Stocks Gain as Tech Overcomes Inflation Worries: Markets Wrap

(Bloomberg) -- U.S. equities climbed, led by technology and communication services, Friday as inflationary pressures continued to reverberate through markets.

The S&P 500 rose 0.7% in a second day of gains after a slide Wednesday on higher-than-expected consumer prices. Johnson & Johnson gained after saying it will split into two companies. And Lordstown Motors slid after announcing production delays. Treasuries fell.

“It’s almost like were in this period of invincible optimism,” Liz Young, head of investment strategy at SoFi, said in a phone interview. “It is just an optimistic time. When you have a week that was kind of flat to sideways, a Friday bounce isn’t all that unlikely.”

While global stocks secured their first weekly drop since early October, their losses have been muted compared with the gyrations in the bond market. Equities remain near all-time highs after a strong corporate earnings season. However, bond traders fear elevated inflation could lead to tighter monetary policy. U.S. consumer sentiment has dropped to a 10-year low.

“Both cyclical and secular growth sectors are doing well because that’s where we’re seeing growth in the economy,” said Tom Hainlin, national investment strategist at U.S. Bank National Association, by phone. “We’re seeing cyclical companies be able to overcome that inflation. And then I’m seeing the secular growth companies still seeing strong demand.” 

Treasury yields rose Friday with the 30-year bond gaining 4 basis points after a U.S. trading holiday Thursday. Meanwhile, a gauge of the U.S. yield curve has flattened to the least since March 2020. 

“In many ways, we’re back in this environment where inflation fears are rearing their ugly head again,” said Kara Murphy, CIO of Kestra Investment Management, by phone. “We’re still sticking with our view that eventually these will abate, but I think the timing and how long it will take for these prices to pull back is longer than what we might have expected a few months ago.”

In Europe, stocks climbed, led by luxury consumer companies, and in Asia, shares were higher, helped by a rally in Japan.

The dollar fell amid caution triggered by a U.S. warning Russia may be weighing a potential invasion of Ukraine. 

Oil and Bitcoin slipped. Gold erased earlier losses.

For more market analysis, read our MLIV blog.

Stocks

• The S&P 500 rose 0.7% as of 4 p.m. New York time
• The Nasdaq 100 rose 1%
• The Dow Jones Industrial Average rose 0.5%
• The MSCI World index rose 0.7%

Currencies

• The Bloomberg Dollar Spot Index fell 0.2%
• The euro was little changed at $1.1446
• The British pound rose 0.4% to $1.3421
• The Japanese yen rose 0.2% to 113.88 per dollar

Bonds

• The yield on 10-year Treasuries advanced two basis points to 1.57%
• Germany’s 10-year yield declined three basis points to -0.26%
• Britain’s 10-year yield was little changed at 0.91%

Commodities

• West Texas Intermediate crude fell 1% to $80.81 a barrel
• Gold futures rose 0.2% to $1,868.50 an ounce

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