Wall St rallies, Treasury yields steady ahead of holiday weekend

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

By Stephen Culp

NEW YORK (Reuters) - Wall Street rebounded and Treasury yields paused in the wake of upbeat economic data on Friday as investors positioned themselves ahead of the long U.S. Memorial Day weekend and the unofficial start to summer.

The U.S. stock market's bounce-back caps a week in which minutes from the most recent Federal Reserve policy meeting struck a more hawkish-than-expected tone, economic data hinted at the possibility of rising inflation and megacap chipmaker Nvidia's beat-and-raise earnings report re-ignited investors' AI fervor.

The tech-heavy Nasdaq led all three major U.S. stock indexes higher in a broad-based rally; 10 of the 11 major sectors in the S&P 500 were green.

"We're seeing a bit of a relief rally from yesterday's sharp decline," said Peter Cardillo, chief market economist at Spartan Capital Securities in New York. "It's Friday ahead of a long weekend and most of the market action will be in the early part of the session."

On a weekly basis, the S&P 500 and the Dow were on track to snap their streak of consecutive Friday-to-Friday gains, while the tech-laden Nasdaq appeared set to notch a nominal gain for the week.

Investors are growing increasingly resigned to the higher-for-longer interest rate narrative in the wake of the Fed minutes release on Wednesday, as well as cautious remarks from various policy makers which expressed doubt as to whether inflation is indeed on a reliable downward trajectory.

Financial markets are now pricing just one rate cut this year, a far cry from the six cuts that were projected earlier in the year.

On the economic front, new orders for U.S. durable goods increased more than expected, while the University of Michigan's final take on May consumer sentiment bumped higher, while near- and long-term inflation expectations cooled down.

"The economy is still growing and earnings have been good," Cardillo added. "Those are the basic fundamentals of the stock market."

The Dow Jones Industrial Average rose 49.56 points, or 0.13%, to 39,114.82, the S&P 500 gained 30.41 points, or 0.58%, to 5,298.25 and the Nasdaq Composite added 143.36 points, or 0.86%, to 16,879.40.

European shares extended their sell-off as investor sentiment was dampened by interest rate worries, setting course for a weekly decline.

The pan-European STOXX 600 index lost 0.24% and MSCI's gauge of stocks across the globe gained 0.26%.

Emerging market stocks lost 0.66%. MSCI's broadest index of Asia-Pacific shares outside Japan closed 0.86% lower, while Japan's Nikkei lost 1.17%.

Treasury yields pared earlier gains in the stronger-than-expected economic data.

Benchmark 10-year notes last fell 1/32 in price to yield 4.4787%, from 4.475% late on Thursday.

The 30-year bond last fell 3/32 in price to yield 4.5844%, from 4.58% late on Thursday.

The dollar dipped against a basket of world currencies but remained on track for a weekly gain as stronger-than-expected economic data has left markets on edge about the outlook for interest rate cuts.

The dollar index fell 0.35%, with the euro up 0.28% to $1.0843.

The Japanese yen weakened 0.03% versus the greenback at 156.99 per dollar, while Sterling was last trading at $1.2735, up 0.30% on the day.

Crude prices edged higher, after having been under pressure for much of the week as the notion of prolonged restrictive Fed policy dampened the demand outlook.

U.S. crude rose 0.79% to $77.48 per barrel and Brent was last at $81.72, up 0.44% on the day.

Gold prices rose but appeared set for their first weekly fall in three due to lowered rate cut expectations.

Spot gold added 0.3% to $2,336.32 an ounce.

(Reporting by Stephen Culp)

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.

Before investing, consider the funds' investment objectives, risks, charges, and expenses. Contact Fidelity for a prospectus or, if available, a summary prospectus containing this information. Read it carefully.

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