Stocks rise following hot March inflation

investmentnews.com:

Stocks rose in early trading and bond yields fell, with the latest inflation report coming roughly in line with Wall Street’s estimates.

S&P 500 futures signaled the US equity benchmark will extend this week’s gains, buoyed by big tech earnings. Treasury two-year yields, which are more sensitive to imminent policy moves, fell three basis points to 4.96%.

The Federal Reserve’s preferred gauge of underlying US inflation rose at a brisk pace in March, reinforcing concerns of persistent price pressures. The so-called core personal consumption expenditures price index, which strips out the volatile food and energy components, increased 0.3% from the prior month, data out Friday showed. From a year ago, it advanced 2.8%.

“Bottom line, yes the consumer is spending, but they continue to run down their savings in order to do so,” said Peter Boockvar, author of the Boock Report. “The inflation stats were about as estimated and why inflation breakevens are little changed in response.”

The US equity market will continue to rely on a handful of megacaps stocks for direction until an uptick in real interest rates ignites recession fears, according to Bank of America Corp. strategists led by Michael Hartnett.

That concentration will remain intact until real 10-year yields — rates adjusted to reflect the true cost of funds — rise to around 3%, “or higher yields combine with higher credit spreads to threaten recession,” they wrote. Elevated bond yields adjusted for inflation, seen as a proxy for tight financial conditions, are a common way for stock-market bubbles to burst.

Elsewhere, the yen’s extended slump has heightened speculation that Japanese authorities may intervene in the market to prop up the currency. Copper hit $10,000 a ton