Markets enjoyed a month of strong gains following the resurgence in oil prices and reassurances from the Fed about rate hikes. The rising possibility of a production freeze and weaker-than-expected increases in crude inventories were among the factors fueling the rise in prices. Additionally, an earlier reluctant Iran has shown indications of joining talks on production controls. Moreover, the Fed has kept rates unchanged and said the number of hikes through the year is likely to decline. Fed Chair Janet Yellen also emphasized that a cautious stance will be taken while considering rate increases. Economic data has once again remained mixed in nature though GDP and employment numbers continued to improve.
March’s Performance
For the month, the S&P 500, the Dow and the Nasdaq advanced 6.7%, 7.1% and 6.8%, respectively. The S&P 500 experienced its highest percentage monthly gain since October. Benchmarks closed in the green for the month following strong gains in energy, technology and materials sector, reduced rate hike fears and upward movement in oil prices.
Oil prices increased following positive comments from ministers and officials of both OPEC and non-OPEC countries. However, the terrorist attack in Brussels curbed some of the gains in oil prices.
Separately, the Federal Open Market Committee (FOMC) decided to keep interest rates unchanged and forecast that the number of rate hikes this year will be two instead of four. Also, Fed Chair Janet Yellen’s indication that Fed should take a cautious stance before hiking interest rates last month boosted investor sentiment. Meanwhile, economic data remained mixed during the month.
For the quarter, both the S&P 500 and the Dow gained 0.8% and 1.5%, respectively. However, the Nasdaq declined 2.8% and posted its worst first quarter performance since 2009. The Nasdaq fell during the quarter after the iShares Nasdaq Biotechnology (IBB) plunged 22.9%. The oil rebound, improving U.S. economy and reduced rate hike possibilities had a positive impact on the market.
Oil Rebound Powers Market’s Gains
Crude prices have made a strong resurgence since the second half of February. This was one of the most important catalysts of the surge in markets over the month. WTI crude rose by 14% in March, while Brent crude increased 10%, its highest gain since Apr 2015. Rising possibilities of a production freeze, a weaker-than-expected rise in crude inventories and a decline in oil rig count played major roles in boosting oil prices in March.
The major oil producing companies will be meeting on Apr 17 to discuss an oil production freeze in order to boost oil prices. Meanwhile, Iran, which previously showed an unwillingness to enter into any such agreement, recently expressed interest in joining the meeting.
Moreover, the U.S. Energy Information Administration (EIA) reported on Wednesday that U.S. commercial crude oil inventories rose 2.3 million barrels to 534.8 million for the week ended Mar 25. This was lower than an increase of 2.6 million barrels reported by the American Petroleum Institute (API) a day earlier.
