As U.S. stocks and bonds rallied this week, Wall Street’s core equities hit a record high in the barometer as the latest signs of the country’s economic recovery turned to American assets.
The economic report points to the rapid improvement in the labor market and a stimulus to consumer spending, fueling the appetite of both foreign and domestic investors for U.S. securities.
The rise in both tandem stocks and bonds generally runs counter to market dynamics, but a combination of factors boosted both markets this week, analysts said. The blue-chip S&P 500 stock index rose 1.2 percent over the period and more than 5 percent since the end of March, making it the third-straight monthly advance.
Economically sensitive S&P 500 sectors such as the energy, financial and industrial sectors have advanced since the end of January, each accounting for more than a fifth.
“With the economic reopening in the coming months, we believe the bull market is strong,” said Mark Heffel, chief investment officer at UBS Wealth Management. “We maintain a cyclical bias and give US customers a prudent, energy, financial and industrial choice.”
The wealthy finance group raised its S&P 500 target to 4,400 on Friday, indicating that the gauge will rise to its record high and accumulate another 5 percent by the end of 2021.
This year’s economic stimulus triggered a heavy retreat in long-term U.S. government bonds in the first quarter of this year. However, the direction of travel has begun to change over the past two weeks.
Ten-year Treasury yields, the main benchmark for a stable income market, fell 0.14 percentage points to 1.58 percent last fortnight, marking the largest decline in any such two-week period since last summer. Yields on the opposite side of the price reached 1.7777 percent on March 30.
Some investors and analysts are baffled by recent demand, especially since data released on Thursday showed that U.S. retail sales rose the most in 10 months last month, when American numbers first filed – the lowest level of unemployment benefits since the start of the Carnavirus crisis. In general, such positive news will move investors away from this heavenly debt.
Investors, however, pointed to growing foreign demand for treasuries, which still yields higher yields than many other global equivalents as one of the reasons for the immediate rally.
A strong sell-off in 30-year Treasury bonds on April 13 helped boost confidence in the market as concerns were raised about whether investors’ demands were enough to absorb a huge wave of newly issued offsets. For more insight, investors are expected to watch the 20 24 auction of 20-year notes on Wednesday.
Subadra Rajappa, head of U.S. rate strategy at Society Gunarale, noted that the dramatic sales shutdown in the first three months of this year had suddenly put the market at risk. “The ever-strong data resistance of the U.S. Treasury proves that a positive growth and inflation outcome is valuable for realization,” he said.
“We can’t detect any major changes in the message that the Treasury market is sending us, but we also don’t think that yields could be in line with their ‘fundamentals’ because of the endless resumption,” added Roberto Perili, economist at Cornerstone Macro.