(Bloomberg) — Stocks touched all-time highs and bond yields fell as second-quarter earnings roll in and Federal Reserve Chairman Jerome Powell makes the case for maintaining economic stimulus.
The S&P 500 flucutuated as Powell presented testimony to Congress emphasizing that the U.S. economic recovery still hasn’t progressed enough to begin scaling back support such as asset purchases. Bank of America Corp. dropped after second-quarter earnings failed to impress investors, while Wells Fargo & Co. gained.
The 10-year U.S. Treasury yield retreated below 1.4% and the dollar declined. Powell added that inflation is likely to remain high in coming months before moderating.
“The Fed chair is deeply committed to the transitory narrative, putting the dual mandate of full employment in all caps while price stability is in lower case letters,” said Julian Emanuel, chief equity and derivatives strategist a BTIG.
The Stoxx Europe 600 index was little changed. The pound gained and gilts fell after U.K. consumer prices accelerated more than analysts’ expectations in June.
A report earlier showed prices paid to U.S. producers rose in June by more than expected, indicating pressure is mounting on companies to pass along higher costs to consumers. The June U.S. consumer inflation print on Tuesday topped all forecasts and pointed to higher costs associated with the reopening from the pandemic. Fed officials have said they expect such pressures to be transitory but some commentators see a risk of more durable increases that could force a quicker-than-expected reduction in stimulus.
“The Fed remains laser-focused on the employment situation,” said Ross Mayfield, investment strategy analyst at Baird. “So while the recovery in parts of the economy is totally complete and has even surpassed pre-covid levels, the fact that we’re still about 7 million short of pre-pandemic nonfarm payrolls, labor force participation is weak, and the unemployment rate is above 4-5% means the Fed will remain accommodative. But no doubt the inflation numbers are starting to put them in a bind.”
Global stocks remain close to a record and a range of other factors are influencing the outlook. They include the spread of the more contagious Covid-19 delta variant, the possibility of a peak in earnings and economic growth, and U.S. fiscal spending plans.
Oil edged lower after builds in gasoline and distillate inventories as well as an increase in the U.S production during peak summer demand. Futures earlier fell as much as 1.8% in New York on Wednesday.
For more market commentary, follow the MLIV blog.
Here are some events to watch this week:
Bank of Korea monetary decision ThursdayBank of Japan interest rate decision Friday
These are some of the main moves in financial markets:
Stocks
The S&P 500 rose 0.2% as of 2:42 p.m. New York timeThe Nasdaq 100 rose 0.4%The Dow Jones Industrial Average rose 0.2%The MSCI World index was little changed
Currencies
The Bloomberg Dollar Spot Index fell 0.5%The euro rose 0.5% to $1.1833The British pound rose 0.3% to $1.3857The Japanese yen rose 0.6% to 109.99 per dollar
Bonds
The yield on 10-year Treasuries declined six basis points to 1.36%Germany’s 10-year yield declined three basis points to -0.32%Britain’s 10-year yield was little changed at 0.63%
Commodities
West Texas Intermediate crude fell 2.9% to $73.06 a barrelGold futures rose 0.9% to $1,826.60 an ounce
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