US stocks jump as Treasury yields pull back from recent highs

US stocks rose on Friday as Treasury yields fell from recent highs and investors weighed the latest economic data at the end of a week in which the outlook for interest rates remained in sharp focus.

The blue-chip S&P 500 was up 1.5 percent Friday afternoon in New York, and the tech-heavy Nasdaq Composite jumped 1.9 percent. The S&P 500 is up 1.9 percent over the past five sessions and is on track to end a three-week losing streak.

The US ISM Non-Manufacturing Purchasing Managers’ Index reading for February was 55.1, which was higher than expected for 54.6.

“The economy is off to a good start for 2023 and is overall more resilient to higher interest rates than expected,” said Bill Adams, chief economist at Comerica Bank. “Over time, margin pressure will slow hiring and potentially lead to higher unemployment rates, but surveys show little indication of that so far.”

Data released on Thursday showed jobless claims fell to 190,000 in the week ended February 25, well short of a forecast of 195,000, and below expectations for a seventh straight month, indicating a continuing tight labor market. .

Investors will be closely watching next week’s payroll report and unemployment data.

“While we are expecting payrolls will not be as strong as last month – a modest 200,000 – it will still be very strong and give us the best indication of the supply and demand balance,” said Seema Shah, chief global strategist at Principal Asset. management. “We need to re-evaluate and understand how far wage pressures have subsided, and given that inflation expectations have risen, we could see a very sticky picture over the next three to six months.”

Markets were also buoyed by comments from Atlanta Federal Reserve President Raphael Bostic, who said Thursday he supported a “slow and steady” approach to raising rates but was prepared to support higher hikes if economic data remained strong. was open to

US Treasury yields slipped on Thursday after hitting their highest level in years. The two-year notes, which are more sensitive to monetary policy, fell to 4.86 per cent on Thursday after hitting 4.94 per cent, the highest since 2007. Ten-year notes fell to 3.96 per cent. Bond prices rise when yields fall.

For much of February, investors were rattled by a series of stronger-than-expected economic data points, fueling fears that major central banks would hold interest rates longer to combat sluggish inflation. Will maintain

“Equity markets are now responding more to the bright growth outlook, which means they are better placed to absorb the potential.” [of further rate increases]Barclays analysts said.

In Europe, the region-wide Stoxx 600 and France’s Cac 40 both closed 0.9 percent higher, ending the week with gains of 1.4 percent and 2.2 percent, respectively. Britain’s FTSE 100 was flat. Germany’s DAX rose 1.6 percent after S&P Global Composite Purchasing Managers’ Index data for the eurozone’s biggest economy downgraded to 50.7 from 51.1. The index ended the week up 1.5 per cent.

Final European S&P composite purchasing managers’ index data was downgraded to 52 from 52.3 on Friday. However, both readings still indicate an expansion in activity compared to the previous month.

“It makes sense that data is improving and the economic outlook in the eurozone has improved,” said Neil Shearing, group chief economist at Capital Economics. “But since it has been revised, it will dampen some of the optimism.”

Tuesday’s data from France and Spain, two of the eurozone’s biggest economies, showed stronger-than-expected inflation figures.

The yield on the 10-year German government bond fell 0.03 percentage points to 2.69 percent.

The dollar index, which measures the greenback against six peer currencies, fell 0.4 percent. The euro was up 0.3 percent, while sterling was 0.8 percent higher against the greenback.

Brent crude oil was up 1.3 per cent at $85.87 a barrel and WTI, the US equivalent, was up 2 per cent at $79.79.

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