US stocks rose on Friday as Treasury yields fell from new highs and investors weighed the latest economic data at the end of the week as the outlook for interest rates remained in focus.
The blue-chip S&P 500 was up 1.5 percent on Friday afternoon in New York, and the tech-heavy Nasdaq Composite was up 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 for February had a reading of 55.1, above expectations of 54.6.
“The economy is off to a good start through 2023 and overall appears to be more resilient to higher interest rates than expected,” said Bill Adams, chief economist at Comerica Bank. “Over time, margin pressure will slow hiring and may even push the unemployment rate higher, but surveys show no signs of this.”
Data released on Thursday showed jobless claims fell to 190,000 in the week ended February 25, below the 195,000 forecast, and below expectations for the seventh straight month, pointing to an ongoing labor market.
Investors will be watching next week’s payrolls report and unemployment figures.
“Although we expect wages to not be as strong as last month – 200,000 lower – this will remain strong and give the best possible signal about the balance of supply and demand,” said Seema Shah, head of global strategy at Principal Asset. Management. “We need to reassess and understand how much wage pressure has faded, and given that inflation expectations have increased we can see a very sticky picture over the next three to six months.”
Markets were also lifted by comments from Atlanta Federal Reserve president Raphael Bostic, who said on Thursday that he preferred a “slow and steady” approach to raising rates, but was open to supporting higher hikes if economic data continues to be strong.
US Treasury yields fell after hitting their highest level in years on Thursday. The two-year note, which is more sensitive to monetary policy, fell to 4.86 percent after reaching 4.94 percent, the highest since 2007, on Thursday. The ten-year note fell to 3.96 percent. Bond prices rise when yields fall.
For many in February, investors were rattled by a strong series of economic data forecasts, which spurred fears that the big central banks will keep interest rates longer to fight lingering inflation.
“Equity markets now seem to be responding more to bright growth prospects, which means they are in a better place to absorb the prospects. [of further rate increases]”said analysts at Barclays.
In Europe, the region-wide Stoxx 600 and France’s Cac 40 closed 0.9 percent higher, ending the week up 1.4 percent and 2.2 percent. Britain’s FTSE 100 was uneven. Germany’s Dax gained 1.6 percent after S&P Global composite purchasing managers’ index data for the euro zone’s largest economy was revised lower from 51.1 to 50.7. The index ended the week up 1.5 percent.
The S&P European composite purchasing managers’ index data was last revised downward on Friday from 52.3 to 52. However, both readings still indicated an expansion in activity over the previous month.
“It adds to the sense that the data is improving and the economic outlook in the eurozone is improving,” said Neil Shearing, group chief economist at Capital Economics. “But since it has been revised down, it will create optimism.”
Figures on Tuesday showed stronger-than-expected inflation data from France and Spain, the euro zone’s two biggest economies.
The yield on 10-year German government bonds 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 rose 0.3 percent, while sterling was 0.8 percent higher against the greenback.
Brent crude rose 1.3 percent to $85.87 a barrel, and WTI, the U.S. equivalent, gained 2 percent to $79.79.