Dow, S&P 500 touch record territory as stock-market tries to shake off inflation concerns

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The Dow Jones Industrial Average was trading in record territory at midday Friday, while the S&P 500 touched a milestone above 4,100 as the broader market digested a delayed report on U.S. producer prices that rose more than forecast, reviving fears of inflation.

The main U.S. equity indexes are all headed for weekly gains.

How are stock benchmarks faring?
  • The Dow DJIA, +0.25% rose 82 points, or 0.3%, to 33,585, after hitting an intraday record of 33,654.15.
  • The S&P 500 index SPX, +0.23% rose by about 8 points, or 0.2%, to 4,105, after setting an intraday record peak at 4,107.25 and hitting a milestone above 4,100.
  • The Nasdaq Composite Index COMP, +0.06% was 3 points higher, or less than 0.1%, at 13,835.

On Thursday, the Dow added 57.31 points, or 0.2%, to finish at 33,503.57, the S&P 500 rose 17.22 points to reach at a record at 4,097.17, a gain of 0.4%, while the Nasdaq finished 140.47 points, or 1%, higher at 13,829.31, within 2% of its Feb. 12 record high.

What’s driving the market?

The Dow and S&P 500 were aiming for records, but technology stocks were under pressure Friday after a delayed, key U.S. economic report revealed inflation may be hotter than expected as the economy rebounds from the pandemic. Government bond yields rose as a result.

The U.S. producer-price index rose 1% in March, the U.S. Labor Department said Friday.  Economists polled by The Wall Street Journal had forecast a 0.5% rise. The rate of wholesale inflation over the past 12 months climbed to 4.2% in March. That’s the highest level since September 2011.

Investors have been keenly attuned to the possibility of a surge in inflation in the aftermath of COVID.

Fed Vice Chairman Richard Clarida, in a Friday interview, said that any rise in inflation will be transitory, noting that the Fed’s forecast is that inflation will move above 2% for a time this year and “for inflation to return later this year to around 2%.”

“We would expect those to be transitory and as the year progresses and we go into next year, if they’re not, then we’ll have to take that into account certainly,” Clarida said on Bloomberg TV.

Stock-market investors this week have been mostly taking cues from the Fed and trading near record levels, as the central bank underscores its intention to not remove its easy money policies until the jobs market achieves a full recovery from the COVID pandemic.

Fed Chairman Jerome Powell on Thursday advocated stepping up the rate of vaccinations globally and said that the lack of vaccinations abroad poses a threat for the U.S.’s economic progress.

“Viruses are no respecters of borders, and until the world really is vaccinated we’re all going to be at risk of new mutations,” Powell said at a seminar on the global economy hosted by the International Monetary Fund. “I would look at global vaccination as a risk really…to the progress that we are making.”

A projection of future interest rates by Fed officials implies that the central bank will hold key interest rates near 0% through at least 2023.

Stock buying has reverted to technology stocks this week after a rotation into beaten-down in value stocks seen as likely to outperform as the economy rebounds from COVID.

Some analysts said the market’s moves on Friday could be subject to profit-taking after a healthy weekly run-up. For the week, the S&P 500 is on track for a 1.9% gain, the Dow is headed for a weekly gain of 1.1%, and the Nasdaq was aiming for a 2.6% weekly gain, as of Thursday’s close. The S&P 500 and the Dow are headed for their third straight weekly gain.

“The market may be ready to take a breather as investors digest all the good news, determine how much of that is priced in and weigh it against uncertain risks like inflation,” wrote Lindsey Bell, Ally Invest’s chief investment strategist, in a Friday note. 

“To be sure, the backdrop in 2021 suggests there should be more room to run, but right now the market is expensive.”

Which companies are in focus?
How are other assets faring?
  • The ICE U.S. Dollar Index DXY, a measure of the currency against a basket of six major rivals, was up 0.1% at 92.19.
  • U.S. crude CL.1, for May delivery CLK21, -0.42% fell 15 cents per barrel, or 0.3%, to trade at $59.44 a barrel on the New York Mercantile Exchange.
  • The 10-year Treasury note yield TMUBMUSD10Y rose 1 basis points to 1.65%. Bond prices move inversely to yields.
  • Gold futures fell, with the June contract GCM21 sinking $11.80, or 0.7%, at $1,746 an ounce on Comex, pulling back from a six-week peak.
  • In Europe, the Stoxx 600 index SXXP gained 0.1%, and London’s FTSE 100 UKX was down 0.4%, as Prince Philip—active patron of business organizations and consort to Queen Elizabeth II—has died at 99.
  • In Asia, the Shanghai Composite SHCOMP finished 0.9% lower, Hong Kong’s Hang Seng HSI closed down 1.1%, while Japan’s Nikkei 225 NIK closed up 0.2%.