Investors played down a hotter-than-expected wholesale price inflation report, a decline in small business optimism and the scrutiny surrounding Facebook Chief Executive Mark Zuckerberg’s Congressional testimony to push stocks higher, focusing instead on last night’s conciliatory speech by Chinese President Xi that appeared to cool trade war jitters. Treasury yields ticked higher and the U.S. dollar dipped, while gold and crude oil prices were higher. News on the equity front focused on some large M&A deals.

The Dow Jones Industrial Average (DJIA) jumped 429 points (1.8%) to 24,408, the S&P 500 Index increased 44 points (1.7%) to 2,657, and the NASDAQ Composite rallied 144 points (2.1%) to 7,094. In moderate volume, 886 million shares were traded on the NYSE and 2.2 billion shares changed hands on the NASDAQ. WTI crude oil rose $2.09 to $65.51 per barrel and wholesale gasoline gained $0.06 to $2.04 per gallon. Elsewhere, the Bloomberg gold spot price added $4.35 to $1,340.70 per ounce, and the Dollar Index—a comparison of the U.S. dollar to six major world currencies—was 0.2% lower at 89.63.

The Producer Price Index (PPI) showed prices at the wholesale level in March rose 0.3% month-over-month (m/m), above the Bloomberg expectation of a 0.1% increase, and versus February’s unrevised 0.2% gain. The core rate, which excludes food and energy, increased 0.3%, topping forecasts to match February’s unrevised 0.2% rise. Y/Y, the headline rate was 3.0% higher, north of projections of a 2.9% gain, after the prior month’s unadjusted 2.8% increase. The core PPI rose 2.7% y/y last month, above estimates of a 2.6% gain and versus February’s unrevised 2.5% increase.

Tomorrow, the March inflation picture will become clearer with the release of the Consumer Price Index (CPI), projected to be flat m/m after February’s 0.2% gain. The core CPI is forecasted to match the prior month’s 0.2% increase. Compared to last year, headline inflation is estimated to rise 2.4% after February’s 2.2% rise and the core rate is anticipated to be up 2.1%, above the 1.8% gain posted in the month prior. The inflation data will precede tomorrow’s afternoon release of the minutes from the Fed’s March meeting in which it expectedly raised rates and sounded a slightly more hawkish tone. MBA Mortgage Applications are also on tap.

Treasuries were lower, as the yield on the 2-year note rose 4 basis points to 2.32%, the yield on the 10-year note gained 2 basis points to 2.80%, and the 30-year bond rate ticked 1 basis point higher to 3.02%.

Bond rates were higher after the Treasury yield curve steepened a bit last week, and the U.S. dollar extended yesterday’s losses, giving back some of last week’s modest gain, while the stock markets continue to be volatile, posting wide-ranging intra-day swings.

Schwab Center for Financial Research – Market Analysis Group

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