Stocks Rebound as Consumers Revise Inflation Path: Markets Wrap

(Bloomberg) — Stocks climbed after data showed American consumers tempered inflation expectations in late May, which bodes well for prospects of Federal Reserve rate cuts.

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The S&P 500 headed toward its fifth straight week of gains — the longest bullish streak since February. When traders come back from the US holiday weekend, the so-called “T+1” rule will come into effect — making US stocks settle in one day rather than two. Treasuries barely budged after Fed Governor Christopher Waller said the factors that lowered the so-called neutral rate may reverse.

Equities extended gains after University of Michigan data showed consumers expect prices will climb at a 3.3% annual rate over the next year, down from the 3.5% that was expected earlier in the month. In April, respondents expected year-ahead inflation of 3.2%.

“After further review, the consumer is not as pessimistic about the inflation trajectory,” said Jeff Roach at LPL Financial. “What we learned from this final estimate from UofM is consumer spending could slow, easing up inflationary pressures from the demand side of the economy.”

The S&P 500 topped 5,300. The Nasdaq 100 rose over 1% as Nvidia Corp. headed toward a fresh all-time high. Workday Inc. tumbled after the software company cut its subscription outlook.

Treasury two-year yields were little changed at 4.93%. The US bond market was due to close early ahead of the Memorial Day holiday. The dollar retreated. Bitcoin rose. Oil and gold edged up. Copper headed for its biggest weekly loss since February.

The stock market can keep soaring to all-time highs even if the Fed forgoes interest-rate reductions this year as the economy and earnings are growing, according to Deutsche Bank AG’s Binky Chadha.

Minutes from the two-day Federal Open Market Committee gathering ending May 1 released Wednesday showed that, while participants assessed monetary policy was “well positioned,” various officials mentioned a willingness to tighten further if warranted.

“It was another week dominated by ‘Fed anxiety’,” said Florian Ielpo at Lombard Odier Asset Management. “Let’s however remember that despite rising rates, company earnings appear resilient, subtly suggesting that the impact of what’s typically seen as positive economic news might be less straightforward.”

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The rally in global equity markets is at risk of overheating, according to Bank of America Corp. strategist Michael Hartnett.

The bank’s so-called global breadth rule shows that about 71% of equity indexes are trading above both their 50- and 200-day moving averages. A reading above 88% would trigger a contrarian sell signal, he said.

Corporate Highlights:

• Elon Musk’s SpaceX has initiated discussions about selling existing shares at a price that could value the closely held company at roughly $200 billion, according to people familiar with the matter.

• Eli Lilly & Co. will spend $5.3 billion to boost production of a key ingredient in its weight-loss and diabetes shots after the treatments’ explosive popularity led to shortages.

• Novo Nordisk A/S’s blockbuster diabetes drug Ozempic cut patients’ risk of dying in a kidney-disease study, the latest research pointing to the medicine’s usefulness in a constellation of disorders.

• Intuit Inc. reported losing 1 million customers who use its TurboTax service for free, stoking concerns about demand for the software.

• Lucid Group Inc. will eliminate about 400 jobs in the coming months, the latest move by an electric-vehicle maker to cut costs in a dramatically slowing market for plug-in cars.

• CVS Health Corp. has been seeking a private equity partner to fund growth at Oak Street Health, the $10.6 billion primary care provider it bought a year ago, according to people familiar with the matter.

• Bayer AG Chief Executive Officer Bill Anderson said the wave of lawsuits over its Roundup weedkiller is an “existential” threat to the company and farmers, ratcheting up the stakes as it considers a controversial legal maneuver.

Some market moves:

Stocks

• The S&P 500 rose 0.8% as of 11:19 a.m. New York time

• The Nasdaq 100 rose 1.2%

• The Dow Jones Industrial Average rose 0.3%

• The Stoxx Europe 600 fell 0.1%

• The MSCI World Index rose 0.6%

Currencies

• The Bloomberg Dollar Spot Index fell 0.2%

• The euro rose 0.3% to $1.0851

• The British pound rose 0.4% to $1.2748

• The Japanese yen was little changed at 156.95 per dollar

Cryptocurrencies

• Bitcoin rose 0.8% to $68,302.2

• Ether fell 0.8% to $3,727.99

Bonds

• The yield on 10-year Treasuries declined one basis point to 4.47%

• Germany’s 10-year yield declined one basis point to 2.58%

• Britain’s 10-year yield was little changed at 4.26%

Commodities

• West Texas Intermediate crude rose 0.5% to $77.28 a barrel

• Spot gold rose 0.4% to $2,337.90 an ounce

This story was produced with the assistance of Bloomberg Automation.

–With assistance from Alexandra Semenova and Sagarika Jaisinghani.

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