It was a choppy ride but US equities are poised to end the first quarter of the year higher as strong gains from the healthcare and technology sectors help offset the retreat in energy stocks.
Although the S&P 500 fell 0.2 per cent to 2,082.36 on Tuesday, the large-cap index is still on track for a 1 per cent gain for the first three months of the year.
The advance marks the index’s ninth straight quarter of gains and its longest winning streak since 1998.
The Dow Jones Industrial Average and the technology-heavy Nasdaq Composite are also set to advance 0.4 per cent and 4.1 per cent, respectively, for the quarter, despite dipping lower on Tuesday.
Healthcare stocks were this quarter’s big winners thanks to the flurry of deals that has helped propel the S&P 500 healthcare index 7.1 per cent higher.
The consumer discretionary and consumer staples sectors have also outperformed with the rebound in US consumer spending boosting retailers and dealmaking between major food producers turbocharging shares of companies such as Kraft.
But with the dollar bull run showing little sign of abating and valuations for many stocks running at multiyear highs, US stocks could see more corrective pauses in the months ahead.
Investors are braced for a sharp slowdown in first-quarter earnings from S&P 500 companies, which start reporting in the middle of April.
According to Frost Investment Advisers, which manages $10bn, earnings are expected to drop 4.6 per cent in the quarter from a year earlier as the strong dollar — up 9 per cent this year — takes a bite out of companies’ overseas earnings and profits from major energy groups continue to slide.
“We continue to see US equities underperforming as we approach Fed tightening,” said analysts at Barclays.
In the meantime, investors looking for more clues on the timing of the first US interest rate increase had a couple more economic data points to pore over on Tuesday.
The latest reading from the S&P/Case-Shiller index showed that home prices in the 20 largest US cities were up 4.6 per cent in January from a year earlier, the biggest gain since September.
Elsewhere, a report on US consumer confidence showed a rebound in March that topped expectations as Americans grew more optimistic about future incomes and job prospects.
A consumer sentiment index from the Conference Board rose to 101.3 from an upwardly revised 98.8 in February, tracking less than 3 points below a seven-and-a-half-year high hit in January.
Among the major movers on Tuesday, Charter Communications was up 7.6 per cent to $197.03 after it struck a deal to buy US cable company Bright House Networks for $10.4bn.
CBRE Group, the world’s largest commercial real estate services company by revenue, jumped 5.5 per cent to $38.40 on news that it has agreed to acquire Johnson Controls’ facilities management business for $1.47bn.