After posting their biggest pullback in at least 11 weeks on Wednesday, US stocks rebounded as cash-rich investors looked past fears that accelerating inflation could lead to interest rate hikes earlier, and have deployed their funds again.
Investors therefore intended to put aside inflation fears that financial markets barely responded to Thursday’s data, which showed U.S. producer prices were recording their biggest annual gain since 2010 in April.
“It’s a rebound Thursday,” said John Augustine, chief investment officer at Huntington Private Bank, which manages $ 20 billion in assets. “With the money on the sidelines, investors will come back.”
Still, Augustine said investors should redeploy their funds in a measured manner because “inflation concerns are not going away.”
The Dow Jones Industrial Average ended the day up 1.3%, the S&P 500 was up 1.2% and the Nasdaq Composite gained 0.7%.
The gains have been driven by shares of small-cap companies, chipmakers and transportation providers – companies that stand to gain as the United States emerges from the pandemic recession. [.N]
The rebound in US stocks pushed up the MSCI World Stock Index, which tracks 50 countries, by 0.3%.
Wall Street fell earlier this week after data showed consumer prices in the United States had unexpectedly risen in nearly 12 years in April.
Some investors are now worried that the acceleration of price pressures will cause the US Federal Reserve to tighten monetary policy sooner than expected, thereby reducing its supply of cheap money which has propelled financial markets up.
For now, however, inflation concerns have taken precedence.
Yields on benchmark 10-year Treasuries, which climbed 7 basis points overnight in the largest daily rise in two months, fell almost 4 basis points to 1.6556%, investors having taken a break.
Yields on benchmark two-year Treasury bills also fell to 0.1569%. [US/]
Against a basket of major currencies, the dollar held steady at 90.718, largely retaining the gains made on Wednesday, when rate hike expectations weakened the currency’s appeal.
A firm dollar capped gains in the euro, which edged up 0.1% to $ 1.20805. [USD/]
Lower yields on Treasuries helped gold recoup some of its losses from the previous day, as higher bond yields dampened the appeal of non-performing bullion. Spot gold climbed 0.6% from a one-week low to $ 1,826.71 an ounce. [GOL/]
A recent rebound in oil prices also came to a halt on Thursday as investors turned to the coronavirus crisis in India and America’s main fuel pipeline system resumed operations. [O/R]
Brent crude fell 3.4% to $ 66.98 per barrel, while US West Texas Intermediate crude fell 3.5% to $ 63.78 per barrel.
Among cryptocurrencies, bitcoin, which fell 13% overnight when Elon Musk said Tesla Inc would stop accepting it as payment due to its high power consumption, slid again on Thursday at following reports that the US Department of Justice was investigating the Binance crypto exchange.
As of Thursday night, bitcoin had fallen 0.7% to $ 48.965.
(Reporting by Koh Gui Qing in New York; additional reporting by Tom Wilson and Marc Jones in London, Wayne Cole in Sydney; Editing by Dan Grebler, Cynthia Osterman and Jonathan Oatis)
By Koh Gui Qing