(Bloomberg) -- Stocks rallied and Treasuries fell as the latest U.S. jobs data bolstered optimism in the economy, all but solidifying a rate hike later this month. The dollar advanced.
The S&P 500 Index rose for the second week in a row after the unemployment rate fell to 3.8 percent in May, the lowest in nearly half a century. Technology shares led the rally as the Nasdaq Composite Index closed at an 11-week high. The dollar headed for a seventh straight weekly gain, the longest streak since 2014, while the 10-year Treasury yield rose above 2.89 percent as investor focus turned to the pace of the Federal Reserve’s rate increases.
The jobs data underscored that the economy is strong enough to withstand another rate hike when the Federal Reserve meets later this month. Investors remain optimistic that threats of more international tariffs will not materialize into an all-out trade war between the U.S. and its key partners.
“This average hourly earnings report for May kind of puts in play the fact that inflation certainly is headed upward not downward,” Dan Heckman, a fixed-income strategist at U.S. Bank Wealth Management, said by phone. “This cements the June rate hike and if things continue to perform economically at this level and wages continue to move higher, and the unemployment rate drives even lower, I think the Fed, they need to raise rates at least three times this year.”
In Europe, stocks were set for the largest gain in a month after Italy’s populist parties grabbed power, ending a three-month political gridlock. The latest developments in Spain also removed uncertainty, providing some well-needed relief overseas. The common currency declined.
Elsewhere, West Texas Intermediate crude declined as rising U.S. output overshadowed a surprise drop in stockpiles, with traders also focused on whether Saudi Arabia and Russia will boost production.
Terminal users can read more in Bloomberg’s Markets Live blog.
These are some key events to watch this week:
- Automakers report May U.S. sales the same day.
- Also Friday: some onshore Chinese stocks join MSCI Inc.’s global indexes.
- On Saturday U.S. Secretary of Commerce Wilbur Ross will travel to Beijing for more talks with Vice Premier Liu He on topics including ZTE Corp. and trade.
These are the main moves in markets:
- The S&P 500 Index climbed 1.1 percent to 2,734 as of 4 p.m. New York time.
- The Nasdaq Composite Index gained 1.5 percent to highest since March 13.
- The Stoxx Europe 600 Index rose 1 percent, the largest increase in eight weeks.
- The MSCI Emerging Markets Index gained 0.9 percent.
- The Bloomberg Dollar Spot Index gained 0.2 percent.
- The euro fell 0.3 percent to $1.1656.
- The British pound rose 0.4 percent to $1.3346.
- The Japanese yen dropped 0.6 percent to 109.47 per dollar.
- The yield on 10-year Treasuries climbed four basis points to 2.89 percent.
- Germany’s 10-year yield rose four basis points to 0.39 percent.
- Italy’s 10-year yield fell 11 basis points to 2.689 percent.
- Spain’s 10-year yield decreased six basis points to 1.441 percent.
- Gold fell 0.4 percent to $1,293.60 an ounce.
- West Texas Intermediate crude dropped 2.1 percent to $65.58 a barrel.
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