Stocks had their best week in more than two months as fears eased over rising inflation and North Korea.
All three major U.S. indexes rose more than 2% last week, the first time that’s happened since the beginning of March. All three are also now in positive territory for the year, with the Dow Jones Industrial Average now positive by 0.5%. NASDAQ is up a healthy 7.2% while the S&P 500 is up 2.0%. Stocks got a boost from energy shares, one of the week’s best performers, as oil prices spiked to their highest levels in nearly four years as President Trump pulled out of the nuclear deal with Iran. The price of U.S. crude ended the week at a little above $70.50 a barrel after hitting just under $72 earlier in the week. Oil prices have climbed more than 20% since hitting a recent low in early February.
Chinese stocks had their biggest weekly gains since February as tensions between the U.S. and North Korea decreased sharply following the release of three American prisoners in advance of talks between President Trump and Kim Jong-un. Hong Kong’s Hang Seng index jumped 4.0% while the Shanghai Composite rose 2.3%. Japanese stocks rose another 1.3%, their seventh straight weekly increase; they’re up more than 10% during that time. European stocks were also up for the seventh straight week, as the Stoxx Europe 600 rose 1.7% to close at 392.40, its highest level since February 1.
For the second time in the past three weeks, the yield on the benchmark 10-year Treasury note hit 3% only to retreat again. The note began the week at 2.95% and then immediately started to rise, moving just slightly past 3% on Wednesday morning before falling back following the release of the consumer price index, which rose a lower-than-expected 0.2% in April compared to the month before, while the more important core rate – excluding food and energy prices – rose only 0.1%, 2.1% compared to a year ago. That raised hopes that inflation may not be rising as fast as some have worried, which would likely put upward pressure on interest rates and downward pressure on bond prices. The producer price index also came in lower than forecast, with the core rate rising 2.3% on an annualized basis, down from the prior month’s comparable 2.7% increase. The 10-year note ended the week at 2.97%, up two basis points on the week.
Reports/dates/facts/links worth paying attention to over the next week:
1. May 15: Retail sales for April; Empire State manufacturing survey for May; National Association of Home Builders housing market index for May.
2. May 16: Housing starts for April; industrial production for April.
3. May 17: Weekly unemployment claims; leading economic indicators for April; Philadelphia Fed business outlook survey for May.