By Stephen Culp
NEW YORK (RockedBuzz via Reuters) – U.S. stocks ended the session higher and the dollar retreated on Monday as investors anxiously awaited inflation data on Wednesday, while the Bank of Japan suggested it may close the door to an era of negative interest rates.
The tech-heavy Nasdaq led the rally in U.S. stocks, gaining 1.1%, with electric carmaker Tesla Inc and Amazon.com providing the biggest upside impulse.
The S&P 500 and Dow rose 0.7% and 0.3%, respectively. The relatively languid session appeared like the calm before this week’s storm of US economic data, with Wednesday’s crucial consumer prices (CPI) report of key importance.
“We are in horse latitude, with lack of directional breezes ahead of the Fed meeting,” said Sam Stovall, chief investment strategist at CFRA Research in New York. “What drives markets today is the anticipation of what could happen later this week.”
“Investors are focusing on how they will respond to Wednesday’s CPI report,” Stovall added.
Analysts expect inflation to have intensified last month, driven by rising oil costs. The main measure, which eliminates food and energy price volatility, is expected to cool on an annual basis.
The long-awaited CPI data will provide market participants with a snapshot of August inflation and may provide some illumination on the length of the US Federal Reserve’s tightening policy cycle.
The Fed, which has left the door open to further interest rate hikes, has pledged to remain nimble in its response to economic data.
Financial markets have essentially triggered a rate pause at the end of the September 19-20 monetary policy meeting, beyond which the path forward becomes less certain, according to the CME’s FedWatch tool.
Elsewhere, comments from Bank of Japan (BOJ) governor Kazuo Ueda raised the possibility that Japan could begin to move away from the era of negative interest rates.
The Dow Jones Industrial Average rose 87.32 points, or 0.25%, to 34,663.91, the S&P 500 gained 30.01 points, or 0.67%, to 4,487.5 and the Nasdaq Composite gained 156.37 points, or 1.14%, to 13,917.89.
European stocks closed higher, led by a rise in mining stocks, as investors braced for the US consumer price index data and the European Central Bank’s (ECB) policy decision, expected later. in the week.
The pan-European STOXX 600 index rose 0.34% and MSCI’s index of stocks across the world gained 0.68%.
Emerging market stocks rose 0.51%. MSCI’s broadest index of Asia-Pacific shares outside Japan closed 0.4% higher, while Japan’s Nikkei lost 0.43%.
The dollar lost ground against a basket of world currencies, while the pound continued its recovery from last week’s three-month low and the euro strengthened. The yen appreciated against the greenback following Ueda’s comments.
The dollar index fell 0.52%, with the euro rising 0.45% to $1.0747.
The Japanese yen strengthened 0.87% against the greenback at 146.55 per dollar, while the pound last traded at $1.2509, up 0.36% on the day.
US Treasury bond yields rose slightly ahead of the CPI report.
The price of benchmark 10-year bonds last fell 8/32, yielding 4.288%, from 4.256% on Friday.
The price of 30-year bonds last fell 23/32, yielding 4.3753%, from 4.332% on Friday.
Oil prices stabilized, with Brent remaining above $90 a barrel, the highest in the last ten months reached last week following new production cuts by Russia and Saudi Arabia.
U.S. crude fell 0.25% to settle at $87.29 a barrel, while Brent crude settled at $90.64 a barrel, down 0.01% on the day.
Gold prices rose slightly against the dollar.
Spot gold rose 0.2% to $1,921.98 an ounce.
(Reporting by Stephen Culp; Additional reporting by Amanda Cooper in London; Editing by William Maclean, Angus MacSwan and Deepa Babington)