The stock market kept its bullish momentum as traders geared up for a pause in one of the Federal Reserve’s most-aggressive tightening campaigns in decades.
(Bloomberg) — The stock market kept its bullish momentum as traders geared up for a pause in one of the Federal Reserve’s most-aggressive tightening campaigns in decades.
While the advance in the S&P 500 was mild, it was enough to drive the gauge above 4,300 and toward its highest since April 2022. Big tech led gains on Monday as Tesla Inc. climbed for a 12th consecutive session — poised for a record winning run — and Oracle Corp. rallied ahead of its earnings report. Another slide in oil reduced concern about further inflation.
In the run-up to the Fed’s rate decision, Tuesday’s consumer price index is expected to be one of this week’s key drivers for markets. Economists surveyed by Bloomberg see core inflation, excluding food and energy, moderating to 5.2% from a year earlier.
To David Kelly at J.P. Morgan Asset Management, the Fed should weigh progress on inflation against the risk of recession in its June meeting.
“The numbers just won’t support any further tightening, and this will become clearer in the next few weeks,” Kelly said. “If so, the investment environment could support lower long-term interest rates, a lower dollar and further gains in stock prices, as investors no longer have to fight a Fed that no longer has to fight inflation.”
US consumers’ near-term inflation expectations fell last month to the lowest level in two years as their outlook for personal finances and credit conditions worsened, according to a Fed Bank of New York survey.
‘Hawkish Skip’
A “hawkish skip” would only buy the Fed a little bit of time, according to Neil Dutta at Renaissance Macro Research.
“If the Fed decides to skip the June meeting, as I anticipate, I don’t think they have a choice but to sound hawkish given their data-dependent pledge,” Dutta added.
Prospects for a pause in rate hikes helped the S&P 500 enter a bull market last week after gaining 20% from its October low. Wall Street’s top strategists are split on the way forward.
Goldman Sachs Group Inc.’s David Kostin expects the gains to continue as other sectors catch up with the searing rally for technology shares. Morgan Stanley’s Michael Wilson, meanwhile, points instead to the bear market of the 1940s, when the S&P 500 rallied 24% before returning to a new low.
Elsewhere, oil fell amid persistent concerns around the demand outlook as Goldman Sachs cut its price forecast again. Cryptocurrencies resumed losses as last week’s regulatory crackdown by the US Securities and Exchange Commission weighed on sentiment.
Key events this week:
- US CPI, Tuesday.
- Eurozone industrial production, Wednesday.
- US PPI, Wednesday.
- Federal Reserve rate decision, updated economic forecasts, Jerome Powell’s press conference, Wednesday.
- IEA oil market report, Wednesday.
- China property prices, retail sales, industrial production, Thursday.
- China central bank meeting to decide on one-year policy loan rate, Thursday.
- European Central Bank President Christine Lagarde holds press conference following the rate decision, Thursday.
- US initial jobless claims, retail sales, empire manufacturing, business inventories, industrial production, Thursday.
- Bank of Japan rate decision, Friday.
- US University of Michigan consumer sentiment, Friday.
Some of the main moves in markets:
Stocks
- The S&P 500 rose 0.3% as of 12:21 p.m. New York time
- The Nasdaq 100 rose 0.8%
- The Dow Jones Industrial Average rose 0.2%
- The MSCI World index rose 0.2%
Currencies
- The Bloomberg Dollar Spot Index rose 0.2%
- The euro was little changed at $1.0745
- The British pound fell 0.6% to $1.2492
- The Japanese yen fell 0.2% to 139.71 per dollar
Cryptocurrencies
- Bitcoin fell 1% to $25,862.55
- Ether fell 2% to $1,735.27
Bonds
- The yield on 10-year Treasuries advanced three basis points to 3.77%
- Germany’s 10-year yield advanced one basis point to 2.39%
- Britain’s 10-year yield advanced 10 basis points to 4.34%
Commodities
- West Texas Intermediate crude fell 3.5% to $67.69 a barrel
- Gold futures fell 0.5% to $1,967.50 an ounce
This story was produced with the assistance of Bloomberg Automation.
–With assistance from Vildana Hajric, Isabelle Lee, Carly Wanna and Emily Graffeo.
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