Fresh records for stocks as bonds slip

(Bloomberg) -- The Trump trades are alive and well.

The four major U.S. equity benchmarks climbed to fresh records, with the Dow adding 150 points to top 20,400 for the first time, as investors added to reflation trades that have characterized markets since President Trump’s election in November. Banks led the S&P 500 to its fifth straight gain, while small-cap and technology indexes also hit records. MSCI’s global stock index hovered near its all-time high, as shares in European and emerging markets also advanced.

The New York Stock Exchange
Traders work on the floor of the New York Stock Exchange (NYSE) in New York, U.S., on Monday, Aug. 22, 2016. U.S. stocks fluctuated after erasing an early slide, as a rally in drugmakers spurred by deal activity offset declines in commodity shares led by falling crude-oil prices. Photographer: Michael Nagle/Bloomberg

The dollar strengthened and bonds retreated before data this week provided detail on the strength of U.S. consumer prices. Speeches from a range of Federal Reserve officials will deliver clues on how the central bank factors promised increases in government spending into its thinking on monetary policy. Crude fell below $53 a barrel.

Trump’s promise last week that he’d soon deliver details of a “phenomenal” tax plan jolted risk-on trades out of a month-long rut as investors speculate the president and Republican-led Congress will deliver on pro-growth policies. One of the best earnings seasons of the bull market and recent economic data reinforced the idea that the economy is on firm footing, poised to accelerate if government spending increases or taxes are cut.

What's coming up in the markets:

A day after joining the equity rally that took off in the U.S. Friday, Asian investors will turn to measures of Chinese price growth, South Korean trade and Japanese manufacturing to gauge the relative strength of leading economies. Inflation will remain on the radar for most investors this week, with CPI numbers from the U.K. due Tuesday and data from the U.S. coming on Wednesday. Fed Chairwoman Janet Yellen faces Congress for two days of testimony this week and the dollar could rally if she suggests a March increase is still in the cards, Bloomberg strategists said.

Here are the main market moves on Monday:

STOCKS
The S&P 500 rose 0.5% to a record 2,328.25 at 4 p.m. in New York. The measure capped a third weekly gain after Trump said he’d soon unveil details of his tax plan. The Dow rose 142.79 points to 20,412.16, while the Nasdaq gained 0.5% and the Russell 2000 Index added 0.3%. All three closed at records.

BONDS
The yield on 10-year Treasury notes added two basis points to 2.43%. Traders are pricing in a 32% chance that the Fed lifts rates at its March 15 meeting. The yield has been climbing since the Feb. 8 close at 2.336%, which was the lowest since mid-January. European government bonds were mixed after the European Commission boosted its outlook for euro-area inflation. The rate will average 1.7% in 2017, 0.3 points higher than previously forecast The yield on 10-year German benchmarks increased one basis point to 0.33%.

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