Stocks grasp for record, bonds rally ahead of CPI
U.S. stocks traded near record highs and bonds rallied as investors braced for a key inflation report that could provide clues on the direction of monetary policy.
The S&P 500 fluttered around its May 7 record closing level, with megacap technology and biotech stocks lifting the benchmark index. The 10-year Treasury yield retreated below 1.5% before an afternoon auction of the notes.
Equities have been trading in a tight range and Treasury yields have been easing in recent weeks as investors who believe accelerating inflation will be short-lived clash with those those who bet it will prove persistent enough to warrant tightening. For now, the Fed's dovish stance is calming the markets.
"Even if inflation comes out a little higher than Street expectations tomorrow, the Fed isn't going to change its path," said Esty Dwek, head of global market strategy at Natixis Investment Managers, said in a Bloomberg TV interview. "There's a lot of wait-and-see going on and really just thinking it would take a lot to really surprise markets."
Seven of the main 11 S&P 500 industry groups advanced, led by health-care stocks. Johnson & Johnson, Merck & Co., Pfizer and Eli Lily were among the biggest contributors to the broader index's advance. Biogen resumed a rally two days after getting regulatory approval for its Alzheimer's drug. Bitcoin rose more than 8%, trading above $36,000.
The 10-year U.S. Treasury yield declined as much as 6.3 basis points to 1.471%, which is below closing levels since March even as dealers prepared to underwrite an auction of $38 billion of the notes Wednesday afternoon. The 30-year bond's yield touched 2.148%, last seen March 1.
Meanwhile, a rally in commodities has stalled with global recovery remaining patchy, especially with the pandemic still spreading in the developing world. The Bloomberg Commodity Index, which shows returns on a basket of raw materials, fell 0.2%.
Shares edged up in China, where a measure of producer prices for May was at the highest since 2008 but consumer-price gains remained subdued. The nation is also considering imposing a cap on the price of thermal coal to contain high energy costs.
U.K. property developers posted some of the biggest losses in europe weeks before a stamp-duty exemption was due to expire and demand was seen moderating.
Stocks:
- The S&P 500 rose 0.1% as of 12:41 p.m. New York time.
- The Nasdaq 100 rose 0.4%.
- The Dow Jones Industrial average fell 0.1%.
- The MSCI World index was little changed.
Currencies:
- The Bloomberg Dollar Spot Index rose 0%.
- The euro was little changed at $1.2177.
- The British pound fell 0.3% to $1.4115.
- The Japanese yen fell 0.1% to 109.63 per dollar.
Bonds:
- The yield on 10-year Treasuries declined three basis points to 1.50%.
- Germany's 10-year yield declined two basis points to -0.24%.
- Britain's 10-year yield declined four basis points to 0.73%.
Commodities:
- West Texas Intermediate crude fell 0.7% to $70 a barrel.
- Gold futures were little changed.
