(Bloomberg) — A flurry of data showing the American economy’s resilience has put US stocks on course for their strongest week of the year.
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The latest readings, from inflation to jobless claims and retail sales, have reassured investors and supported hopes that the world’s biggest economy is heading for a “Goldilocks” scenario of contained price pressures accompanied by resilient growth. The S&P 500 has rallied 3.7% this week, while the Nasdaq 100 is up more than 5%, the biggest gains for both indexes since November.
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“There is little in the data flow now to really derail sentiment in the immediate near-term,” said Chris Weston, head of research at Pepperstone Group Ltd.
Stock markets around the world have largely erased last week’s losses, when traders were worried the Federal Reserve won’t cut interest rates fast enough to achieve a soft landing for the US economy. In Europe Friday, the Stoxx 600 Index added 0.3% as it headed for its best week since May. US equity futures were little changed.
The dollar slipped, on course for a third week of declines, the longest such losing streak in more than five months. Treasury yields headed lower across the curve, after surging Thursday as the resilient US economic data prompted traders to dial back bets for a jumbo September Fed rate cut. A 25 basis-point reduction remains fully priced, with more than 90 basis points of easing expected by the end of 2024.
Friday’s market gains were strongest in Asia, where stocks also headed for their best weekly performance in over a year, led by Japan as a weaker yen boosts exporters’ earnings prospects. The currency is set for its sharpest weekly drop since June after sliding 1.3% against the dollar Thursday. It was trading around the 149 level, easing fears of a massive carry trade unwind.
Among individual stock moves, Applied Materials Inc. fell in US premarket trading, after the semiconductor capital-equipment company’s forecast disappointed bullish investors looking for a bigger payoff from artificial intelligence spending. Bayer AG jumped 10% following a significant win for the German company in long-running cancer litigation over its Roundup weedkiller.
The latest gains on Wall Street saw the S&P 500 notch its strongest six-day winning run since November 2022. Strategists at Bank of America Corp. said US stocks just recorded a seventh straight week of inflows, underscoring the sustained appetite for equities among investors. BofA said about $5.5 billion went into US equity funds in the week through Aug. 14, in a note citing EPFR Global data.
US officials have been trying to use higher rates to ease inflation without causing the economy to contract. Fed Bank of St. Louis President Alberto Musalem said the time is nearing when it will be appropriate to cut rates. His Atlanta counterpart Raphael Bostic told the Financial Times he’s “open” to a reduction in September.
“A soft landing is no longer a hope. It’s becoming a reality,” said David Russell at TradeStation. “These numbers also suggest that recent market volatility wasn’t really a growth scare. It was just normal summer seasonality amplified by moves in the currency market.”
In commodities, gold was on track for a weekly gain. Oil dropped as the market weighed strong US economic data and a possible attack by Iran or its proxies on Israel against a lackluster Chinese demand outlook.
Key events this week:
US housing starts, University of Michigan consumer sentiment, Friday
Fed’s Austan Goolsbee speaks, Friday
Canada housing starts, Friday
Some of the main moves in markets:
Stocks
S&P 500 futures were little changed as of 6:14 a.m. New York time
Nasdaq 100 futures were little changed
Futures on the Dow Jones Industrial Average were little changed
The Stoxx Europe 600 rose 0.3%
The MSCI World Index rose 0.3%
Currencies
The Bloomberg Dollar Spot Index fell 0.2%
The euro rose 0.1% to $1.0988
The British pound rose 0.4% to $1.2905
The Japanese yen rose 0.5% to 148.54 per dollar
Cryptocurrencies
Bitcoin rose 3% to $58,388.89
Ether rose 2.5% to $2,613.99
Bonds
The yield on 10-year Treasuries declined three basis points to 3.88%
Germany’s 10-year yield declined three basis points to 2.23%
Britain’s 10-year yield declined two basis points to 3.90%
Commodities
West Texas Intermediate crude fell 1.9% to $76.70 a barrel
Spot gold rose 0.3% to $2,464.98 an ounce
This story was produced with the assistance of Bloomberg Automation.
–With assistance from Richard Henderson, Robert Brand, Sagarika Jaisinghani, Divya Patil and Lynn Thomasson.
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