Stocks Trade at Record, Yields Steady After CPI: Markets Wrap

U.S. stocks traded at all-time highs and government bonds held around the lowest level since March as investors assessed data that showed consumer prices rose more than forecast last month.

The S&P 500 climbed above its record high as all the main U.S. equity indexes rallied. The 10-year Treasury yield eased back below 1.5% following an initial surge in the wake of the inflation report.

Prices paid by U.S. consumers rose in May at the fastest pace since 2009, according to Labor Department data. The report comes amid a debate about whether the Federal Reserve can maintain its ultra-accomodative policies with a strengthening economy raising the risk of destabilizing inflation. Rangebound trading in equities and falling yields have characterized the start of June as investors awaited some impetus from progress reports on the global recovery. A frenzy in meme stocks and gyrations in cryptocurrencies have been among the few sources of pronounced market volatility.

“The frothiness in CPI continues for now but between base effects and pent-up demand pressures, it is probably not giving a definite answer to the great inflation debate, and you need to read the bond market tea leaves,” said Anu Gaggar, senior global investment analyst at Commonwealth Financial Network. “The 10-year Treasury yield is back at levels last seen in early March, signaling that the bond market is falling in line with the Fed’s thinking that inflation is transitory and does not warrant tapering of monetary stimulus any time soon.”

Ten of the main 11 S&P 500 industry groups climbed, with health-care and energy stocks leading the advance. Financial stocks were the outliers, with large banks including JPMorgan Chase & Co., Bank of America Corp. and Wells Fargo & Co. among the biggest laggards in the broader index. Amazon.com Inc., Microsoft Corp., Tesla Inc. and Apple Inc. were driving the Nasdaq 100 toward its highest level since late April. The Dow Jones Industrial Average traded within 0.5% of its all-time closing high.

GameStop Corp. fell after the company said it planned to offer more shares and disclosed that regulators are investigating trading of its stock. Other retail trader favorites were mixed, with some of the stocks that surged amid the frenzy on Wednesday giving back gains.

Commodities, one of the leading reflation plays, resumed gains, with the Bloomberg Commodity Index trading around the highest since 2015. Oil erased an earlier loss triggered by fears of oversupply.

For market commentary, follow the MLIV blog.

Here are key events to watch this week:

• Group of Seven leaders’ summit starts in Cornwall, England Friday.

These are some of the main moves in markets:

Stocks

• The S&P 500 rose 0.5% as of 10:34 a.m. New York time
• The Nasdaq 100 rose 0.9%
• The Dow Jones Industrial Average rose 0.4%
• The Stoxx Europe 600 was little changed
• The MSCI World index rose 0.4%

Currencies

• The Bloomberg Dollar Spot Index fell 0.2%
• The euro was little changed at $1.2186
• The British pound rose 0.3% to $1.4165
• The Japanese yen rose 0.2% to 109.46 per dollar

Bonds

• The yield on 10-year Treasuries was little changed at 1.49%
• Germany’s 10-year yield was little changed at -0.25%
• Britain’s 10-year yield advanced two basis points to 0.75%

Commodities

• West Texas Intermediate crude rose 0.3% to $70 a barrel
• Gold futures were little changed

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