By Chuck Mikolajczak
NEW YORK (Reuters) -Global stocks rallied on Friday but stayed on track for a weekly decline, while the dollar stalled after its recent rally but found some support from a stronger-than-expected U.S. manufacturing survey.
U.S. stocks scored strong gains, with both the S&P 500 and Nasdaq up more than 1%, in an attempt to snap a five-session streak of declines, their longest since mid-April. All 11 major S&P sectors rose, led by consumer discretionary stocks.
The U.S. currency rallied late last year as investors bet President-elect Donald Trump’s policies would drive growth and inflation, meaning fewer interest rate cuts ahead from the Federal Reserve and higher U.S. Treasury yields, while European central banks are set to keep cutting rates.
The Fed’s December policy statement led investors to reduce expectations for the number and size of cuts from the central bank in 2025.
“We continue to focus on growth and inflation as the two principal capital market drivers and our initial view is favorable towards traditionally more risky assets, meaning viewing equities more favorably than fixed income at this point in time as we position coming into the new year,” said Bill Northey, senior investment director at U.S. Bank Wealth Management in Billings, Montana.
“Particular focus will continue to revolve around the evolution of monetary policy and the interaction that we have with what is going to be a changing legislative and administrative agenda for the U.S. economy, but we do believe that continues to set up favorably.”
The Dow Jones Industrial Average climbed 327.59 points, or 0.77%, to 42,720.66, the S&P 500 rose 71.22 points, or 1.21%, to 5,939.77 and the Nasdaq Composite climbed 319.55 points, or 1.66%, to 19,600.35.
MSCI’s gauge of stocks across the globe advanced 7.07 points, or 0.84%, to 847.00 – on track for its biggest daily percentage gain since Dec. 24 – but still poised for its third weekly decline in the past four.
In Europe, equities closed lower, with the pan-European STOXX 600 index down 0.49%, weighed by luxury companies and alcohol providers, but able to record a second straight weekly gain.
Trading volume was light at the end of a holiday-shortened week.
The dollar index, which measures the greenback against a basket of currencies, fell 0.2% to 109 after briefly paring losses as the Institute for Supply Management (ISM) said a key manufacturing index increased more than expected 49.3 last month, the highest reading since March, from 48.4 in November.
The greenback was on track for its biggest weekly percentage gain since mid-November, up about 1.4%, and its fifth straight week of gains, having hit a two-year high of 109.54 in the prior session.
The euro was up 0.3% at $1.0296 but set for its fifth straight weekly loss and its largest weekly percentage drop since mid-November.
Against the Japanese yen, the dollar weakened 0.23% to 157.15 while the British pound strengthened 0.29% to $1.2416.
The yield on benchmark U.S. 10-year notes was up 1 basis point at 4.585%, also paring declines after the manufacturing data. The yield remained above the 4.5% mark that has proven problematic for equities after reaching an eight-month high of 4.641% earlier this week.
U.S. crude jumped 1.2% to $74.01 a barrel and Brent gained 0.82% to $76.55 per barrel, buttressed by colder European and U.S. weather and additional economic stimulus announced by China.
(Reporting by Chuck Mikolajczak, additional reporting by Johann M Cherian and Pranav Kashyap in Bengaluru, editing by Christina Fincher and Richard Chang)
