Wall Street equities rose on Monday to new record peaks, as muted inflation and robust consumer spending further support the Federal Reserve’s dovish stance and embolden investors to snap up high-growth stocks.
The S&P 500 climbed 0.1 per cent to close at 2,943 having struck a fresh intraday higher earlier in the session as well, ticking above the previous historic intraday high that was set in September 2018. The benchmark index’s rise was fuelled by a roughly 0.9 per cent increase in financials and communications services that was partially offset by the real estate sector.
The index had first reached a record closing high last week and sentiment was boosted further after stronger-than-expected US growth data for the first three months of 2019.
Meanwhile, the tech-heavy Nasdaq Composite also struck a new high, rising 0.2 per cent to 8,162, having joined the S&P 500 in notching a fresh intraday peak earlier in the day. The Dow Jones Industrial Average meanwhile, was roughly flat at 26,554.
“We think subsiding economic and profit recession fears, [the Federal Reserve’s] dovish pivot, and positive developments with China on a trade deal and more time to negotiate Brexit justify this recovery,” said David Bianco, chief investment officer at DWS.
Sentiment was boosted after US consumer spending in March rose by the most since August 2009. However, price pressure remained benign, with the Fed’s preferred inflation indicator — the core personal consumption expenditures price index — up 1.6 per cent year-on-year in March. The reading is slightly softer than forecasts of 1.7 per cent, and remains well under the central bank’s 2 per cent target, playing into the existing dovish outlook for US monetary policy.
The dollar held around some of its strongest levels in two years after the data, with the index tracking the world’s reserve currency slipping 0.2 per cent to just under 98 points.
The gains on Wall Street bucked a more muted performance in Europe, where the continent-wide Stoxx 600 index ended the day up less than 0.1 per cent.
Frankfurt’s Xetra Dax 30 finished 0.1 per cent higher, while London’s FTSE 100 inched up by 0.2 per cent. Property and utility stocks led the declines, while banks offset losses after S&P left Italy’s credit rating on hold. Spain’s Ibex 35 was 0.1 per cent higher after the result of the country’s general election.
Meanwhile, in Asia, China’s CSI 300 was up 1.2 per cent after posting its biggest weekly decline in six months last week, falling 5.6 per cent. Figures released over the weekend showed Chinese industrial profits returned to growth in March, rising 13.9 per cent year on year, following four consecutive months of falls. Further clues on the impact of Chinese stimulus programmes will come on Tuesday with the official manufacturing purchasing managers’ index.
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