US Stocks Add to Weekly Gains as Sentiment Calms: Markets Wrap

(Bloomberg) -- US stocks continued to advance in afternoon trading, adding to weekly gains for major indexes driven by speculation that the Federal Reserve won’t raise interest rates beyond peak levels already priced in by markets.

The S&P 500 and the Nasdaq 100 rose more than 1%, pushing higher even after data earlier in the session highlighted resilience in the service sector. Sentiment remained upbeat as some investors deduced that data have come in strong because the impact of the Fed’s hikes on the economy tends to be delayed. 

The selloff in bonds paused on Friday and Treasuries rallied, with the 10-year yield declining further to hover around 3.97%. A dollar index fell and is poised to snap four consecutive weeks of gains. 

Data this week showed continued labor-market resilience in the US, supporting the case for the Fed to keep tightening policy, a theme that had pushed almost every major asset into the red in February. But sentiment improved after Atlanta Fed’s Raphael Bostic said on Thursday that the central bank could possibly pause its rate hikes sometime this summer. Investors deciphered his comments as dovish, even though Bostic and his colleagues said they’d continue to be data dependent and a Fed report on Friday emphasized that further rate increases are in store.

Traders are still optimistic because even the most hawkish Fed officials haven’t suggested that rates could need to go beyond levels already baked in, said Priya Misra, global head of rates strategy at TD Securities. Swap markets have been pricing a peak Fed policy rate of 5.5% in September. 

“I think they stay at 5.5% and we have to see how data evolves in the second quarter,” she said on Bloomberg Television.

Misra also added that robust data doesn’t mean the Fed’s persistent tightening isn’t working.

“It takes a long time,” she said. “Policy only turned restrictive last year.”

Read: Traders Hedge Risk of Half-Point Hike at Fed’s Next Meeting

Risk sentiment also received a boost on Friday from forecast-beating factory data from China. Oil extended gains for a third straight day, with confidence in China’s robust rebound supporting prices. 

Some of the main moves in markets:

Stocks

• The S&P 500 rose 1.3% as of 1:44 p.m. New York time
• The Nasdaq 100 rose 1.7%
• The Dow Jones Industrial Average rose 0.8%
• The MSCI World index rose 0.4%

Currencies

• The Bloomberg Dollar Spot Index fell 0.4%
• The euro rose 0.2% to $1.0623
• The British pound rose 0.6% to $1.2018
• The Japanese yen rose 0.5% to 136.06 per dollar

Cryptocurrencies

• Bitcoin fell 4.6% to $22,336.65
• Ether fell 4.9% to $1,560.13

Bonds

• The yield on 10-year Treasuries declined nine basis points to 3.97%
• Germany’s 10-year yield declined four basis points to 2.72%
• Britain’s 10-year yield declined three basis points to 3.85%

Commodities

• West Texas Intermediate crude rose 1.8% to $79.57 a barrel
• Gold futures rose 0.7% to $1,854.10 an ounce

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