U.S. Stocks Rise to Records, Treasuries Rally: Markets Wrap

(Bloomberg) -- Major U.S. indexes rose to all-time highs in thin trading ahead of a holiday and the rally in global bonds extended as investors weighed the prospect of more dovish appointees to two of the world’s major central banks.

The Dow Jones Industrial Average notched its first record since October, while the S&P 500 climbed a fifth day to extend its high. Futures on the broader index briefly topped 3,000 for the first time. The Nasdaq indexes rose past closing records set in early May. Stock investors piled into high dividend-yielding sectors like utilities and REITs after 10-year Treasury yields dipped to the lowest since November 2016 on rising market bets that the Federal Reserve will cut rates this month. Markets closed at 1 p.m. ahead of the July 4 holiday.

“We’ve seen continued doubt and worry over this bull market for a decade now, yet it continues to defy all skeptics,” said Ryan Detrick, senior market strategist for LPL Financial. “The bottom line is the dual benefit of both fiscal and monetary policy should help extend this business cycle potentially much longer than many expect.”

The dollar fell after jobless claims came in broadly as forecast and private hiring numbers missed expectations. A reading on the services sector fell to the lowest since 2017, but Wednesday’s batch of data did little to move markets, with jobs numbers coming Friday. The euro erased a small drop as purchasing manager data for the region was revised slightly higher.

Europe’s leaders have nominated Christine Lagarde to take the helm of the ECB later this year, ushering in a candidate analysts anticipate will take up departing President Mario Draghi’s mantle in providing stimulus. And U.S. President Donald Trump said he’s planning to nominate Christopher Waller and Judy Shelton to serve on the Fed Board, candidates both seen as likely to advocate lower interest rates.

The yield difference between Italian 10-year government bonds and the equivalent German securities fell to below 200bps for the first time since May 2018 after the European Commission deciding not to penalize Italy for breaking government spending limits.

“An absence of inflation, the shortages of ‘safe’ positive yielding bonds that is a legacy of QE, geopolitical concerns and a dovish monetary policy bias almost everywhere are seeing the bond rally go on, and on,” Kit Juckes, chief global FX strategist at Societe Generale, wrote in a note.

Meanwhile, Cleveland Fed President Loretta Mester said she’d need to see more data before supporting an immediate rate cut, while many of her colleagues are leaning toward loosening policy.

Elsewhere, oil rebounded after tumbling Tuesday. Shares in Japan, China and South Korea led losses in Asia as equities in Australia edged higher. The yen strengthened after the Bank of Japan made small tweaks to its bond buying program.

Here are some key events coming up:

• U.S. markets equity markets close at 1 p.m. on Wednesday and remain shut Thursday for the Independence Day holiday.
• The U.S. jobs report is due Friday and is projected to show non-farm payrolls rose by 164,000 in June, rebounding from 75,000 the month prior.

Here are the main moves in markets:

Stocks

• The S&P 500 Index increased 0.8% as of 1 p.m. New York time, hitting the highest on record with its fifth straight advance.
• The Dow rose 0.7% for its first record since Oct. 3.
• The Stoxx Europe 600 Index jumped 0.8%, reaching the highest in almost 13 months on its fifth consecutive advance and the biggest increase in more than two weeks.
• The MSCI Emerging Market Index dipped 0.5%, the biggest decrease in more than a week.
• The MSCI Asia Pacific Index fell 0.3%, the largest fall in a week.

Currencies

• The Bloomberg Dollar Spot Index decreased 0.1%, the biggest dip in more than a week.
• The euro increased less than 0.05% to $1.1282.
• The Japanese yen climbed 0.1% to 107.82 per dollar, the strongest in more than a week.

Bonds

• The yield on 10-year Treasuries declined two basis points to 1.95%, the lowest in more than two years.
• The two-year rate was little changed at 1.76%.
• Italy’s 10-year rate fell 25 basis points to 1.58%.
• Germany’s 10-year yield dipped two basis points to -0.38%, hitting the lowest on record with its fifth straight decline.

Commodities

• West Texas Intermediate crude gained 1% to $56.82 a barrel.
• Gold futures increased 0.8% to $1,419.30 an ounce, the highest in more than a week.

--With assistance from Laura Curtis.

To contact the reporters on this story: Vildana Hajric in New York at vhajric1@bloomberg.net;Jeremy Herron in New York at jherron8@bloomberg.net

To contact the editors responsible for this story: Samuel Potter at spotter33@bloomberg.net, Namitha Jagadeesh

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