US stocks had their best week since Donald Trump’s election victory

Stay informed with free updates

Simply sign up US stocks myFT Digest – delivered straight to your inbox.

US stocks posted their best week since Donald Trump’s election victory, boosted by strong bank earnings and weak core inflation data, raising the chances of further interest rate cuts this year.

The S&P 500 closed up 1 percent on Friday, leaving the index up 2.9 percent for the week.

That marked its best weekly gain since rising 4.7 percent in the five sessions through Nov. 8, when Trump’s election victory raised hopes that tax cuts and deregulation under the incoming administration would boost American companies. The Nasdaq Composite, which is dominated by technology stocks, added 2.5 percent, its best weekly gain since early December.

Last week’s rise came as banks, including JPMorgan Chase, Goldman Sachs and Citigroup, kicked off earnings season in the US by… Reporting strong increases in profits Over the past year, supported by a boom in trade and deal making.

Investor sentiment also benefited from numbers released this week by the Bureau of Labor Statistics that showed annual headlines Economic inflation It rose in line with expectations to 2.9 percent in December from 2.7 percent in November. Core inflation, which excludes volatile food and energy costs, unexpectedly fell to 3.2 percent from 3.3 percent the previous month.

Mike Zygmunt, co-head of trading and research at Visdom Investment Group, said this week’s inflation data meant sentiment had “flipped into exciting territory” again.

He added that at present, “the inflation man is no longer a worry (and) good earnings and guidance from reporting banks have encouraged bulls.”

Signs of slowing inflation have revived hopes among investors that the Federal Reserve, which holds its next two-day meeting at the end of January, will continue to cut interest rates. Rates During the coming months.

Last week’s hot jobs numbers left some market participants calling for an end to the central bank’s easing cycle or even an interest rate hike to offset the potential inflationary strength of the world’s largest economy.

Stocks have also been under pressure in recent weeks amid a global bond sell-off centered on the United States.

However, the decline stalled this week, with the policy-sensitive two-year Treasury yield, which closely tracks interest rate expectations, falling from a recent high of 4.42 percent on Monday to 4.27 percent.

The 10-year yield – a benchmark for global borrowing costs – fell from about 4.8 percent to 4.61 percent over the same period. Returns fall as prices rise.

“Lowering interest rate risks and improving earnings are a good combination to renew weak risk appetite,” said Florian Ilbo, head of macroeconomics at Lombard Odier Investment Managers.

“The second half of January may see a reversal of the trends that marked its beginning: lower interest rates leading to higher stocks,” Ilbo added.

Weak inflation numbers in December may reduce the risk of impending interest rate hikes, according to Aditya Bhave, a strategist at Bank of America. Resilient economic growth, strong consumer spending and a solid jobs market nonetheless mean “we maintain our view that the Fed’s cutting cycle is over,” he said in a note to clients.