Investor confidence lead stocks to rally

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 four-day pattern 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.

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 bunds 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. Meanwhile, bond investors took heart from an account of the European Central Bank’s most recent meeting, which showed policy makers aren’t yet ready to remove a pledge to expand its assetbuying program if needed.