(Bloomberg) — Wall Street traders drove stocks higher as bond yields sank after the latest economic data spurred bets the Federal Reserve will cut interest rates at least twice this year to prevent a recession.
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Equities erased losses, with S&P 500 up for a fourth straight day. Despite the bounce, caution still lurked in the background after a furious rally spurred worries about an overheated market, with the pendulum swinging in favor of defensive dividend-payers that had underperformed in the past month. Conversely, most big techs fell. Shorter maturities led gains in Treasuries.
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Prices paid to US producers unexpectedly declined by the most in five years suggesting companies are absorbing some of the hit from higher tariffs. Growth in retail sales decelerated notably. Factory production declined for the first time in six months while New York state manufacturing contracted again. And confidence among homebuilders slumped.
“If you are in the stagflation camp, these data aren’t confirming your thesis,” said Jamie Cox at Harris Financial Group. “While growth is slowing, disinflation remains intact.”
The S&P 500 rose 0.3%. The Nasdaq 100 wavered. The Dow Jones Industrial Average gained 0.4%. Cisco Systems Inc. surged on a solid forecast. Walmart Inc. pared most of a slide driven by concerns it would start raising some prices. UnitedHealth Group Inc. plummeted on a report it was under criminal investigation for possible Medicare fraud.
The yield on 10-year Treasuries fell eight basis points to 4.46%. Long maturities were earlier whipsawed by large trades that briefly pushed the 30-year yield to nearly 5%. The Bloomberg Dollar Spot Index lost 0.2%.
Oil slumped as Donald Trump said the US and Iran are getting closer to a deal regarding Tehran’s nuclear program.
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“Today’s data doesn’t change the narrative,” said Ellen Zentner at Morgan Stanley Wealth Management. “Retail sales suggest consumers are becoming pickier, while there remains no sign of broad-based layoffs. The slowdown in inflation in April provides little comfort as the impact from tariffs is yet to come.”
Despite the de-escalation with China, the trade story isn’t over, Zentner said. It’s still going to take time for tariffs to make themselves felt in economic data, she said.
Fed Governor Michael Barr said the economy is on solid ground, but warned tariff-related supply-chain disruptions could lead to lower growth and higher inflation.
Recession remains a possibility as tariff fallout continues to buffet global economies, according to JPMorgan Chase & Co. Chief Executive Officer Jamie Dimon.
“Hopefully we’ll avoid it, but I wouldn’t take it off the table at this point,” Dimon said in a Bloomberg Television interview Thursday at JPMorgan’s annual Global Markets Conference in Paris. “If there is a recession, I don’t know how big it would be or how long it would last.”
In a separate Bloomberg Television interview, Apollo Global Management Inc. President Jim Zelter described the Trump administration’s recent tariff pause and de-escalation with China as a “macro political pivot.”
“You would have been saying recession went from 30% to 70% or 80%, now it is probably below 50%,” he said.
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Wells Fargo Investment Institute sees economic growth, clarity around Trump’s tariffs and continued earnings growth driving further stock-market gains through the rest of this year and next.
Strategists at the firm published new S&P 500 forecast for 2026, expecting US equity benchmark to climb to between 6,400 and 6,600 by year’s end. WFII’s new 2025 year-end target for gauge is range of 5,900 to 6,100.
“Our constructive equity outlook is not an all clear for the riskiest areas of the markets,” the team wrote, emphasizing preference from US large- and mid-cap companies.
Equity gains will likely get harder from these elevated levels, so the relatively low cost of volatility hedges on offer right now hands investors an opportunity to build a defense against summer volatility.
“While we continue to expect a range of trade agreements to be reached to sustain the tariff rate at roughly the level during the pause period, ongoing uncertainty could trigger further bouts of market volatility,” said Solita Marcelli at UBS Global Wealth Management.
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Meantime, tax-bill discussions in Congress show the US “appears unwilling” to rein in its fiscal deficit, while foreigners are less inclined to finance it, creating a “major problem” for the dollar and the bond market, said George Saravelos, Deutsche Bank’s global head of currency strategy.
“Running a wider fiscal deficit requires foreigners to buy an ever-expanding amount of US Treasuries and an ongoing rise of America’s foreign liabilities,” he wrote. “This we believe is no longer sustainable.”
The dollar’s descent is elevating the price of hedging currency trades around the world, breaking up a long-standing market conviction that costs tend to come down when the greenback weakens.
The correlation between the dollar and a widely-watched gauge of volatility in Group-of-10 currencies fell to the lowest level in seven years this week. For most of the past 15 years that correlation was positive.
Corporate Highlights:
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Dick’s Sporting Goods Inc. reached a $2.4 billion deal to acquire Foot Locker Inc., combining two retailers troubled by President Donald Trump’s tariff wars.
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President Donald Trump said he’s asked Apple Inc.’s Tim Cook to stop building plants in India to make devices for the US, pushing the iPhone maker to add domestic production as it pivots away from China.
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CVS Health Corp. is trying to buy stores and patient data from Rite Aid Corp., the beleaguered pharmacy chain that is going out of business after filing for bankruptcy a second time earlier this month.
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CoreWeave Inc. has secured a deal worth as much as $4 billion to provide additional cloud computing capacity to artificial intelligence leader OpenAI, expanding a tie-up between the two firms.
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Deere & Co.’s earnings beat the highest of analyst estimates, even as the world’s largest farm machinery maker trimmed its profit outlook for the year.
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Phillips 66, which is under pressure from Elliott Investment Management to streamline its business, agreed to sell a stake in its German and Austrian fuel station unit for about $1.6 billion.
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Carvana Co. Chief Executive Officer Ernest Garcia III filed to sell shares worth $192 million as the used-car retailer’s stock surged, by far his largest cash-out since the company’s initial public offering.
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Coinbase Global Inc. said hackers bribed contractors or employees outside the US to steal sensitive customer data and demanded a $20 million ransom, in one of the most high-profile security breaches of a crypto trading platform.
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BlackRock Inc.’s executive pay proposal won preliminary approval from shareholders at its annual meeting, overcoming criticism from Institutional Shareholder Services Inc. that it has been slow to respond to questions about its pay practices.
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Alibaba Group Holding Ltd.’s quarterly revenue grew a disappointing 7%, reflecting a persistent Chinese consumer malaise that may dog the online commerce leader’s big pivot toward AI.
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Shein Group Ltd. lowered US retail prices this week after the Trump administration temporarily cut duties on Chinese imports, as the online fashion retailer moves to win back consumers scared away by recent tariff-induced price hikes.
Some of the main moves in markets:
Stocks
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The S&P 500 rose 0.3% as of 2:27 p.m. New York time
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The Nasdaq 100 was little changed
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The Dow Jones Industrial Average rose 0.4%
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The MSCI World Index rose 0.2%
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Bloomberg Magnificent 7 Total Return Index fell 0.9%
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The Russell 2000 Index rose 0.3%
Currencies
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The Bloomberg Dollar Spot Index fell 0.1%
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The euro was little changed at $1.1174
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The British pound rose 0.2% to $1.3293
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The Japanese yen rose 0.7% to 145.70 per dollar
Cryptocurrencies
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Bitcoin was little changed at $103,590.54
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Ether fell 2.1% to $2,546.74
Bonds
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The yield on 10-year Treasuries declined eight basis points to 4.46%
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Germany’s 10-year yield declined eight basis points to 2.62%
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Britain’s 10-year yield declined five basis points to 4.66%
Commodities
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