Wall Street stocks went further into record territory on Friday as investors ignored high inflation in the United States to focus on President Joe Biden’s stimulus deal.
The S&P 500 was up 0.3% by mid-afternoon in New York, putting the blue chip index on track for a new record close. The broad benchmark was heading for a weekly gain of 2.7%, its best performance since early April, while the tech-focused Nasdaq Composite was stable for the session.
“If adopted, [the infrastructure plan] would increase GDP by around 1% at its maximum effect in 2025-2026, ”predicts a note from Evercore ISI Research.
The infrastructure deal eclipsed Friday’s release of data showing basic personal consumption spending in the United States – the Federal Reserve’s preferred measure of price hikes – reaching 3.4% in the 12 months leading up to May. , its largest annual increase in 29 years.
The monthly rise in inflation was, however, slightly lower than economists’ expectations, which potentially allowed the US central bank to modify its ultra-accommodative monetary policy.
“We see a small sigh of relief as equities are also supported by infrastructure news,” said Keith Parker, chief US equities strategist at UBS. Expectations that companies would report strong profits in the second quarter as they reap the benefits of the reopening of the US economy were also “a strong tailwind,” he added.
Public debt prices fell on inflation data. Ten-year US Treasury yields were 1.53 percent.
Investors holding bonds, more sensitive to inflation than stocks, fear that price increases will become more persistent. For the first time since April 2018, inflation was the issue of greatest concern to credit investors, according to a Bank of America survey released on Friday.
“There is no doubt that the inflation numbers over the next few months will continue to be high,” said Francesco Sandrini, senior multi-asset strategist at fund manager Amundi.
“But markets are struggling to find confidence in what to do about it” following mixed messages from Fed officials about whether price hikes should lead to tighter monetary policy, he said. -he declares.
Fed Chairman Jay Powell continued to call the price spike “transient,” but St Louis Fed Chairman James Bullard on Thursday said he believed the price hikes could be problematic . “A new risk is that inflation will continue to surprise on the upside,” he said in a statement. presentation.
Schroders strategist Sean Markowicz said: “What we might see next year is that higher commodity prices will translate into higher input prices, which will spill over into prices at higher consumption, then higher wages. ”
This has left open the question of whether Powell’s “transient” inflation “means six, 12, 18 months or more,” Markowicz added.
In Europe, the Stoxx 600 index closed 0.1% higher, leaving the continent-wide benchmark up 1.2% for the week.
The recent oil recovery has accelerated, with Brent crude climbing an additional 0.5% to exceed $ 76 a barrel, the highest level of the global marker since October 2018.
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