(Bloomberg) — US equities bounce back as a rally in tech stocks regained steam and persistent inflationary pressures cemented expectations for higher rates in the US and Europe. Treasuries advanced.
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The S&P 500 gained 0.2% even as Amazon.com Inc.’s warning after the market close on growth in its key cloud computing business soured the mood in early trading. Treasuries recouped some of Thursday’s losses, with the 10-year benchmark yield falling to 3.46%.
Markets remain on edge, as data on inflation reinforced expectations of a Federal Reserve interest rate hike next week, and possibly in June.
The personal consumption expenditures price index excluding food and energy, one of the Fed’s preferred inflation gauges, rose 0.3% in March for a second month. Compared with a year ago, the measure was up 4.6%, Commerce Department data showed Friday.
Read more: US Core PCE Inflation Stays Brisk While Consumer Spending Stalls
“What looks like sticky contemporaneous inflation remains an issue, preventing the market from getting too carried away on the rate-cutting phase to come in subsequent quarters,” wrote Padhraic Garvey, head of global debt and rates strategy at ING Financial Markets.
US equities are on track to end the month 0.9% higher, as strong corporate results have lifted sentiment amid concerns about Fed policy and a looming recession. In the latest batch of earnings, Exxon Mobil Corp. rose after more than doubling its profit in the first quarter. Intel Corp. gained after better-than-expected results. And Snap Inc. plunged after missing revenue estimates.
“April largely is a good month. Again, it’s probably earnings-season driven, but we’ve been getting some economic reports that are also saying that the economy and especially inflation is likely going in the right direction — just not maybe fast enough,” said Kim Forrest, chief investment officer at Bokeh Capital Partners. “Businesses and people are spending, inflation is still there, but the data says it’s slowly ramping down.”
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Read more: Snap Shares Set for Biggest Drop in Six Months After Sales Fall
In Europe, the Stoxx 600 gained, even as an uptick in consumer-price gains pointed to more rate increases by the European Central Bank, which also meets next week.
In contrast, the Bank of Japan renewed its commitment to stimulus in its first meeting under new governor Kazuo Ueda. It left its short-term policy rate at minus 0.1%, maintained its 0.5% ceiling for 10-year bond yields, and launched a policy review that may take one-and-a-half years. Japanese stocks surged while the yen tumbled.
Elsewhere, oil prices headed for a sixth straight monthly decline. The dollar was stronger against major peers, and Bitcoin was little changed.
Here are some of the main moves in markets:
Stocks
The S&P 500 rose 0.3% as of 10:09 a.m. New York time
The Nasdaq 100 was little changed
The Dow Jones Industrial Average rose 0.3%
The Stoxx Europe 600 rose 0.3%
The MSCI World index rose 1.2%
Currencies
The Bloomberg Dollar Spot Index rose 0.3%
The euro fell 0.2% to $1.1006
The British pound rose 0.2% to $1.2521
The Japanese yen fell 1.8% to 136.34 per dollar
Cryptocurrencies
Bitcoin fell 1.5% to $29,181.13
Ether fell 1.3% to $1,894.72
Bonds
The yield on 10-year Treasuries declined six basis points to 3.46%
Germany’s 10-year yield declined 11 basis points to 2.35%
Britain’s 10-year yield declined seven basis points to 3.73%
Commodities
West Texas Intermediate crude rose 0.4% to $75.09 a barrel
Gold futures fell 0.3% to $1,992.80 an ounce
This story was produced with the assistance of Bloomberg Automation.
–With assistance from Cecile Gutscher.
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