A stellar quarter for stocks ended on a positive note on speculation the Federal Reserve will be able to achieve a soft landing that will keep powering Corporate America.

Wall Street traders sent the S&P 500 to its 22nd record this year after data showed the economy is in good shape, offsetting the latest Fedspeak that reinforced bets officials will be in no rush to cut rates. A US$4 trillion surge in U.S. equity values in just three months has startled doomsayers, while leaving a host of strategists scrambling to update their 2024 targets.

“We think the market’s view of where economic fundamentals are heading, rather than any one economist’s or strategist’s view, is what ultimately drives stock market pricing,” said Lori Calvasina at RBC Capital Markets.

Stocks closed higher after spending most of the session struggling for direction, with investors digesting Fed Governor Christopher Waller’s remarks that he’d like to see “at least a couple months of better inflation data” before slashing rates. Traders also remained a reluctant to make any huge bets ahead of the Fed’s preferred inflation gauge and Jerome Powell’s remarks Friday — when markets will be closed.

The S&P 500 topped 5,250, ending with a quarterly rally of over 10 per cent. The equity benchmark has only seen double-digit gains for two quarters in a row in five instances since 1950, according to data compiled by Bloomberg. 

Two-year yields, which are more sensitive to imminent Fed moves, climbed five basis points to 4.62 per cent in a shortened session ahead of the holiday. The dollar extended its quarterly advance.

“Right or wrong, expectations for a June rate cut probably won’t shift unless inflation continues to rise and the labor market appears to be a major contributor to the increase,” said Chris Larkin at E*Trade from Morgan Stanley.

In economic data, the government’s two main measures of activity — gross domestic product and consumer spending — posted strong advances at the end of last year. Consumer sentiment rose markedly toward the end of March, supported by strong stock-market gains and expectations that inflation will continue to ease.

To Chris Zaccarelli at Independent Advisor Alliance, a solid economy — driven by a resilient consumer — sets the table for another strong earnings season, which will kick off next month.

“For those that are still holding onto the idea that the much-forecasted 2023 recession is right around the corner, they’ve missed an excellent 15 (if not 17) months in the stock market,” Zaccarelli noted.

The S&P 500 will end the year at 5,300 as the consensus real U.S. GDP forecast has climbed in a positive sign for stocks, according to RBC Capital Markets’ Calvasina, who raised her target from 5,150.

The S&P 500 is blowing past milestones this year, even as the rally leads some to worry about the market running too hot. But now a technical indicator that has an “undefeated” record suggests the momentum isn’t going to fade any time soon.

The relative strength index of the benchmark gauge — which measures price momentum — has closed above a value of 50 for 100 straight trading sessions as of Wednesday’s close, data compiled by SentimenTrader showed. After a similar show of strength in its price momentum, the S&P 500 was higher every time over the ensuing two, three, six, and twelve months periods, the analysis found.

“For now, do not fight the trend — but continue to keep at least one eye on the exits as inflation remains stubborn, macro uncertainty remains elevated, and equity markets remain stretched (overbought) heading into a potentially volatile election season,” said Dan Wantrobski at Janney Montgomery Scott.

The valuation of the equal-weighted S&P 500 has increased to a price-to-earnings ratio of 17 — but the index has shown in the past that it can continue to rise even when trading above fair value, according to Goldman Sachs Group Inc. strategists led by Ryan Hammond.

“For investors concerned about overvaluation or risks to the economic outlook, our options strategists note that downside protection appears attractively priced,” the strategists wrote.

Since World War II, two straight quarters of double-digit percentage gains would be followed by some weakness in the following month — with the gauge climbing by an average of 12.27 per cent one year later, according to Bespoke Investment Group.

“While in the near term it wouldn’t surprise us if equity markets pulled back, history would suggest that it’s too soon to fade equities,” said Ryan Grabinski at Strategas Securities.

Grabinski looked back at previous five-month periods where the S&P 500 was also up about 27 per cent. Of the 130 observations, there was just one that resulted in a negative return 12 months later.

Corporate Highlights:

• Apple Inc.’s overseas suppliers have ramped up production of the company’s long-anticipated new iPads and a launch is planned for early May, according to people with knowledge of the matter.
• Home Depot Inc. told investors it expects to take on $12.5 billion of debt to help fund its planned purchase of building-products distributor SRS Distribution Inc.
• Walgreens Boots Alliance Inc. narrowed its fiscal 2024 guidance citing a challenging retail environment, including reduced consumer spending.
• B. Riley Financial Inc., the boutique investment bank facing questions about its dealings with a former business partner, gained extra time to supply missing financial data to its lenders.
• Palantir Technologies Inc. was cut to sell at Monness, Crespi, Hardt & Co., which cited  “egregiously rich” valuation.
• Estee Lauder Cos. was raised to buy at Bank of America Corp., which said the company’s earnings have now bottomed.
• Country Garden Holdings Co., one of China’s biggest property developers, warned it will miss a deadline for reporting annual results, further complicating plans to restructure its debt following a default last year.

Key events this week:

• Good Friday. Exchanges closed in U.S. and many other countries in observance of holiday. U.S. federal government is open.
• U.S. personal income and spending, PCE deflator, Friday
• San Francisco Fed President Mary Daly speaks, Friday
• Fed Chair Jerome Powell speaks, Friday

Some of the main moves in markets:

Stocks

• The S&P 500 rose 0.1 per cent as of 4 p.m. New York time
• The Nasdaq 100 fell 0.1 per cent
• The Dow Jones Industrial Average rose 0.1 per cent
• The MSCI World index was little changed

Currencies

• The Bloomberg Dollar Spot Index rose 0.1 per cent
• The euro fell 0.4 per cent to $1.0788
• The British pound fell 0.2 per cent to $1.2621
• The Japanese yen was little changed at 151.39 per dollar

Cryptocurrencies

• Bitcoin rose 2.9 per cent to $70,872.76
• Ether rose 1.6 per cent to $3,565.65

Bonds

• The yield on 10-year Treasuries advanced one basis point to 4.20 per cent
• Germany’s 10-year yield was little changed at 2.30 per cent
• Britain’s 10-year yield was little changed at 3.93 per cent

Commodities

• West Texas Intermediate crude rose 2 per cent to $82.99 a barrel
• Spot gold rose 1.2 per cent to $2,221.19 an ounce