US Stocks Rise As Soft Inflation Sinks Bond Yields: Markets Wrap

Stocks rose as more evidence of cooling US inflation extended a week-long drop in bond yields and sent the dollar to a three-year low, signs traders are convinced the Federal Reserve has room to cut interest rates should the economic expansion lose steam.

Treasuries climbed, with traders fully pricing in bets on two Fed reductions in 2025. Attention will soon shift to a $22 billion sale of 30-year debt for a read on whether spiraling deficits are causing investors to shun the maturity. A flare-up in geopolitical worries dragged stocks away from session highs and oil bounced as ABC News reported Israel is considering taking military action against Iran. Oracle Corp. hit a record on a strong sales outlook. 

US inflation remained muted in May, another sign that tariffs have yet to result in higher prices for consumers and businesses. The producer price index rose 0.1% from a month earlier, compared with the median forecast in a Bloomberg survey of economists that called for a 0.2% increase.

“For the second day in a row, inflation data came in lower than expected, and this gives the Fed room to sit on their hands,” said Chris Zaccarelli at Northlight Asset Management. “As long as inflation isn’t increasing – or even better, is decreasing – the Fed can be patient and wait for more information on how the new tariffs and trade negotiations are going to impact the price stability part of their dual mandate later this year.”

In addition, because the jobs market has been holding up, the Fed doesn’t need to rush to the rescue of labor and cut to support the full employment part of their dual mandate, Zaccarelli added. A separate reading showed recurring jobless claims hit the highest since 2021. However, the report covers periods that included Memorial Day and the start of summer school breaks in some states, which tends to make the data more volatile.

“While stocks have rebounded and are approaching the record levels seen in February, investors may soon be wondering what could push stocks beyond that threshold,” said Rick Gardner at RGA Investments. “The next catalyst for markets may be a trade deal with China, the extension of the 2017 tax cuts and the prospect of Fed rate cuts as inflation continues to soften.”

Traders who hung on during this year’s tariff-fueled roller-coaster ride in stocks are facing a conundrum: Bonds may offer more attractive returns in coming years, according to one widely tracked measure. 

The equity risk premium, which investors use to determine the difference between expected returns on equities and US Treasuries, is hovering around its lowest point since 2002, data from Bloomberg Intelligence showed. That suggests stocks are more expensive relative to bonds than they have been for most of the last two decades, according to Bloomberg Intelligence strategists Gina Martin Adams and Michael Casper.

Meantime, ARK Investment Management founder Cathie Wood says corporate America is regaining its appetite for risk as expectations build around Trump’s push for deregulation and tax cuts.

Speaking on Bloomberg’s Trumponomics podcast during the Founders Forum Global conference in Oxford, Wood said major US firms are ramping up capital spending in response to a more business-friendly policy outlook. She cited Meta Platforms Inc.’s reported investment in the AI startup Scale AI as one sign of that shift.

The US stock market is back on track and within spitting distance of February’s all-time highs. Yet corporate executives are dumping shares at the fastest clip since November.

A gauge of insider sentiment, which tracks the numbers of buyers versus sellers, shows that 200 insiders bought shares this month through June 11, while 778 sold shares, according to data compiled by the Washington Service. That puts the buy to sell ratio at around 0.26, the lowest since November when Trump’s reelection triggered a months-long rally.

• The deadly crash of an Air India long-range aircraft on Thursday marks the first-ever complete loss of a Boeing Co. 787 Dreamliner, shining a spotlight on the US planemaker’s most advanced aircraft.

• Oracle Corp. projected cloud infrastructure sales will jump more than 70% in the fiscal year that began this month, boosting shares in late trading on investor enthusiasm for the closely watched business.

• Arm Holdings Plc Chief Executive Officer Rene Haas said that US export controls on China threaten to slow overall technological advances and are ultimately bad for consumers and companies, aligning himself with Nvidia Corp. Chief Executive Officer Jensen Huang and others looking to ease tensions between Washington and Beijing.

• A senior Trump administration official projected that Huawei Technologies Co.’s output of its Ascend AI chip will be at or below 200,000 for 2025, responding to US lawmakers’ concerns that China is gaining ground in production of advanced semiconductors.

• CoreWeave Inc.’s soaring share price is torching short sellers who are paying high prices to bet that the stock will soon fall back to earth.

• Warner Bros. Discovery Inc.’s decision to split into two independent companies is a sign of a broader “shakeout” across a media industry that has become increasingly dominated by streaming and on-demand services, Netflix Inc. co-Chief Executive Officer Greg Peters said.

• Chipmaker Micron Technology Inc. said it will spend about $200 billion on US manufacturing, research and development, the latest company to pledge large-scale investments in the country since President Trump won the election.

• GameStop Corp. plans to offer $1.75 billion worth of convertible bonds, which would make the video-game retailer one of the year’s biggest issuers of the equity-linked securities.

• BioNTech SE agreed to buy former Covid vaccine rival CureVac NV for about $1.25 billion in an all-stock transaction that will boost its growing oncology business.

• BYD Co. sees China’s electric-vehicle price war as unsustainable, according to a senior company executive, who stopped short of saying the country’s largest EV maker would scale back the aggressive discounting it helped trigger.

Some of the main moves in markets:

Stocks

• The S&P 500 rose 0.2% as of 12 p.m. New York time

• The Nasdaq 100 rose 0.2%

• The Dow Jones Industrial Average was little changed

• The Stoxx Europe 600 fell 0.3%

• The MSCI World Index rose 0.2%

Currencies

• The Bloomberg Dollar Spot Index fell 0.6%

• The euro rose 0.8% to $1.1576

• The British pound rose 0.3% to $1.3586

• The Japanese yen rose 0.6% to 143.66 per dollar

Cryptocurrencies

• Bitcoin fell 1.8% to $107,014.14

• Ether fell 3.5% to $2,717.5

Bonds

• The yield on 10-year Treasuries declined five basis points to 4.37%

• Germany’s 10-year yield declined six basis points to 2.48%

• Britain’s 10-year yield declined eight basis points to 4.48%

Commodities

• West Texas Intermediate crude rose 0.4% to $68.39 a barrel

• Spot gold rose 0.9% to $3,386.06 an ounce