meanwhile, the Cboe Volatility index closed at the lowest in three weeks.

U.S. Treasuries were little changed and the dollar strengthened as investors digested the latest remarks by Fed officials and looked ahead to core PCE data for the clues on how the Fed’s path for interest rates might change after turbulence in the financial sector upended market expectations.

Financial stocks were hit hard by the collapse of three U.S. banks this month but were able to stage a rally Wednesday, even after a report the Federal Deposit Insurance Corp. was mulling a squeeze on big banks to help cover the almost US$23 billion in costs from the bank failures.

Wall Street strategist are struggling to predict how U.S. stocks might react in the months ahead, given the uncertainty of the Fed’s path forward. Their average year-end target for the S&P 500 has stayed at 4,050 for a third straight month in a streak of inaction not seen since 2005. 

“The Fed remains in a very difficult position (largely of its own doing),” wrote Chris Senyek of Wolfe Research in a note. “With banks stabilizing, inflation still way above target, the labor market still historically strong, and the Fed desperately needing to rebuild credibility, our sense is that the FOMC will hike by 25 basis points on May 3. However, Powell does not like to surprise markets, so this is far from a certainty.”

Fed Chair Jerome Powell pointed to Fed officials’ forecast for another quarter percentage-point hike this year when asked by lawmakers Wednesday when the central bank will stop raising interest rates, Bloomberg News reported. However, traders are pricing in roughly 50-50 odds that move will occur at the Fed’s next meeting in May.

With easing concerns about the safety of bank deposits, Peter Tchir of Academy Securities said analysts are turning their attention back to examining the economy and prepping for upcoming earnings.

In the latest batch of corporate results, Lululemon Athletica Inc. jumped after its earnings and outlook topped estimates. A profit drop at Jefferies Financial Group Inc. could spell trouble for other bank earnings. Meanwhile, weaker homebuying demand from a March survey of real estate agents could be a potential early sign buyers are unnerved by the turmoil in the banking sector. 

Gold fell, Bitcoin extended its climb to US$28,500, and oil erased an earlier gain from a decline in U.S. crude stockpiles.

Key events this week:

• Eurozone economic confidence, consumer confidence, Thursday
• U.S. GDP, initial jobless claims, Thursday
• Boston Fed President Susan Collins and Richmond Fed President Thomas Barkin speaks at event. Treasury Secretary Janet Yellen also speaks, Thursday
• China PMI, Friday
• Eurozone CPI, unemployment, Friday
• U.S. consumer income, PCE deflator, University of Michigan consumer sentiment, Friday
• ECB President Christine Lagarde speaks, Friday
• New York Fed President John Williams speaks, Friday

Some of the main moves in markets:

Stocks

• The S&P 500 rose 1.4 per cent as of 4 p.m. New York time
• The Nasdaq 100 rose 1.9 per cent
• The Dow Jones Industrial Average rose 1 per cent
• The MSCI World index rose 0.2 per cent

Currencies

• The Bloomberg Dollar Spot Index rose 0.2 per cent
• The euro was little changed at US$1.0840
• The British pound fell 0.2 per cent to US$1.2313
• The Japanese yen fell 1.5 per cent to 132.83 per dollar

Cryptocurrencies

• Bitcoin rose 4 per cent to US$28,408.45
• Ether rose 1.9 per cent to US$1,808.65

Bonds

• The yield on 10-year Treasuries was little changed at 3.57 per cent
• Germany’s 10-year yield advanced four basis points to 2.33 per cent
• Britain’s 10-year yield advanced two basis points to 3.47 per cent

Commodities

• West Texas Intermediate crude fell 0.3 per cent to US$72.97 a barrel
• Gold futures fell 0.4 per cent to US$1,982 an ounce