US stocks extended a rally on investor bets that a peak in interest rates is near and bank turmoil will ease further. Treasuries were little changed and the dollar weakened in the risk-on mood.
(Bloomberg) — US stocks extended a rally on investor bets that a peak in interest rates is near and bank turmoil will ease further. Treasuries were little changed and the dollar weakened in the risk-on mood.
The S&P 500 advanced 0.6%, lead higher by gains in technology. The tech-heavy Nasdaq 100 gained 0.9%, pushing the index deeper into a bull market. Meanwhile, the Stoxx Europe 600 Index rose 1% to a three-week high led by gains in retail.
The moves come as the worst of the bank selloff recedes, even with a lack of fresh news on the direction of interest rates. Applications for US unemployment benefits ticked up for the first time in three weeks, suggesting some softening in what’s still a robust labor market. Next, investors will turn their attention to Friday’s inflation data for insights on the Federal Reserve’s policy moves. Investors expect US rates to sit around 4.3% by the end of the year, around 70 basis points lower than the current level.
“Net, initial and continuing jobless claims rose last week. But layoffs remain at historically low levels, not yet picking up in response to Fed rate hikes,” said Rubeela Farooqi, chief US economist at High Frequency Economics. “We expect a softening in demand for workers as the effects of restrictive monetary policy spread more broadly” and as tighter credit conditions weigh on lending activity, which “is likely to affect business decisions about hiring.”
Treasury yields were steady at 3.56%, following muted trading on Wednesday when the 10-year benchmark moved by the smallest margin in more than a month. The yield is down from a March high of 4.09% before the collapse of three US banks threw off market expectations for interest rates.
“Markets will keep a distant eye on the other regional banks that experienced duress, but barring a flare up, activity is returning to business as usual,” wrote Michael O’Rourke, chief market strategist at JonesTrading. “That means the focus will turn back to inflation metrics, especially over the next couple of days.”
In Wednesday’s trading, the Nasdaq 100 rose 1.9%, which cemented its 20% rebound from a low in December. The gauge, which includes Apple Inc., Microsoft Corp., and Amazon.com Inc., closed at the highest level since August in a sign investors are preparing for the Fed to end its interest-rate hiking cycle and potentially pivot to looser policy later this year.
Elsewhere in markets, oil rebounded after its first drop in three sessions. Gold drifted and Bitcoin traded around $28,500.
Key events this week:
- Boston Fed President Susan Collins and Richmond Fed President Thomas Barkin speaks at event. Treasury Secretary Janet Yellen also speaks, Thursday
- China PMI, Friday
- Eurozone CPI, unemployment, Friday
- US consumer income, PCE deflator, University of Michigan consumer sentiment, Friday
- ECB President Christine Lagarde speaks, Friday
- New York Fed President John Williams speaks, Friday
Some of the main moves in markets:
Stocks
- The S&P 500 rose 0.6% as of 10:58 a.m. New York time
- The Nasdaq 100 rose 0.9%
- The Dow Jones Industrial Average rose 0.3%
- The Stoxx Europe 600 rose 1%
- The MSCI World index rose 1.2%
Currencies
- The Bloomberg Dollar Spot Index fell 0.4%
- The euro rose 0.7% to $1.0916
- The British pound rose 0.5% to $1.2381
- The Japanese yen was little changed at 132.76 per dollar
Cryptocurrencies
- Bitcoin rose 0.2% to $28,449.49
- Ether fell 0.4% to $1,795.66
Bonds
- The yield on 10-year Treasuries was little changed at 3.56%
- Germany’s 10-year yield advanced four basis points to 2.36%
- Britain’s 10-year yield advanced four basis points to 3.52%
Commodities
- West Texas Intermediate crude rose 1.3% to $73.90 a barrel
- Gold futures rose 0.2% to $1,988.70 an ounce
This story was produced with the assistance of Bloomberg Automation.
–With assistance from John Viljoen.
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