U.S. stocks rally, S&P has biggest gain in 3 weeks

U.S. stocks rallied, Treasuries advanced and the dollar slipped as investors grew confident that the Jerome Powell-led Federal Reserve won’t rush to raise interest rates as the economy picks up steam.

The S&P 500 Index pushed past its average price for the past 50 days and erased losses for the week with its biggest gain in almost three weeks. The gauge extended gains in afternoon trading, reversing a fourday pattern that had seen it swoon. The 10-year Treasury yield slipped to 2.87 percent, roughly where it started the week, as investors dissect the Fed’s semiannual monetary policy report to Congress. The dollar was flat versus major peers.

The report indicated that the central bank sees the labor market at or beyond full employment, while some pockets of finance are showing signs of rising leverage and high valuation. Concern that the Fed would step up the pace of rate hikes rattled markets earlier in the week.

“Concerns about interest raters are overblown,” Don Townswick, the director of equities at Hartford, Connecticut-based Conning Inc, said by phone. “The markets will tend to remain strong. Historically markets have been strong during the first 18 to 24 months of rising interest rates as long as inflation is under control.”

The Stoxx Europe 600 Index rose as gains in telecom shares offset declines in retailers. The MSCI Asia Pacific Index rose earlier, underpinned by gains from Sydney to Shanghai. Yields on 10-year German bonds dropped to the lowest since January. The common currency slipped.

Traders seem unconvinced by the Federal Reserve’s hawkish tilt, with the market still pricing in less than the three quarter-point rate hikes that officials have signaled as likely this year. Minutes of the Fed’s January meeting indicated confidence the economy is strengthening amid signs inflation is rising.