Treasury yields rose after data showed a further increase in consumer year-ahead inflation expectations, with some traders taking profits on dovish Federal Reserve wagers.

In a thin trading session ahead of the Thanksgiving holiday, two-year U.S. yields hit 4.9 per cent. The S&P 500 edged higher. Amazon.com Inc. climbed ahead of Black Friday and Cyber Monday sales. Microsoft Corp. gained on news Sam Altman will return to lead OpenAI. Nvidia Corp. dropped after its results. The dollar advanced. Oil declined.

Americans expect inflation will climb at an annual rate of 4.5 per cent over the next year, up from the 4.4 per cent expected earlier in the month, according to the final November reading from the University of Michigan. They see costs rising 3.2 per cent over the next five to 10 years, data Wednesday showed.

“For a data-dependent Fed, this is not good news as they do not want to see consumer inflation expectations become unanchored, since historically it becomes increasingly difficult to reset consumer psychology towards a lower inflationary environment,” said Quincy Krosby, chief global strategist for LPL Financial.

In other economic news, applications for U.S. jobless benefits fell last week after a run of increases, a slight reprieve in what otherwise has been a gradually cooling labor market. Durable goods orders declined in October by more than expected as commercial aircraft bookings retreated and demand weakened for business equipment.

The stand-out theme in the SOFR options market Wednesday has been the liquidation of dovish hedges — which has picked up in a sign that traders are taking profits on dovish Fed wagers placed as far back as September.

Equities extended their November gains. The S&P 500 will rally to a record high next year, helped by positive sentiment and resilient valuations, according to Lori Calvasina at RBC Capital Markets.

“The sentiment set up is constructive for now,” Calvasina wrote in a note, saying that an indicator of investor appetite that’s proved reliable in 2023 is sitting in a range typically followed by 10 per cent gains in the S&P 500 over 12 months. “Valuations can stay higher than many investors realize,” as cooling inflation should support price-to-earnings multiples, she wrote.

Elsewhere, oil slumped as the OPEC+ meeting that had been set for the weekend was delayed, dimming traders’ expectations that the cartel will intervene to tighten supplies.

Corporate Highlights:

• Boeing Co.’s largest 737 Max variant was given so-called type-inspection authorization by the Federal Aviation Administration that clears the path for the next phase of flight testing for the long-delayed model.
• Broadcom Inc. completed its takeover of software maker VMware Inc. following an unexpectedly long 18-month process that culminated in the deal getting approval in China.
• Deere & Co. forecast smaller-than-expected profit next year, with slowing equipment demand from farmers starting to weigh on the world’s largest tractor maker.
• Autodesk Inc. was downgraded by Piper Sandler after the company’s tepid growth rate and tempered margin expectations.
• Guess? Inc., a clothing company, reported net revenue that missed estimates.
• Nordstrom Inc., a department store chain, reported total revenue that missed estimates.
• Urban Outfitters Inc., a clothing retailer, reported comparable sales for its namesake banner that missed estimates.
• Virgin Galactic Holdings Inc. was downgraded by Morgan Stanley, which noted the rocket company has no planned revenue-generating flights from mid-2024 to 2026.

Some of the main moves in markets:

Stocks

• The S&P 500 rose 0.4 per cent as of 4 p.m. New York time
• The Nasdaq 100 rose 0.4 per cent
• The Dow Jones Industrial Average rose 0.5 per cent
• The MSCI World index rose 0.1 per cent

Currencies

• The Bloomberg Dollar Spot Index rose 0.3 per cent
• The euro fell 0.2 per cent to US$1.0887
• The British pound fell 0.4 per cent to $1.2495
• The Japanese yen fell 0.8 per cent to 149.59 per dollar

Cryptocurrencies

• Bitcoin rose 2.1 per cent to $37,598.9
• Ether rose 4.5 per cent to $2,074.67

Bonds

• The yield on 10-year Treasuries advanced two basis points to 4.41 per cent
• Germany’s 10-year yield was little changed at 2.56 per cent
• Britain’s 10-year yield advanced five basis points to 4.15 per cent

Commodities

• West Texas Intermediate crude fell 1.3 per cent to $76.73 a barrel
• Spot gold fell 0.4 per cent to $1,989.81 an ounce