Bloomberg: Why are US Stocks Going Up: US stocks ended the week on a high note, driven by speculation that the Federal Reserve won’t raise interest rates beyond peak levels already priced in. A rally in the S&P 500 Friday helped snap a three-week losing streak. The Nasdaq 100 scored its best day since early February. Sentiment remained upbeat despite a report showing resilience in the service sector, as some investors wagered the impact of the Fed’s hikes on the economy would be delayed. A measure of prices paid by service providers showed costs rising at a slower pace, which was cheered by traders.
Bond yields rose for the week though Treasuries rallied on Friday, with the 10-year yield hovering around 3.96%. A benchmark of the dollar had its worst week since mid-January, ending four consecutive weeks of gains.
All eyes will be on the non-farm payrolls report next week for clues on whether the economy can handle more rate hikes. Data this week showed continued labor-market resilience in the US, supporting the case for the Fed to stick to its tightening policy, a theme that had pushed almost every major asset into the red in February.
Also Read: Federal Reserve Chair Jerome Powell to testify next week
But investors were heartened after Atlanta
Also Read: Fed officials’ hawkish stance; market expects policy rate to peak at 5.5% in September
Traders are still optimistic because even the most hawkish Fed officials haven’t suggested that rates could need to go beyond levels already baked in, said Priya
“I think they stay at 5.5% and we have to see how data evolves in the second quarter,” she said on Bloomberg Television.
Misra also added that robust data doesn’t mean the Fed’s persistent tightening isn’t working.
“It takes a long time,” she said. “Policy only turned restrictive last year.”
Risk sentiment also received a boost on Friday from forecast-beating factory data from China. Oil gained for the fourth day, with confidence in China’s robust rebound supporting prices.