US stocks rally with commodities on stimulus bets; bonds fall
Riskier assets from stocks to commodities and emerging-market currencies surged as traders warmed to an unprecedented policy boost from the European Central Bank.
The Standard & Poor's 500 Index capped a fourth weekly gain and closed at the highest level of the year. European equities rallied, while developing-nation shares erased losses for 2016. Credit markets jumped and oil led commodities to a three-month high, while Treasuries fell for a third week on speculation US rates will rise this year.
Stocks and commodities continued a rebound from steep losses at the start of the year, with American equities cutting losses to less than 1.5 percent after falling to a 22-month low a month ago. Investor sentiment in the aftermath of the ECB's announcements, swinging from optimism the stimulus could boost growth to concern the measures would fall short, illustrates the tension in markets and challenges central banks face in mollifying them after seven years of unconventional policy maneuvers.
The ECB's stimulus comes amid growing confidence that the U.S. economy has averted any threat of recession that's boosted bets the Federal Reserve will stay on course for tighter policy, while China's leaders have eased concern over their handling of the world's second-largest economy. The Fed, Bank of Japan and Bank of England are all set to meet next week.
"Since the Feb. 11 lows in the equity market, global recessionary fears have receded, and that has been key," Joe Quinlan, chief market strategists at U.S. Trust, Bank of America Private Wealth Management, said by phone. "What the ECB did yesterday helped that momentum and that train of thought become more ingrained, that they will do whatever it takes and then some for global economic expansions."
The S&P 500 climbed 1.6 percent to 2,022.07 at 4 p.m. in New York, erasing a loss for the week and closing at the highest level since Dec. 31. The index has trimmed a loss in 2016 to 1.1 percent. The gauge's close above its 200-day moving average ended the longest run below that technical level since 2011. Banks, energy and technology shares, which have paced the rebound in equities since midFebruary, led gains on Friday.
While traders are pricing in little chance of a Fed increase on March 16, they have boosted the odds for later in the year. The probability of a June move is now 51 percent, from less than 2 percent a month ago, data compiled by Bloomberg show.