A key measure of inflation Consumption was weaker than expected last month, helping calm investors who feared prices would rise too quickly with the economic recovery. Treasury yields fell widely as a result of the report, including the benchmark 10-year Treasury note, which influences interest rates on mortgages and other consumer loans.
Bond yields have risen sharply over the past month on expectations of faster growth and the inflation that may ensue. Falling bond prices drew investors reluctant to pay high prices for stocks, especially tech stocks that seemed the most expensive.
“It’s clear that investors expect inflation to rise in the near term, but the long-term view is rather benign,” said Katie Nixon, chief investment officer at Northern Trust Wealth Management.
The Labor Department said Wednesday that consumer prices in the United States rose 0.4% in February, the largest increase in six months. However, a closely watched measure called core inflation, which excludes food and energy prices, posted a much smaller gain of 0.1%. The rise in core inflation was also lower than economists’ expectations.
The latest inflation report, along with the Federal Reserve’s promise to keep interest rates low, helped allay concerns about the recent rise in bond yields, Nixon said.
“Investors are starting to think that this is not a bad backdrop for risky assets,” she said.
Markets have benefited from the calm in bond trading in recent days. The yield on the 10-year Treasury bill fell to 1.52% on Wednesday. It hit 1.60% at the end of last week, leading to a sell off in shares.
Banks were among the biggest winners. JPMorgan rose 2.2%, Bank of America 2.9% and Citigroup 3.9%. Over 75% of S&P 500 companies posted gains.
Tech stocks have fallen behind the broader market. Apple fell 0.9% and Microsoft slipped 0.6%
General Electric fell 5.4% for the biggest decline in the S&P 500 after the company said it would end its GE Capital financing business and merge its jet leasing business with Ireland-based AerCap .
Video game company Roblox jumped 54.4% when it debuted on the stock market. The company allows users to play online games created by others on the platform.