Wall Street climbs as yields pull back

  • Treasury yields slip after rally
  • Focus on ISM services sector data
  • Dell slips as forecast disappoints
  • Indexes up: Dow 0.24%, S&P 0.47%, Nasdaq 0.63%

March 3 (Reuters) – U.S. stocks rose on Friday as Treasury yields took a breather from a week-long rally that was sparked by worries that the Federal Reserve would keep interest rates higher for longer to tame stubborn inflation.

Wall Street indexes have had a volatile start to March after the latest economic data pointed to rising raw material costs and a resilient labor market, while signaling that the U.S. central bank was yet to see the desired impact of its policy tightening measures on inflation.

The U.S. 10-year Treasury yield fell on Friday after touching a four-month high in the previous session but stayed above the 4% level.

“What is driving the optimism despite the new data we received in contrast to January is investors are still open for the next Fed meeting to come up with a 25 basis point hike,” said Guido Petrelli, chief executive officer of Merlin Investor.

“The volatile market will continue in March until we get consistent data in terms of the economy slowing down but not open up worries of a recession.”

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Offering respite to stock markets on Thursday, Atlanta Fed President Raphael Bostic said the impact of higher rates on the economy might only begin to “bite” in earnest this spring, an argument for the Fed to stick with “steady” quarter-point rate increases.

Hawkish comments from Fed policymakers and recent economic data have pushed traders to price in at least three more 25 basis point rate hikes this year and see interest rates peaking at 5.43% by September from the current 4.66%.

The odds of a bigger 50 basis point rate hike in March stood at just 20% but investors are awaiting monthly payrolls and consumer prices data to see if the Fed will go big later this month.

The Institute for Supply Management’s survey, due at 10:00 a.m. ET, is expected to show that a gauge of services sector activity in February eased to 54.5 in February from 55.2 in January.

Central bank officials including Bostic and Fed Dallas President Lorie Logan are scheduled to speak later in the day.

At 9:42 a.m. ET, the Dow Jones Industrial Average (.DJI) was up 79.56 points, or 0.24%, at 33,083.13, the S&P 500 (.SPX) was up 18.74 points, or 0.47%, at 4,000.09, and the Nasdaq Composite (.IXIC) was up 72.54 points, or 0.63%, at 11,535.52.

Nine of the 11 major S&P sectors were higher, with communication services (.SPLRCL) and technology (.SPLRCT) indexes leading gains.

Apple Inc rose 1.9% after Morgan Stanley said the stock could rally more than 20% this year on potential hardware subscription.

Dell Technologies Inc (DELL.N) slipped 0.9% after it forecast current-quarter revenue and profit below Wall Street estimates, hit by an ongoing demand slump in its PC business.

Marvell Technology Inc (MRVL.O) slid 9% after the semiconductor maker reported lower-than-expected first-quarter profit and forecasts revenue below analysts’ estimates.

Hewlett Packard Enterprise (HPE.N) rose 2.1% after the laptop maker gave an upbeat full-year earnings forecast.

Broadcom Inc (AVGO.O) rose 4.3% after the chipmaker forecast second-quarter revenue above analysts’ estimates as increased investments in AI spurred demand for chips.

Advancing issues outnumbered decliners by a 2.98-to-1 ratio on the NYSE and 1.67-to-1 ratio on the Nasdaq.

The S&P index recorded 14 new 52-week highs and two new lows, while the Nasdaq recorded 36 new highs and 18 new lows.

Reporting by Sruthi Shankar in Bengaluru; Editing by Anil D’Silva

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