Wall Street puts Fed aside amid quarter-end battle

Wall Street traders took Jerome Powell’s hawkish signals in stride, with bond yields dropping. Stocks fluctuated in one of the last few days of a quarter that saw a blistering artificial-intelligence rally.

A slide in chipmakers offset gains in other technology groups, with Nvidia slumping on concerns over an eventual U.S. tightening in chip-export restrictions. Giants Tesla and Google’s parent Alphabet gained. Swap market bets on further tightening barely budged after the Federal Reserve’s chief played down the odds of a recession while signaling officials could hike for two straight meetings, if needed.

With the Fed set to disclose the results its stress test Wednesday, traders took a more cautious stance on the financial industry. While analysts don’t expect any huge negative surprises, a gauge of banks fell. Several executives have recently tempered shareholder expectations regarding dividend increases and stock buybacks – which had been the focus of investors in previous years.

“Quarter-end positioning could drive volatility through the end of the week,” said Mark Hackett, chief of investment research at Nationwide. “Investors are increasingly pricing in a soft landing. A reacceleration in earnings will be required to drive the next phase of the market move.”

Mutual funds bought stocks for the first time since February in the past month as fear of missing out outweighed economic concerns, according to Barclays strategists.

“FOMO has seen frustrated bears turning into reluctant bulls,” the strategists led by Emmanuel Cau wrote. “It is noteworthy that equities were being bought despite the negative economic and market outlook” of most investors.

Meantime, BlackRock introduced a bullish call on AI amid a rally that’s putting the Nasdaq 100 on pace for its best-ever first half of a year.

“A mega force like AI can be a big driver of returns even when the macro environment is not your friend,” wrote strategists including Jean Boivin, Wei Li and Vivek Paul. “A longer-term investor can look past some of the near-term pain.”

In other corporate news, General Mills fell after the food producer gave a guidance that suggests price hikes will no longer make up for slowing sales as inflation-weary shoppers cut back on spending. Netflix gained as Oppenheimer raised its price target.

Elsewhere, oil rose after a U.S. government report showed nationwide stockpiles fell the most in two months, outpacing market expectations.