Stocks Push Higher as Pro-Cyclical Rotation Reemerges…..

U.S. stocks closed broadly higher, building on yesterday’s rise, which saw the Information Technology sector reap large gains on Tuesday. Today however saw the reemergence of the pro-cyclical rotation that has persisted recently as more value-oriented issues outperformed their growth peers. Energy, Financials, and Materials stocks led the way, while the Information Technology sector was off the pace, even as Treasury yields continued to stabilize after the recent spike. A subdued read on consumer price inflation also appeared to offer support for the markets, along with continued optimism regarding the progress on COVID-19 vaccine rollouts and the passing of a new $1.9 trillion fiscal relief package, which President Biden is expected to sign on Friday. In equity news, GE confirmed reports earlier this week that it will combine its aircraft-leasing business with Ireland’s AerCap Holdings valued at more than $30 billion, while Dow member Visa reported a continued increase in payment volumes. Treasuries were mixed, and the U.S. dollar was lower. Gold and crude oil prices both ticked higher. Asia finished mixed and Europe closed mostly higher.

The Dow Jones Industrial Average rose 464 points (1.5%) to 32,297, the S&P 500 Index gained 23 points (0.6%) to 3,899, and the Nasdaq Composite was little changed at 13,069. In heavy volume, 1.2 billion shares were traded on the NYSE and 5.9 billion shares changed hands on the Nasdaq. WTI crude oil rose $0.43 to $64.44 per barrel. Elsewhere, the Bloomberg gold spot price increased $9.50 to $1,725.60 per ounce, and the Dollar Index—a comparison of the U.S. dollar to six major world currencies—lost 0.2% to 91.81.

The Information Technology sector led a rebound in growth and momentum stocks yesterday, which fostered a bounce in the Nasdaq out of correction territory and lifted the broad markets. The moves came as the spike in bond yields and the reemergence in the U.S. dollar both cooled.

Consumer price inflation remains relatively subdued, mortgage applications decline

The Consumer Price Index (CPI) rose 0.4% month-over-month (m/m) in February, matching the Bloomberg consensus estimate, and compared to January’s unrevised 0.3% gain. The core rate, which strips out food and energy, was up 0.1% m/m, versus expectations of a 0.2% rise and January’s unadjusted flat reading. Y/Y, prices were 1.7% higher for the headline rate, in line with forecasts and above January’s unadjusted 1.4% rise. The core rate was 1.3% higher y/y, below projections to match January’s unrevised 1.4% increase.

The MBA Mortgage Application Index declined 1.3% last week, following the prior week’s 0.5% gain. The decrease came as the Refinance Index fell 5.0% to more than offset a 7.2% rise for the Purchase Index. The average 30-year mortgage rate increased 3 basis points (bps) to 3.26%.

Treasuries were mixed, as the yields on the 2-year note and the 10-year note both ticked 1 bp lower to 0.16% and 1.52%, respectively, while the 30-year bond rate advanced 1 basis point to 2.24.

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