Stocks Jump as Dollar Tumbles on Tame Inflation: Markets Wrap

U.S. stocks rallied to a seven-week high while the dollar sank after a weak inflation reading signaled the Federal Reserve won’t need to step up the pace of interest-rate increases.

Chipmakers paced gains in major American equity benchmarks, while rate-sensitive shares added to the bullish mood as the 10-year Treasury yield slipped to 2.97 percent. A gauge of small-cap stocks set a record and emerging-market shares rallied on the more-favorable outlook for global borrowing costs. The dollar fell the most since March 21, lifting commodities. The pound weakened after the Bank of England held interest rates.

The U.S. inflation data showed costs for big-ticket items such as automobiles and airfares declined last month, reducing chances that consumer-price increases will run significantly above the Fed’s target. The news energized bulls, with the S&P 500 Index crossing above its 100-day moving average and breaking out of the downward-sloping trendline that’s been in place since late January.

“The market is breathing a sigh of relief that there was not an upside surprise to the inflation stats,” Peter Boockvar, the chief investment officer of Bleakley Financial Group, wrote in an email to clients.

Elsewhere, trading in non-deliverable forwards suggested Malaysia’s ringgit will tumble in the wake of the surprise ouster of the country’s ruling party. Developing markets more broadly signaled stability, and the MSCI Emerging Market Index advanced for a fourth day. European shares snapped a four-day winning streak. The New Zealand dollar slid after the central bank left the door open to an interest rate cut as inflation remains contained.

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These are the main moves in markets:

Stocks

• The S&P 500 Index rose 0.9 percent at the close of trading in New York.
• The S&P 600 Small Cap Index added 0.5 percent.
• The Stoxx Europe 600 Index dipped 0.1 percent.
• The MSCI Emerging Market Index jumped 1.4 percent in its fourth day of gains.
• The MSCI Asia Pacific Index rose 0.8 percent to the highest in three weeks.

Currencies

• The Bloomberg Dollar Spot Index sank 0.7 percent, the first retreat in a week.
• The euro climbed 0.6 percent to $1.1925.
• The British pound fell 0.2 percent to $1.352.
• The Japanese yen advanced 0.3 percent to 109.4 per dollar.

Bonds

• The yield on 10-year Treasuries sank two basis points to 2.97 percent.
• Germany’s 10-year yield was little changed at 0.55 percent.
• Britain’s 10-year yield declined three basis points to 1.43 percent.

Commodities

• West Texas Intermediate rose 0.3 percent to $71.38 a barrel.
• Copper rallied 1.8 percent to $3.1115 a pound, the highest in two weeks.
• Gold climbed 0.6 percent to $1,320.66 an ounce, the highest in almost two weeks.

— With assistance by Cormac Mullen, Ven Ram, Chris Anstey, Samuel Potter, Sophie Caronello, and Natasha Doff