Stocks Climb With VIX Down to Pre-Pandemic Levels: Markets Wrap

(Bloomberg) -- In a week that saw a plunge in stock volatility, investors scooped up companies mostly tied to an economic recovery. On the other side of the spectrum, bond traders sent Treasuries slumping.

It may be too early to say that the reflation trade has come back in full force, but at least the anxiety regarding the Federal Reserve’s hawkish tilt has eased. At least for now, there’s a perception that officials won’t rush to boost interest rates despite mounting inflation pressures. The S&P 500 had its best week since February, with financial and retail shares beating the tech giants that powered the stay-at-home strategy. The Cboe Volatility Index, or the VIX, tumbled to pre-pandemic levels.

Aside from President Joe Biden’s infrastructure deal and reassurances from some prominent voices such as Fed Chair Jerome Powell, a batch of economic readings came out this week. Data Friday showed personal spending stagnated in May, while a closely watched inflation measure continued to climb. Meantime, U.S. consumer sentiment rose in June by less than forecast and longer-term inflation expectations moderated from a month earlier.

“Equities have rallied because the Fed is successfully walking the tightrope,” said Randy Frederick, managing director of trading and derivatives for Charles Schwab. “That’s a very tricky tightrope to walk -- watching and taking action enough to keep inflation under control, but at the same time not acting too aggressively or too quickly that you squash economic growth.”

Among the corporate highlights, some of the biggest banks rose on speculation of a potential deluge of dividends and buybacks after the Fed’s stress tests. Virgin Galactic Holdings Inc. soared after getting regulatory approval to fly customers into space. Nike Inc. jumped on an upbeat forecast, while FedEx Corp. sank amid a disappointing outlook.

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These are some of the main moves in markets:

Stocks

• The S&P 500 rose 0.3% as of 4 p.m. New York time
• The Nasdaq 100 fell 0.1%
• The Dow Jones Industrial Average rose 0.7%
• The MSCI World index rose 0.4%

Currencies

• The Bloomberg Dollar Spot Index was little changed
• The euro was little changed at $1.1941
• The British pound fell 0.2% to $1.3890
• The Japanese yen was little changed at 110.76 per dollar

Bonds

• The yield on 10-year Treasuries advanced three basis points to 1.52%
• Germany’s 10-year yield advanced three basis points to -0.16%
• Britain’s 10-year yield advanced four basis points to 0.78%

Commodities

• West Texas Intermediate crude rose 0.9% to $73.98 a barrel
• Gold futures rose 0.2% to $1,779.50 an ounce

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