(Bloomberg) — US stocks rose in a broad-based advance as solid economic data helped buoy risk appetite for markets roiled by concerns over surging prices and policy tightening. Treasuries fell with the dollar.
A pullback from session highs stabilized, with all but one of the 11 major industry groups in the S&P 500 advancing. The Nasdaq 100 outperformed benchmarks as Apple Inc., Tesla Inc. and Nvidia Corp. bounced back from a late-day tech-led selloff Monday. Citigroup Inc. jumped after report showed Warren Buffett’s Berkshire Hathaway took a stake in the lender. Walmart Inc. tumbled after cutting its profit outlook due to inflationary pressures.
Risk sentiment caught a tailwind Tuesday after data showed U.S. retail sales grew at a solid pace last month, the latest evidence that consumers remained resilient in the face of inflation and higher rates. Another report showed factory production rose at a solid pace for a third month in April.
Treasury yields climbed to day’s highs after the retail sales data. The dollar weakened against all of its Group-of-10 counterparts except the yen.
The risk mood in Europe got a lift from data showing the economy in the euro area expanded more than initially estimated at the start of the year, defying headwinds from the early days of the war in Ukraine.
Commentary
- “Retail sales were much stronger than expected, especially including revisions,” said Dennis DeBusschere, the founder of 22V Research. “This has been a worry of ours — the consumer staying too hot for the Fed. The consumer momentum and strength has been much stronger than just about anyone would have thought.”
- “The takeaway from this morning’s retail sales print was confirmation that spending during the second quarter has started on solid footing,” wrote BMO’s Ian Lyngen.
- “Inflation may be weighing down market sentiment and causing concern for the Fed, but it doesn’t seem to be slowing down the consumer at the moment,” said Mike Loewengart, managing director of investment strategy at E*Trade from Morgan Stanley. “That’s not to say that higher prices won’t start to creep into these numbers. After all we did see a decline month over month. And with a mixed bag on the retail earnings front today, it remains to be seen how investors will digest this read on the consumer.”
- “Going into ‘23, ‘24, yeah there’s a recession out there somewhere but I don’t see that in the near-term,” Scott Clemons, chief investment strategist at Brown Brothers Harriman, said on Bloomberg TV. “The backdrop is just too strong.”
St. Louis Fed President James Bullard, a hawk and FOMC voter, said Tuesday he backs hiking interest rates in half-percentage-point steps and that this will tackle an inflation rate that’s near a four-decade high. Five more Federal Reserve officials are slated to speak throughout the day, including Chair Jerome Powell.
Stocks briefly dipped to session lows amid reports that New York City raised its Covid-19 alert level to high amid increasing pressure on the health care system, a move that it signaled Monday could be imminent.
US-listed Chinese tech stocks jumped Tuesday, after a state television report that top officials reaffirmed support for internet companies. JD.com Inc., China’s second-largest e-commerce operator, rose after revenue growth beat estimates.
Meanwhile, Shanghai reported three days of zero community transmission, a milestone that could lead officials to start unwinding a punishing lockdown. Flareups elsewhere in China showed how hard it is to tackle the omicron strain.
Cryptocurrencies weathered the latest stablecoin turbulence, with Bitcoin rising above the $30,000 mark. Oil in New York fell on news that the US government will allow Chevron Corp. to negotiate its oil license with Venezuela.
What damage will be done to the US economy and global markets before the Fed changes tack and eases policy again? The “Fed Put” is the theme of this week’s MLIV Pulse survey. Click here to participate anonymously.
What to watch this week:
- Fed Chair Jerome Powell among slate of Fed speakers Tuesday
- Reserve Bank of Australia releases minutes of its May policy meeting Tuesday
- G-7 finance ministers and central bankers meeting Wednesday
- Eurozone, UK CPI Wednesday
- Philadelphia Fed President Patrick Harker speaks Wednesday
- China loan prime rates Friday
Some of the main moves in markets:
Stocks
- The S&P 500 rose 1.4% as of 12:28 p.m. New York time
- The Nasdaq 100 rose 1.8%
- The Dow Jones Industrial Average rose 0.9%
- The MSCI World index rose 1.7%
Currencies
- The Bloomberg Dollar Spot Index fell 0.7%
- The euro rose 1.1% to $1.0550
- The British pound rose 1.3% to $1.2482
- The Japanese yen was little changed at 129.25 per dollar
Bonds
- The yield on 10-year Treasuries advanced eight basis points to 2.96%
- Germany’s 10-year yield advanced 11 basis points to 1.05%
- Britain’s 10-year yield advanced 15 basis points to 1.88%
Commodities
- West Texas Intermediate crude fell 0.4% to $113.73 a barrel
- Gold futures rose 0.2% to $1,818.30 an ounce
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