Wall Street rises along with Treasury yields as inflation heats up

NEW YORK (Reuters) -The S&P 500 and the Dow posted modest gains on Friday, but the Nasdaq was lower, with interest-rate sensitive stocks losing ground as Treasury yields edged higher.

FILE PHOTO: Traders wearing masks work,on the floor at the New York Stock Exchange (NYSE) in New York, U.S., May 26, 2020. REUTERS/Brendan McDermid/File Photo

But all three major U.S. stock indexes were on track to post weekly gains as upbeat economic data boosted investor risk appetite ahead of the first-quarter earnings season.

“The reopening trade is still very much alive,” said Oliver Pursche, senior vice president at Wealthspire Advisors in New York. “And you’re seeing that in the relative underperformance of the high-flying tech that did so well throughout the shutdowns.”

A Labor Department report showed producer prices rose last month at twice the speed of February’s growth, reviving some inflation worries.

This, despite U.S. Federal Reserve Chairman Jerome Powell’s assurances on Thursday that the central bank is far more concerned about the recent uptick in COVID-19 infections than inflationary pressures.

“Things are now getting back to normal from a period of suppressed pricing,” Pursche added. “Prices are getting back to their equilibrium. One month of price spikes does not make a trend.”

The Dow Jones Industrial Average rose 72.26 points, or 0.22%, to 33,575.83, the S&P 500 gained 1.68 points, or 0.04%, to 4,098.85 and the Nasdaq Composite dropped 36.54 points, or 0.26%, to 13,792.77.

European stocks were little changed, but remained on track for their best week since November 2019 on evidence of growing momentum in the global economic revival.

The pan-European STOXX 600 index rose 0.06% and MSCI’s gauge of stocks across the globe shed 0.13%.

Emerging market stocks lost 0.95%. MSCI’s broadest index of Asia-Pacific shares outside Japan closed 0.83% lower, while Japan’s Nikkei rose 0.20%.

U.S. Treasury yields rose, hitting session highs in the wake of the PPI report, which provided further evidence that the world’s largest economy was on a stable road to recovery from the pandemic.

Benchmark 10-year notes last fell 7/32 in price to yield 1.655%, from 1.632% late on Thursday.

The 30-year bond last fell 3/32 in price to yield 2.327%, from 2.322% late on Thursday.

The dollar gained ground against a basket of world currencies, but the greenback appeared set for its softest week of the year on upbeat economic data and the dovish Fed.

The dollar index rose 0.17%, with the euro down 0.2% to $1.1888.

The Japanese yen weakened 0.31% versus the greenback at 109.60 per dollar, while Sterling was last trading at $1.3727, down 0.04% on the day.

Crude oil prices dipped on rising supply amid a mixed picture on demand recovery from the COVID slump.

U.S. crude fell 0.03% to $59.58 per barrel and Brent was last at $63.17, down 0.05% on the day.

Gold withdrew from Thursday’s one-month peak, weighed down by a rebounding dollar and rising Treasury yields. Still, the safe-haven metal appears headed for its first weekly gain in three.

Spot gold dropped 0.6% to $1,745.05 an ounce.

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