NEW YORK (Reuters) – Wall Street stocks edged higher and the dollar fell on expectations of a U.S. interest-rate cut on Friday, while oil futures were little changed as supply worries triggered by a tropical storm were offset by signs of a global surplus for several months.
In U.S. Treasuries the yield curve was slightly steeper, with yields largely unmoved by stronger-than-expected producer price data and market expectations of an interest rate cut in July held firm after two days of testimony from Federal Reserve Chair Jerome Powell.
Wall Street’s benchmark, the S&P 500 .SPX, and the Dow Jones Industrial Average rose modestly a day after hitting record highs.
The market already rallied in expectation of a rate cut, and now that Powell basically confirmed a July cut, it is “churning before it makes the next move” during the quarterly earnings season that kicks off next week, said Ken Polcari, managing principal at Butcher Joseph Asset Management in New York.
Polcari said the improving economic data is making investors cautious over the Fed’s rate path.
“Now there’s a little trepidation that if the data is coming in strong why are we cutting rates?” he said. “The market’s thinking he’s going to cut rates in July and then that’ll be it.”
The Dow Jones Industrial Average .DJI rose 188.01 points, or 0.69%, to 27,276.09, the S&P 500 .SPX gained 9.7 points, or 0.32%, to 3,009.61, and the Nasdaq Composite .IXIC added 40.41 points, or 0.49%, to 8,236.45.
All three stock indexes were on track for their second weekly advance in a row ahead of the start of the second-quarter corporate earnings season. Analysts are forecasting a decline in S&P 500 earnings per share of 0.4% for the quarter, according to I/B/E/S data from Refinitiv.
“Most of the gains this year have been from multiple expansion. Earnings needs to start doing its part. Otherwise you risk people looking at multiple expansion saying this looks like a top,” said Michael Antonelli, market strategist at Robert W. Baird in Milwaukee.
The pan-European STOXX 600 index rose 0.04% and MSCI’s gauge of stocks across the globe .MIWD00000PUS gained 0.24%.
U.S. producer prices rose slightly in June as a rising cost of services was offset by cheaper energy costs, beating economists’ expectations that prices would be unchanged.
The Labor Department report comes on the heels of strong consumer price data published on Thursday, suggesting overall inflation could continue to rise moderately despite the gains in consumer prices.
“One individual dataset will not sway or set” the Fed’s decision on interest rates, said Michael Lorizio, senior fixed income trader at Manulife Investment Management.
In Treasuries, benchmark 10-year notes US10YT=RR last rose 3/32 in price to yield 2.1097%, from 2.12% late on Thursday.
In currencies, continued bets on a U.S. rate cut sent the dollar lower for the third day in a row. The dollar index .DXY, which tracks the greenback against six major peers, fell 0.26%, with the euro EUR= up 0.19% to $1.1273.
The Japanese yen strengthened 0.63% versus the greenback at 107.83 per dollar.
In commodities, oil prices inched up on Friday as U.S. Gulf of Mexico crude output was halved by disruptions caused by a tropical storm, but concerns over a global crude surplus in the months ahead limited gains.
U.S. crude futures settled up 1 cent at $60.21 per barrel while Brent crude ended up 20 cents at $66.72.
Gold prices nudged higher as investors shrugged off concerns that the stronger-than-expected U.S. consumer inflation could influence the Fed’s decision on aggressive monetary policy easing.
Spot gold XAU= added 0.9% to $1,416.40 an ounce.
(GRAPHIC-China trade shock: tmsnrt.rs/32qsJDt)
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