Stocks rise following hot March inflation

Stocks rose in early trading and bond yields fell, with the latest inflation report coming roughly in line with Wall Street’s estimates.

S&P 500 futures signaled the US equity benchmark will extend this week’s gains, buoyed by big tech earnings. Treasury two-year yields, which are more sensitive to imminent policy moves, fell three basis points to 4.96%.

The Federal Reserve’s preferred gauge of underlying US inflation rose at a brisk pace in March, reinforcing concerns of persistent price pressures. The so-called core personal consumption expenditures price index, which strips out the volatile food and energy components, increased 0.3% from the prior month, data out Friday showed. From a year ago, it advanced 2.8%.

“Bottom line, yes the consumer is spending, but they continue to run down their savings in order to do so,” said Peter Boockvar, author of the Boock Report. “The inflation stats were about as estimated and why inflation breakevens are little changed in response.”

The US equity market will continue to rely on a handful of megacaps stocks for direction until an uptick in real interest rates ignites recession fears, according to Bank of America Corp. strategists led by Michael Hartnett.

That concentration will remain intact until real 10-year yields — rates adjusted to reflect the true cost of funds — rise to around 3%, “or higher yields combine with higher credit spreads to threaten recession,” they wrote. Elevated bond yields adjusted for inflation, seen as a proxy for tight financial conditions, are a common way for stock-market bubbles to burst.

Elsewhere, the yen’s extended slump has heightened speculation that Japanese authorities may intervene in the market to prop up the currency. Copper hit $10,000 a ton for the first time in two years.

Corporate Highlights:

• Microsoft Corp. and Google’s parent Alphabet Inc. sent a clear message to investors on Thursday: Our spending on artificial intelligence and cloud computing is paying off.
• Intel Corp., the biggest maker of personal computer processors, gave a lackluster forecast for the current period, indicating that it’s still struggling to return to the top tier of the chip industry.
• Snap Inc. offered positive signs that its efforts to revamp its digital advertising business are gaining popularity with marketers — boosting revenue and providing stronger competition with powerhouses Google and Meta Platforms Inc.
• Exxon Mobil Corp. and Chevron Corp. declined after disappointing first-quarter performances.
• AbbVie Inc. lifted its full-year profit guidance as newer anti-inflammatory treatments like Rinvoq and Skyrizi take over for Humira, the blockbuster arthritis drug that fueled the company’s growth for more than 15 years.

Some of the main moves in markets:

Stocks

• S&P 500 futures rose 0.9% as of 8:32 a.m. New York time
• Nasdaq 100 futures rose 1.2%
• Futures on the Dow Jones Industrial Average rose 0.3%
• The Stoxx Europe 600 rose 0.9%
• The MSCI World index rose 0.3%

Currencies

• The Bloomberg Dollar Spot Index was little changed
• The euro was little changed at $1.0727
• The British pound was little changed at $1.2523
• The Japanese yen fell 0.8% to 156.82 per dollar

Cryptocurrencies

• Bitcoin fell 0.8% to $64,303.55
• Ether fell 1.1% to $3,139.61

Bonds

• The yield on 10-year Treasuries declined four basis points to 4.66%
• Germany’s 10-year yield declined five basis points to 2.58%
• Britain’s 10-year yield declined three basis points to 4.33%

Commodities

• West Texas Intermediate crude rose 0.9% to $84.36 a barrel
• Spot gold rose 0.6% to $2,347.47 an ounce

Related Topics: equities, Inflation, stocks, Treasuries