US stocks rose on Monday as investors were confident that upcoming economic data would ease pressure on the Federal Reserve to continue raising interest rates.
Wall Street’s blue-chip S&P 500 index rose 0.8 percent, with all sectors except energy making gains. The tech-heavy Nasdaq Composite added 1.1 percent in late afternoon trading in New York. US equities last week posted their biggest five-day decline in two months.
Stocks have declined and government bond yields have risen since data in early February showed the U.S. added more than 500,000 jobs in the first month of the year, roughly triple the number that had been forecast.
The numbers suggest the US economy is stronger than expected, and traders are betting the Fed will be forced to raise rates more to fight inflation. After a confident start in 2023, “the position of investors has become more bearish”, said analysts at JPMorgan.
Monday’s gains came ahead of Tuesday’s U.S. inflation figures for January. The consumer price index showed that prices declined for the sixth consecutive month in December, registering an annual increase of 6.5 percent, the lowest level since October 2021. Economists expect the CPI for January to fall to 6.2 percent. That would represent the smallest drop in the annual inflation rate since September.
However, Francesco Pesole, forex strategist at ING, said the reading was likely to rattle Fed officials who want to raise rates more aggressively. That would increase the likelihood of a percentage point rate hike in May. Investors are expecting a similar-sized move at the US central bank’s meeting in March.
“US data in January should be strong throughout, mostly thanks to very good weather conditions compared to December,” said Pesole. “The big jump in rents seen in the latest jobs report also points to increased demand.”
Michelle Bowman, a senior Fed official, said on Friday that she expects “continued increases” in US rates will be needed to bring inflation back to the central bank’s 2 percent target. “We are still far from achieving price stability and I hope that we need to further tighten monetary policy to bring inflation down to our target,” he said.
The two-year Treasury yield rose 0.02 percentage points to 4.54 percent, the highest level since late November. The 10-year Treasury yield fell 0.02 percentage points to 3.72 percent.
In Europe, the Stoxx 600 in the regions rose 0.9 percent with the FTSE 100 in London closing 0.8 percent higher at a record high.
A measure of the dollar’s strength against six other currencies fell 0.3 percent. The yen weakened 0.8 percent against the greenback to ¥132.46 as investors digested the news of the expected appointment of academician Kazuo Ueda as the next governor of the Bank of Japan.
Brent crude, the international oil benchmark, settled 0.3 percent higher at $86.61 a barrel, up just over 8 percent last week. U.S. benchmark West Texas Intermediate rose 0.5 percent to trade at $80.14.
In Asia, Hong Kong’s Hang Seng index was down 0.1 percent, Japan’s Topix was down 0.5 percent and South Korea’s Kospi was down 0.7 percent. China’s CSI 300 added 0.9 percent.