S&P 500, Dow scale new heights, Treasury yields rise on strong inflation data

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Traders wearing masks work,on the floor at the New York Stock Exchange (NYSE) in New York, U.S., May 26, 2020. REUTERS/Brendan McDermid/File Photo

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NEW YORK, April 9 (Reuters) - The S&P 500 and the Dow notched record closing highs on Friday after solid U.S. inflation data and an uptick in Treasury yields suggested the economic recovery from the pandemic-related recession was gaining momentum.

"(It was) a fairly quiet Friday with low volume, a welcome change from 12 months ago," said David Carter, chief investment officer at Lenox Wealth Advisors in New York.

"Today was all about inflation," Carter added. "Despite today's higher PPI number, equity markets are starting to begrudgingly believe the Fed is in no rush to raise interest rates."

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All three major U.S. stock indexes posted weekly gains as upbeat economic data boosted risk appetite ahead of first-quarter earnings.

Transports, seen as a proxy for economic health, advanced for their 10th week in a row.

"Cyclical parts of the market like transports are being driven higher due to strong vaccination rates in the U.S., which suggests the economic reopening may accelerate," Carter said.

A Labor Department report showed producer prices rose last month at twice the speed of February's growth, reviving some inflation worries.

U.S. Federal Reserve Chairman Jerome Powell offered assurances on Thursday that the central bank is far more concerned about the recent uptick in COVID-19 infections than inflationary pressures.

"Powell is not overly concerned about long-term inflation," said Ryan Detrick, senior market strategist at LPL Financial in Charlotte, North Carolina. "The Fed has stressed from the very beginning these increases will be transitory."

The Dow Jones Industrial Average (.DJI) rose 297.03 points, or 0.89%, to 33,800.6, the S&P 500 (.SPX) gained 31.63 points, or 0.77%, to 4,128.8 and the Nasdaq Composite (.IXIC) added 70.88 points, or 0.51%, to 13,900.19.

European stocks ended nominally higher, but marked their longest winning streak since November 2019 on rising hopes of a rapid economic rebound.

The pan-European STOXX 600 index (.STOXX) rose 0.08% and MSCI's gauge of stocks across the globe (.MIWD00000PUS) gained 0.32%.

Emerging market stocks lost 0.97%. MSCI's broadest index of Asia-Pacific shares outside Japan (.MIAPJ0000PUS) closed 0.81% lower, while Japan's Nikkei (.N225) rose 0.20%.

U.S. Treasury yields rose in the wake of the PPI report, which provided further evidence that the world's largest economy was on a stable road to recovery from the pandemic.

Benchmark 10-year notes last fell 7/32 in price to yield 1.655%, from 1.632% late on Thursday.

The 30-year bond last fell 3/32 in price to yield 2.327%, from 2.322% late on Thursday.

The dollar inched higher against a basket of world currencies as inflation data lifted bond yields, but the greenback had its softest week of the year due to better-than-expected economic data and the dovish Fed. read more

The dollar index rose 0.11%, with the euro down 0.07% to $1.1904.

The Japanese yen weakened 0.35% versus the greenback at 109.65 per dollar, while Sterling was last trading at $1.3709, down 0.17% on the day.

Crude oil prices dropped on rising supply amid a mixed picture on demand recovery from the COVID-19 slump. read more

U.S. crude dipped 0.47% to settle at $59.32 per barrel, while Brent crude settled at $62.95 per barrel, falling 0.4% on the day.

Gold withdrew from Thursday's one-month peak, weighed down by a rebounding dollar and rising Treasury yields. Still, the safe-haven metal appears headed for its first weekly gain in three.

Spot gold dropped 0.8% to $1,742.64 an ounce.

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Reporting by Stephen Culp; Editing by Will Dunham

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