Stocks edge up as timing of US rate cuts weighed; copper jumps

BY Reuters | ECONOMIC | 05/16/24 10:23 PM EDT

By Caroline Valetkevitch

NEW YORK (Reuters) -A world stock index rose for a seventh straight session and U.S. Treasury yields also gained on Friday as investors tried to assess the timing of potential interest rate cuts by the Federal Reserve this year.

The Dow Jones Industrial Average closed above 40,000 for the first time, and all three major U.S. stock indexes posted strong gains for the week.

Copper surged to a 26-month peak after China announced fresh support for its ailing property sector, while nickel prices touched their highest level since August 2023 amid unrest in nickel producer New Caledonia. Gold prices also gained.

Data from earlier this week showing softening consumer prices in April boosted expectations that the U.S. central bank will be able to cut rates twice this year, beginning in September.

Much depends, however, on what happens with price pressures in the coming months and Fed officials have hinted U.S. rates may not fall anytime soon.

On Friday, Fed Governor Michelle Bowman repeated her view that inflation will fall further with the policy rate held steady, but said she has seen no improvement on inflation this year and remains willing to hike rates should progress stall or reverse.

Minutes from the Fed's most recent policy meeting are due next week and may offer more detail on what Fed officials are looking at to begin cutting rates. The meeting from April 30-May 1, however, took place before Wednesday's CPI data.

The Dow Jones Industrial Average rose 134.21 points, or 0.34%, to 40,003.59, the S&P 500 gained 6.17 points, or 0.12%, to 5,303.27 and the Nasdaq Composite lost 12.35 points, or 0.07%, to 16,685.97.

For the week, the Dow gained 1.2%, the S&P 500 rose 1.5% and the Nasdaq climbed 2.1%.

"People are now looking at the next catalyst. Most likely it's going to be whether or not the Fed actually cuts," said Robert Pavlik, senior portfolio manager at Dakota Wealth.

MSCI's gauge of stocks across the globe rose 0.88 points, or 0.11%, to 794.96, and was set for a seventh session of gains and another record high close. The index was also set to post gains for the week.

The STOXX 600 index fell 0.13%. A report showed European Central Bank board member Isabel Schnabel advocated caution about further interest rate cuts after a likely first one in June.

In Treasuries, the yield on benchmark U.S. 10-year notes rose 4.3 basis points to 4.42% versus 4.377% late on Thursday.

The U.S. dollar was mostly flat against other major currencies.

The dollar index, which measures the greenback against a basket of currencies including the yen and the euro, fell 0.02% to 104.48, with the euro up 0.05% at $1.087.

Against the Japanese yen, the dollar strengthened 0.18% at 155.65.

The Japanese currency has weakened this year as the Bank of Japan has kept monetary policy loose while higher U.S. rates have drawn money toward U.S. bonds and the dollar.

Tokyo is suspected to have intervened on at least two days in late April and early May to support the yen after it tumbled to lows last seen more than three decades ago.

Three-month nickel on the London Metal Exchange (LME) surged 5.2% to $20,820 a metric ton by 1600 GMT after touching $21,365, the highest since August 2023.

LME copper climbed 2.3% to $10,662 per ton, the strongest since March 2022.

Gold prices, aided by China's stimulus measures, also rose. Spot gold rose 1.5% to $2,412.83 per ounce.

Oil prices rose, with global benchmark Brent crude recording its first weekly gain in three weeks.

U.S. crude gained 83 cents to settle at $80.06 a barrel and Brent rose 71 cents to settle at $83.98 per barrel.

(Additional reporting by Amanda Cooper in London and Ankur Banerjee in Singapore and Bansari Mayur Kamdar and Shristi Achar A in Bengaluru; Editing by Jane Merriman, Toby Chopra Jonathan Oatis and Rod Nickel)

In general the bond market is volatile, and fixed income securities carry interest rate risk. (As interest rates rise, bond prices usually fall, and vice versa. This effect is usually more pronounced for longer-term securities.) Fixed income securities also carry inflation risk and credit and default risks for both issuers and counterparties. Unlike individual bonds, most bond funds do not have a maturity date, so avoiding losses caused by price volatility by holding them until maturity is not possible.

Lower-quality debt securities generally offer higher yields, but also involve greater risk of default or price changes due to potential changes in the credit quality of the issuer. Any fixed income security sold or redeemed prior to maturity may be subject to loss.

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