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U.S. stocks surge in recovery; dollar, bond yields dip

EconomyMay 14, 2021 05:07PM ET
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2/2 © Reuters. FILE PHOTO: A man wearing a facial mask, following the coronavirus disease (COVID-19) outbreak, stands in front of an electric board showing Nikkei (top in C) and other countries stock index outside a brokerage at a business district in Tokyo, Japan, Janu 2/2

By Koh Gui Qing

NEW YORK (Reuters) -U.S. stocks rallied in a sharp rebound on Friday as investors set aside inflation worries and bought shares hammered by the week's volatility, with the shift back into riskier assets dragging on the dollar.

The jump in shares was in step with buoyant global stocks as investors put on the back burner concerns that rising prices could lead the U.S. Federal Reserve to raise interest rates sooner than expected and reduce the gush of cash that has propelled financial markets.

The Dow Jones Industrial Average climbed 1%, the S&P 500 jumped 1.5%, the most on any day since March 26, and the Nasdaq Composite leaped 2.3%, its biggest one-day rise in about two months.

The MSCI World Index, which tracks 50 markets, jumped 1.5%.

But some warned that investors may be too complacent if they ignore the dangers of accelerating price pressures.

"I don't see us off to the races," said Tim Ghriskey, chief investment strategist at Inverness Counsel, which manages about $4 billion in assets. He said inflation risks are "real" and financial markets will likely be choppy for some time.

"You could buy (stocks) if you could sleep at night with the volatility, but I might have a slug of cash, too."

Indeed, even with Friday's strong recovery, U.S. stocks still notched their worst performances in nearly three months for the week. The S&P 500 lost 1.4% this week, while the Nasdaq shed 2.3%, declines not seen since Feb. 26.

Still, mega-cap growth stocks, which have been beaten down this week on concerns over their lofty valuations, surged, with shares in Apple Inc (NASDAQ:AAPL), Amazon.com Inc (NASDAQ:AMZN) and Microsoft Corp (NASDAQ:MSFT) ending up at least 1.9% each and Tesla (NASDAQ:TSLA) Inc leaping 3.2%. (N)

Fears of rising prices burst into the fore this week and spooked markets, and despite assurances from the Fed it does not expect to tighten policy anytime soon, some investors worry policymakers may be misjudging inflation risks.

That said, data released on Friday showed U.S. retail sales unexpectedly stalled in April as the boost from stimulus checks wore off, further bolstering arguments that the economic recovery was far from roaring, and that interest rate hikes are not imminent.

That appeared to calm markets, for now.

The U.S. dollar dropped as risk appetite recovered and the prospect of rate hikes occurring sooner faded (higher rates burnish the currency's appeal). Against a basket of six major currencies, the U.S. dollar index shed 0.5% to 90.312. [USD/]

A softer dollar lifted the euro, which jumped 0.6% to $1.21445.

The surprisingly muted retail sales report weighed on benchmark 10-year Treasury yields, which fell to 1.6335%. Two-year Treasury yields dipped to 0.1510%. [US/]

The drop in yields flattened the yield curve, an indicator of economic growth expectations, by a touch. The spread between two- and 10-year Treasury yields, which had widened earlier this week when investors were focused on inflation, narrowed to 148.3 basis points.

Pullbacks in the dollar and Treasury yields added to the appeal of non-yielding bullion, with spot gold up 0.9% at $1,843.11 an ounce. [GOL/]

Oil prices also rebounded on Friday to claw back some of the losses seen the previous day as a weaker dollar increased the appeal of the commodity for holders of other currencies. [O/R]

Brent crude jumped 2.5% to $68.70 a barrel, and U.S. West Texas Intermediate crude climbed 2.4% to $65.36 a barrel.

In cryptocurrencies, bitcoin recovered some ground after skidding 13% this week on reports of a regulatory probe into crypto exchange Binance, and after Tesla's chief executive, Elon Musk, said the carmaker would stop accepting the token as payment due to environmental concerns.

Bitcoin was up 1.9% at $50,239.51, but was markedly below a record $64,889.97 struck on April 14.

U.S. stocks surge in recovery; dollar, bond yields dip
 

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Comments (16)
Aniebiet Akang
Aniebiet Akang May 14, 2021 3:28PM ET
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Take profits. More drama next week. All Options are vulnerable. Players will get played soon
Harry Okadigwe
Harry Okadigwe May 14, 2021 1:34PM ET
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y'all should remember today is Friday so close your trades on time
Parthasarathi Bhattacharya
Parthasarathi Bhattacharya May 14, 2021 11:50AM ET
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Fed has no option other than loose monitary policy in place.Moreover US Job market is lagging behind.So it's only transitory inflation.
Dave Jones
Dave Jones May 14, 2021 11:50AM ET
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what if it's not transitory?
Jennifer Nise
Jennifer Nise May 14, 2021 11:50AM ET
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Love to be here
Parthasarathi Bhattacharya
Parthasarathi Bhattacharya May 14, 2021 11:50AM ET
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Fed has no option other than loose monitary policy in place.Moreover US Job market is lagging behind.So it's only transitory inflation.
Roman Cimarno
Roman Cimarno May 14, 2021 8:20AM ET
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Thanks for article.
Tre Hsi
Tre Hsi May 14, 2021 5:38AM ET
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"the massive public and private debt levels limit the Fed in how much interest rates can increase this time without too much damage to the overall economy"  -- oh dear, that doesn't sound good
Greg Nathan
Greg Nathan May 14, 2021 1:28AM ET
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Do we take crypto or don't we?  We do - great - we don't - we don't...  There's no such discussion when it comes to gold.  Everyone takes it.  When a loaf of bread costs an unheard of amount of US dollars what will your gold be worth?   If you have crypto you have to find vendors that sell stuff you want that have trading in crypto worked out...  Can I have a coin for 50k please?  There must be a group of geeks continually laughing in a back room somewhere.
Vv Pp
Vv Pp May 14, 2021 1:28AM ET
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world is changing (and getting better actually!), accept it
Harry Okadigwe
Harry Okadigwe May 14, 2021 1:28AM ET
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buy Bitcoin it's around $50k at the moment
Aniebiet Akang
Aniebiet Akang May 14, 2021 1:09AM ET
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Uncertainty looms, deceit lurks; I see sudden changes around the corner
Dave Jones
Dave Jones May 14, 2021 1:09AM ET
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looms? lurks? melodrama
Kevin McCarthy
Kevin McCarthy May 14, 2021 12:50AM ET
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so, can we have your liver then?
Stefan Kunco
Stefan Kunco May 14, 2021 12:43AM ET
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Don't give a chair to a senile grandfather anymore
Tre Hsi
Tre Hsi May 14, 2021 12:43AM ET
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especially when that grandfather put too much orange fake tan and sleeps around with ********stars......
Sloppy Joe
Sloppy Joe May 14, 2021 12:01AM ET
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fed officials calm because they cannot ******their own child
Adam Paine
Adam Paine May 13, 2021 11:51PM ET
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market makers can't afford to lose options tomorrow. throwing as much margin as it takes to make strike price
rweqrwq rwqrwqrwq
rweqrwq rwqrwqrwq May 13, 2021 11:40PM ET
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these headline have been the best comedy , i have a laugh every time i see them since march 2020
hj lee
hj lee May 13, 2021 11:25PM ET
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scam fed.
perplexed76 .
perplexed76 . May 13, 2021 11:24PM ET
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short correction is over, gamblers are back
Greg Nathan
Greg Nathan May 13, 2021 11:15PM ET
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Bitcoin - a prudent store of wealth - eh?  Down nearly 25% in a matter of days...  Nice store of value - the new gold...  Yeah take the risk if you want to.  There was a headline a while back saying it can go to zero...  I'm not touching it.  Buy crypto if you want, but please have gold first.  If you are buying crypto for the attributes that belong to gold you don't have it right.  Gold doesn't whiplash like that - and on and on why gold.  Considering where things are at I think $1850/ounce for gold is very cheap.
Greg Mako
Greg Mako May 13, 2021 11:15PM ET
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Very true. I don't buy thinks I can't touch with my hands. Gold and brick and mortal yes but imaginery money alias crypto fook that sheat. I wonder who is behind this biggest scam after tulips in 17th century in Holland.
Vv Pp
Vv Pp May 13, 2021 11:15PM ET
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lol
 
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