US stocks climb after inflation data; yields sink: markets wrap

Both the S&P 500 and tech-heavy Nasdaq 100 gained in early trading after data showed growth in producer prices fell more than expected last month, adding to evidence the Fed is making progress in taming inflation. Retail sales fell more than projected, fueling bets on an end to the Fed’s aggressive hiking cycle. Treasury yields sank across the curve, and the dollar fell versus major peers. 

Airline stocks rallied on United Airlines Holdings’s upbeat guidance. Moderna climbed as much as 8% after saying its vaccine against respiratory syncytial virus infections met targets. 

Investors are focusing on indicators of growth and inflation to assess when exactly will the Fed and other major central banks halt their interest-rate increases. St Louis Fed president James Bullard said policy is “almost” in restrictive territory but not quite. Other Fed officials including Raphael Bostic, Lorie Logan and Patrick Harker are slated to speak later on Wednesday.

Treasuries rose across the curve, with the 10-year yield dropping as much as 17 basis points to 3.38%. Money markets are betting the Federal Reserve will conclude one of its most aggressive hiking cycles by the middle of the year, with traders positioning for the upper bound of the fed funds target range to peak below 4.9%, compared with the current level of 4.5%.

The yen dropped as much as 2.6% against the dollar after Japan’s policy makers doubled down on defending their stimulus, defying intense market speculation. The currency later erased losses as the dollar weakened.

United Airlines rose after saying first-quarter profit will be more than double analysts’ estimates. That helped lift airline stocks including Delta Air Lines and American Airlines. Moderna rose after its RSV shot proved highly effective in preventing lung disease in older patients. 

Oil futures headed for a ninth day of advances on optimism Chinese demand will recover rapidly following the abandonment of Covid Zero. 

Data including Taiwan’s economic contraction in the fourth quarter and slowing UK inflation as well as a more muted start to the US earnings-reporting season boosted those who believe monetary easing would have to begin this year.

Iron ore rose for a second day amid China’s improving economic outlook. Gold edged higher. BM/DM