U.S. Stocks Rise As Tech Rally Buoys Mood; Bonds Drift: Markets Wrap

(Bloomberg) -- US stocks advanced as risk appetite continued to recover from turmoil in the banking sector, with investors turning their focus to data on the Federal Reserve’s preferred measure of inflation due Thursday.

The S&P 500 climbed, lead higher by technology stocks, with Micron Technology Inc. up  after issuing a better-than-expected outlook for the quarter. Meanwhile, bank stocks were also higher after UBS Group AG brought back a former CEO to oversee its acquisition of Credit Suisse Group AG. 

US Treasuries were little changed and the dollar strengthened as investors awaited the latest core PCE deflator data and remarks from Fed officials at a US Senate hearing for clues on how the central bank’s path on interest rates might change after bank failures in the US and Europe upended market expectations.

Swaps traders have priced in about a 50% probability the Fed will raise rates by a quarter point at its next meeting, with plans to ease thereafter. However, several strategists say markets are wrong in expecting imminent rate cuts. 

“The Fed remains in a very difficult position (largely of its own doing),” wrote Chris Senyek of Wolfe Research in a note. “With banks stabilizing, inflation still way above target, the labor market still historically strong, and the Fed desperately needing to rebuild credibility, our sense is that the FOMC will hike by 25 basis points on May 3. However, [Chairman Jerome] Powell does not like to surprise markets, so this is far from a certainty.”

Wall Street strategist are still struggling to predict how stocks might react in the months ahead, given the uncertainty of the Fed’s path forward on interest rates. For a third straight month, their average year-end target for the S&P 500 stayed at 4,050, a streak of inaction not seen since 2005. 

As concerns about the safety of bank deposits continue to ease, however, analysts are turning their attention back to examining the economy and prepping for upcoming earnings, said Peter Tchir of Academy Securities.

In the latest batch of corporate results, Lululemon Athletica Inc. jumped after its earnings and outlook topped estimates. A profit drop at Jefferies Financial Group Inc. could spell trouble for other bank earnings. Meanwhile, weaker homebuying demand from a March survey of real estate agents could be a potential early indication buyers are unnerved by the turmoil in the banking sector. 

Elsewhere, oil pared a gain on a report US gasoline inventories shrank last week. Gold fell, and Bitcoin extended its climb to $.

Key events this week:

• Eurozone economic confidence, consumer confidence, Thursday
• US GDP, initial jobless claims, Thursday
• Boston Fed President Susan Collins and Richmond Fed President Thomas Barkin speaks at event. Treasury Secretary Janet Yellen also speaks, Thursday
• China PMI, Friday
• Eurozone CPI, unemployment, Friday
• US consumer income, PCE deflator, University of Michigan consumer sentiment, Friday
• ECB President Christine Lagarde speaks, Friday
• New York Fed President John Williams speaks, Friday

Some of the main moves in markets:

Stocks

• The S&P 500 rose 0.9% as of 11:15 a.m. New York time
• The Nasdaq 100 rose 1.2%
• The Dow Jones Industrial Average rose 0.5%
• The Stoxx Europe 600 rose 1.2%
• The MSCI World index rose 0.2%

Currencies

• The Bloomberg Dollar Spot Index rose 0.2%
• The euro fell 0.1% to $1.0834
• The British pound fell 0.2% to $1.2318
• The Japanese yen fell 1.3% to 132.61 per dollar

Cryptocurrencies

• Bitcoin rose 3.8% to $28,340.94
• Ether rose 1.4% to $1,799.3

Bonds

• The yield on 10-year Treasuries declined two basis points to 3.55%
• Germany’s 10-year yield advanced two basis points to 2.31%
• Britain’s 10-year yield was little changed at 3.45%

Commodities

• West Texas Intermediate crude rose 0.8% to $73.79 a barrel
• Gold futures fell 0.4% to $1,982.90 an ounce

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