US stocks rise, USD falls after seven weeks of equity losses

US stocks rallied on Monday while government bond prices fell, as investors returned to riskier assets after growth fears and high inflation left the S&P 500 nursing its seventh consecutive week of losses.

Monday’s advance followed a late turnround on Wall Street on Friday when the S&P briefly entered bear market territory, defined as a 20 per cent drop from a recent peak, before rebounding to close 0.01 per cent higher.

However, some investors have begun to question whether markets have now priced in enough bad news to create buying opportunities.

The broad S&P closed 1.9 per cent higher, with gains in every sector. The tech-heavy Nasdaq Composite added 1.6 per cent to close at 11,535.27. Global equities have dropped this year as inflation, driven by economies reopening from coronavirus shutdowns and Russia’s invasion of Ukraine disrupting fuel and food prices, hit multi-decade highs in many countries and central banks moved to raise interest rates in response.

The increased risk appetite among investors on Monday was also reflected in currency and government bond markets. The yield on the 10-year US Treasury note, which rises when prices fall, climbed 0.08 percentage points to 2.87 per cent. Germany’s equivalent Bund yield rose by 0.07 percentage points, to 1.01 per cent.

The moves to the upside came after President Joe Biden said he was considering easing tariffs on Chinese goods that had been imposed during the prior administration. Biden’s remarks, made during a news conference with Japanese Prime Minister Fumio Kishida, came in turn after Treasury Secretary Janet Yellen had said last week that she was encouraging the Biden administration to remove the tariffs she said imposed “more harm on consumers and business” in the United States.

The possibility of some easing of tariffs while the US economy grapples with decades-high rates of inflation helped at least temporarily boost risk assets that had been battered in recent weeks by jitters over rising prices, more aggressive Federal Reserve monetary policies and international concerns in Ukraine and China. As of Friday, the S&P 500 had also posted a seventh consecutive weekly loss last week in its longest losing streak since 2001. And at its worst point on Friday, the index sank as much as 20.6% from its January record high to trade in bear market territory.