Rita Nazareth
7 min read
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(Bloomberg) -- Wall Street traders drove stocks higher as bond yields sank after the latest economic data spurred bets the Federal Reserve will cut interest rates at least twice this year to prevent a recession.
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Equities erased earlier losses, sending the S&P 500 up for a fourth straight day. A sense of caution still prevailed after a furious surge spurred worries about an overheated market, with the pendulum swinging in favor of defensive dividend-payers that had underperformed in the past month. Conversely, most big techs fell. Treasuries rose across the curve, led by shorter maturities.
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Prices paid to US producers unexpectedly declined by the most in five years suggesting companies are absorbing some of the hit from higher tariffs. Growth in retail sales decelerated notably. Factory production declined for the first time in six months while New York state manufacturing contracted again. And confidence among homebuilders slumped.
“If you are in the stagflation camp, these data aren’t confirming your thesis,” said Jamie Cox at Harris Financial Group. “While growth is slowing, disinflation remains intact.”
The S&P 500 rose 0.5%. The Nasdaq 100 added 0.5%. The Dow Jones Industrial Average gained 0.4%. Cisco Systems Inc. surged on a solid forecast. Walmart Inc. pared most of a slide driven by concerns it would start raising some prices. UnitedHealth Group Inc. plummeted on a report it was under criminal investigation for possible Medicare fraud.
The yield on 10-year Treasuries declined 10 basis points to 4.44%. Government debt was whipsawed by a slew of block trades that briefly put the 30-year yield on the cusp of 5%. The Bloomberg Dollar Spot Index fell 0.2%.
Oil slumped as Donald Trump said the US and Iran are getting closer to a deal regarding Tehran’s nuclear program.
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“Today’s data doesn’t change the narrative,” said Ellen Zentner at Morgan Stanley Wealth Management. “Retail sales suggest consumers are becoming pickier, while there remains no sign of broad-based layoffs. The slowdown in inflation in April provides little comfort as the impact from tariffs is yet to come.”
