U.S. Stocks Rally as 10-Year Yield Reaches 2.9%: Markets Wrap

(Bloomberg) -- U.S. stocks extended a rebound while Treasury yields rose to a four-year high as economic data supported expectations that the Federal Reserve will maintain a gradual approach to raising interest rates.

The S&P 500 Index climbed for a fourth day as banks and durable-goods makers rallied, returning the gauge to a gain for the year after it fell more than 10 percent from a January peak. Gold rallied and the dollar slumped as the 10-year yield topped 2.9 percent.

Signs of an inflation pickup have roiled financial markets this month, and stock futures tumbled early Wednesday on concern the Fed would quicken its pace of tightening following data that showed faster-than-forecast inflation. Those fears receded as investors digested a separate report showing weak retail sales that raised questions about the economy’s strength.

“We’re trying to weigh how much each data point is going to matter,” said Kristina Hooper, the chief global market strategist at Invesco Ltd. “It’s about building a case for the FOMC.”

New Fed Chairman Jerome Powell suggested Tuesday that the Federal Open Market Committee would forge ahead with gradual tightening even as it keeps an eye on financial-system risks following the recent equity rout.

Oil rallied past $60 a barrel after a smaller-than-expected increase in U.S. supplies in storage. In Europe, stocks advanced as investors traded on earnings from companies including Credit Suisse Group AG. The yen’s rise to a 15-month high weighed on Japan’s Topix index, while shares in Seoul, Hong Kong and Shanghai gained before a weeklong Lunar New Year holiday.

South Africa’s rand headed for its strongest level against the dollar in almost three years as President Jacob Zuma resigned under pressure from the ruling African National Congress.

Terminal users can read more in our markets blog.

Here are some important things to watch out for this week:

• Lunar new year celebrations for the Year of the Dog begin, affecting China, Hong Kong, Taiwan, Singapore, Malaysia and Indonesia. Chinese mainland markets are closed Feb. 15-21.
• Earnings season continues in full swing.

These are the main moves in markets:

Stocks

• The S&P 500 rose 1.3 percent at the close of trading in New York.
• The Stoxx Europe 600 Index increased 1.1 percent.
• The MSCI Asia Pacific Index rose 0.8 percent.

Currencies

• The Bloomberg Dollar Spot Index fell 0.8 percent.
• The euro rose 0.9 percent to $1.2459.
• The Japanese yen increased 0.8 percent to 106.97 per dollar.
• South Africa’s rand jumped 2.4 percent to 11.6869 per dollar.

Bonds

• The yield on 10-year Treasuries rose eight basis points to 2.91 percent.
• Germany’s 10-year yield rose one basis point to 0.75 percent.

Commodities

• West Texas Intermediate rose 2.5 percent to $60.68 a barrel.
• Gold rose 1.7 percent to $1,352.53 an ounce for the biggest gain since May.

--With assistance from Adam Haigh Blaise Robinson Divya Balji Robert Brand Todd White Randall Jensen Jeremy Herron Sarah Ponczek and Cameron Crise

To contact the reporter on this story: Kailey Leinz in New York at kleinz1@bloomberg.net.

To contact the editors responsible for this story: Jeremy Herron at jherron8@bloomberg.net, Brendan Walsh

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