Stocks jump to seven-week high as the dollar tumbles on tame inflation

U.S. stocks rallied to a seven-week high while the dollar sank after a weak inflation reading signaled the Federal Reserve won’t need to step up the pace of interest-rate increases.

Chipmakers paced gains in major American equity benchmarks, while rate-sensitive shares added to the bullish mood as the 10-year Treasury yield slipped to 2.97 percent. A gauge of smallcap stocks set a record and emerging-market shares rallied on the more-favorable outlook for global borrowing costs.

The dollar fell the most since March 21, lifting commodities. The pound weakened after the Bank of England held interest rates.

The U.S. inflation data showed costs for big-ticket items such as automobiles and airfares declined last month, reducing chances that consumer-price increases will run significantly above the Fed’s target. The news energized bulls, with the S&P 500 index crossing above its 100-day moving average and breaking out of the downward-sloping trendline that’s been in place since late January.

“The market is breathing a sigh of relief that there was not an upside surprise to the inflation stats,” Peter Boockvar, the chief investment officer of Bleakley Financial Group, wrote in an email.

Elsewhere, trading in non-deliverable forwards suggested Malaysia’s ringgit will tumble in the wake of the surprise ouster of the country’s ruling party. Developing markets more broadly signaled stability, and the MSCI Emerging Market index advanced for a fourth day. European shares snapped a four-day winning streak. The New Zealand dollar slid after the central bank left the door open to an interest rate cut as inflation remains contained.