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On Friday, Wall Street stocks advanced into record territory as investors abandoned the U.S. inflation reading to focus on President Joe Biden’s latest stimulus deal.
The S&P 500 rose 0.3% at lunchtime in New York, triggering the chip-blue index to close another record. The broad benchmark was heading for a 2.7% weekly gain, its best performance since early April, while the technology-focused Nasdaq Composite was flat during the session.
US stock markets hit historical highs Thursday after Biden reached a $ 1 billion infrastructure spending deal, boosting industrial, energy and financial stocks.
The infrastructure deal overshadowed Friday’s release of data showing basic personal consumption spending in the United States, the Federal Reserve’s preferred measure for rising prices, which reached 3.4% in the U.S. twelve months to May, its largest annual increase in 29 years.
However, the month-on-month rise in inflation was slightly below economists’ expectations, although it could put some pressure on the US central bank to change its ultralight monetary policy.
“We’re seeing a small sigh of relief, with stocks also supported by infrastructure news,” said Keith Parker, UBS’s top U.S. equity strategist. Expectations for companies to report strong second-quarter earnings as they reaped the benefits of the reopening of the U.S. economy were also “a strong tailwind,” he added.
Public debt prices softened after inflation data, allowing the US Treasury’s 10-year benchmark yield to rise 0.04 percentage points, to 1.53%.
Investors who have bonds, more sensitive to inflation than equities, fear price rises will be more persistent. For the first time since April 2018, inflation was the issue that most worried investors, according to a Bank of America survey released Friday.
“There is no doubt that inflation impressions in the coming months will continue to be high,” said Francesco Sandrini, chief multi-asset strategist at fund manager Amundi.
“But markets are struggling to find confidence as to what to do about it” after mixed messages from Fed officials about whether price hikes should lead to tighter monetary policy, he said.
Fed Chairman Jay Powell has continued to characterize rising prices as “transitory,” but St. Louis Fed Chairman James Bullard said Thursday he believed price hikes could be problematic. “A new risk is that inflation could continue to surprise upwards,” he said in a presentation.
Schroders strategist Sean Markowicz said: “What we might see next year is that higher commodity prices will feed into higher ticket prices, which will feed into higher consumer prices. and then at higher wages. ”
This left open the question of whether Powell’s “transient” inflation “means six, 12, 18 months or more,” Markowicz added.
In Europe, the Stoxx 600 index closed 0.1 percent, leaving the benchmark across the continent at 1.2 percent during the week.
The recent rise in oil picked up the pace, with Brent crude rising 0.6% above the $ 76 a barrel, the highest level on the global scoreboard since October 2018.
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