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S&P 500 Rides Falling Yields to Record Highs as Bond Bears Cower

Stock MarketsJun 10, 2021 04:22PM ET
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© Reuters.

By Yasin Ebrahim

Investing.com – The S&P 500 closed at record highs Thursday, shrugging off the hottest pace of inflation in decades as Treasury yields slipped on signs bond bears are caving in on bets against the Federal Reserve.  

The S&P 500 rose 0.47% to close at a record high of 4,239.42 The Dow Jones Industrial Average was up 0.06%, or 19 points, and the Nasdaq Composite was up 0.78%.

The Labor Department said on Thursday its consumer price index rose 0.6% last month after edging up 0.9% in April. The uptick in consumer prices in May lifted the year-on-year increase in the CPI to 5% from 4.2% in April, the highest rate since the 1980s.

But Treasury yields fell as the hottest inflation report in decades failed to revive fears that the Federal Reserve will tighten policy sooner.

The bond vigilantes -- who had been shorting bonds as a bet against the Federal Reserve view of transitory inflation – have been reining in their bearish bets on bonds on worries that the Fed may not be as behind the curve as feared.

"[I]f you're betting against the Fed you tend to not be accurate," Johan Grahn, Head of ETF Strategy at Allianz said in an interview with Investing.com on Thursday. "If you are accurate and it's typically for a short, short moment, then everybody else would bet in the same direction so it's a really slippery slope to go down."

There appears to be good reason to refrain from betting against the Fed's call on inflation. The economy is opening up, driving consumers back to areas that were shuttered during the pandemic such as restaurants and international travel, but this spike in prices doesn't matter yet as wages aren't rising.

"The decision making is happening at the consumer level, but it's not to spend more money necessarily, it's more about deciding where to spend the money, " Grahn added. "The consumer will have to decide whether they want to get on two flights for $300 apiece, for example, or if they want to get on one flight, which could now be $450 apiece instead."

Megacap tech stocks flourished against the backdrop of falling rates, keeping the broader market grinding higher.

Apart from Apple (NASDAQ:AAPL), the Fab 5 including Google-parent Alphabet (NASDAQ:GOOGL), Amazon.com (NASDAQ:AMZN), Microsoft (NASDAQ:MSFT), and Facebook (NASDAQ:FB) were in the green.

Health care stocks, however, were the standout performer on the day, led by a jump in Bristol-Myers Squibb Company (NYSE:BMY) and Bio-Rad Laboratories Inc (NYSE:BIO).

Bristol-Myers Squibb jumped 3% after reporting a positive update from a late-stage trial of its cancer drug Breyanzi.

Energy stocks were higher as oil prices recovered from an intraday dip following signs Iranian nuclear deal talks could resume after the U.S. lifted sanctions on several former Iranian officials and energy firms.

In meme mania news, GameStop (NYSE:GME), fell 27% after a slew of updates including second-quarter results that topped expectations, the appointment of two former Amazon executives, and plans to sell another 5 million shares.

S&P 500 Rides Falling Yields to Record Highs as Bond Bears Cower
 

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Comments (8)
Steves View
Steves View Jun 15, 2021 8:16AM ET
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Bubble has been here. Since WW2 .It's called transition. Algebra was main studies in Grade school. Now its Internet , And coding operation. Since drop of Bomb, Brain over braun has won out.  So Tech Has been replacing Physical Labor.  Some examples, Driverless cars, Soon robots will do operations.  Main Ideal here , Get degree in computers, Or you'll be left out.    No Bubble, New wave Future.
Corrupt Fed
Corrupt Fed Jun 10, 2021 9:06PM ET
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picture is perfect, that bubble about to pop
Leon Kelly
Leon Kelly Jun 10, 2021 7:43PM ET
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They say when all the bears have left the room then the correction is here.
Patrick Joly
Patrick Joly Jun 10, 2021 7:43PM ET
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Interesting...
Amos Patrick
Amos Patrick Jun 10, 2021 7:07PM ET
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Hello
SALIM MUSA MUHAMMAD
SALIM MUSA MUHAMMAD Jun 10, 2021 4:54PM ET
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Hello
Nedelcho Nikolov
Nedelcho Nikolov Jun 10, 2021 4:47PM ET
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Entry big sell 11700
Jb Jeong
Jb Jeong Jun 10, 2021 4:43PM ET
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no reasons, just killing stupid BEARS
Ab Adam
Ab Adam Jun 10, 2021 4:41PM ET
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Tomorrow market is going to be red
Sisyphus Trading
Sisyphus Trading Jun 10, 2021 4:41PM ET
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Thanks for your money in advance bear
David Bologa
David Bologa Jun 10, 2021 4:41PM ET
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the vix too sir?
 
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