Stocks rose Friday, a day after the S&P 500 set a record high, as it appears investors have fallen in line with the Federal Reserve’s belief that inflation spikes will prove to be transitory.
The Dow Jones Industrial Average gained 89 points, the S&P 500 gained 0.1%, and the Nasdaq was up 0.07%.
The S&P 500’s record closing high, its first since May 7, came as investors shook off hotter-than-expected inflation data for May. Near-term price pressures are being seen in categories that will benefit from the economy’s recovery but they aren’t expected to be persistent.
“There are plenty of indicators pointing to near-term spike in inflation – acute labor shortage, supply chain constraints, and cyclical highs for commodity prices,” said Anu Gaggar, senior global investment analyst at Commonwealth Financial Network.
“However, the belief remains that these are cyclical pressures that are to be expected when an economy is in the early stages of a strong rebound. As the cycle matures, these inflation pressures will subside owing to the structural forces that have kept inflation low for long,” Gaggar added.
Consumer prices last month increased at the fastest pace in more than a decade, according to data from the Labor Department.
The fear on Wall Street has been that rising price pressures could challenge the Federal Reserve’s accommodative stance as the world’s biggest economy continues its recovery from the COVID-19 pandemic.
Whether bond yields are in retreat because investors have been buying into the Federal Reserve’s narrative that inflation pressures will ease over the second half of the year, or they’re worried that supply chain bottlenecks and labor market shortages will hold back growth is still a matter for debate.
The yield on the benchmark 10-year U.S. Treasury yield Friday was at 1.455%, near the lowest point since early March.
Stocks appeared to move past both concerns heading into next week’s Fed meeting and the start of the second-quarter earnings season in early July.
Vertex Pharmaceuticals dropped 9% Friday after the company halted a closely watched effort to develop a therapy for a rare genetic disorder that affects the lungs and liver.
This article was originally published by TheStreet.