US Stocks: S&P 500 Notches Best Week Since Late January

US stocks ended the week on a high note, driven by speculation that the Federal Reserve won’t raise interest rates beyond peak levels already priced in, Bloomberg reported.

A rally in the S&P 500 Friday helped snap a three-week losing streak. The Nasdaq 100 scored its best day since early February. Sentiment remained upbeat despite a report showing resilience in the service sector, as some investors wagered the impact of the Fed’s hikes on the economy would be delayed. A measure of prices paid by service providers showed costs rising at a slower pace, which was cheered by traders.

Bond yields rose for the week though Treasuries rallied on Friday, with the 10-year yield hovering around 3.96%. A benchmark of the dollar had its worst week since mid-January, ending four consecutive weeks of gains.

All eyes will be on the non-farm payrolls report next week for clues on whether the economy can handle more rate hikes. Data this week showed continued labor-market resilience in the US, supporting the case for the Fed to stick to its tightening policy, a theme that had pushed almost every major asset into the red in February.

But investors were heartened after Atlanta Fed’s Raphael Bostic said on Thursday that the central bank could possibly pause its rate hikes sometime this summer. Traders interpreted his comments as dovish, even though Bostic and his colleagues said decisions would continue to be data dependent and a Fed report on Friday emphasized that further rate increases are in store.

Traders are still optimistic because even the most hawkish Fed officials haven’t suggested that rates could need to go beyond levels already baked in, said Priya Misra, global head of rates strategy at TD Securities. Swap markets have been pricing a peak Fed policy rate of 5.5% in September.

“I think they stay at 5.5% and we have to see how data evolves in the second quarter,” she said on Bloomberg Television.

Misra also added that robust data doesn’t mean the Fed’s persistent tightening isn’t working.

“It takes a long time,” she said. “Policy only turned restrictive last year.”

Risk sentiment also received a boost on Friday from forecast-beating factory data from China. Oil gained for the fourth day, with confidence in China’s robust rebound supporting prices.

Some of the main moves in markets:

Stocks

• The S&P 500 rose 1.6% as of 4 p.m. New York time
• The Nasdaq 100 rose 2%
• The Dow Jones Industrial Average rose 1.2%
• The MSCI World index rose 0.4%

Currencies

• The Bloomberg Dollar Spot Index fell 0.5%
• The euro rose 0.3% to $1.0634
• The British pound rose 0.8% to $1.2041
• The Japanese yen rose 0.7% to 135.85 per dollar

Cryptocurrencies

• Bitcoin fell 4.8% to $22,296.29
• Ether fell 5% to $1,558.57

Bonds

• The yield on 10-year Treasuries declined 10 basis points to 3.96%
• Germany’s 10-year yield declined four basis points to 2.72%
• Britain’s 10-year yield declined three basis points to 3.85%

Commodities

• West Texas Intermediate crude rose 2% to $79.74 a barrel
• Gold futures rose 1.1% to $1,861.30 an ounce