U.S. stocks ended the week on a high note driven by speculation that the Federal Reserve won’t raise interest rates beyond peak levels already priced in.

A rally in the S&P 500 Friday helped snap a three-week losing streak. The Nasdaq 100 scored its best day since early February. Sentiment remained upbeat despite a report showing resilience in the service sector as some investors wagered the impact of the Fed’s hikes on the economy would be delayed. A measure of prices paid by service providers showed costs rising at a slower pace, which was cheered by traders.

Bond yields rose for the week though Treasuries richened in a Friday rally, with the 10-year yield hovering around 3.96 per cent. A benchmark of the dollar had its worst week since mid-January, ending four consecutive weeks of gains. 

All eyes will be on the non-farm payrolls report next week for clues on whether the economy can handle more rate hikes. Data this week showed continued labor-market resilience in the U.S., supporting the case for the Fed to stick to its tightening policy, a theme that had pushed almost every major asset into the red in February. 

But investors were heartened after Atlanta Fed’s Raphael Bostic said on Thursday that the central bank could possibly pause its rate hikes sometime this summer. Traders interpreted his comments as dovish, even though Bostic and his colleagues said decisions would continue to be data dependent and a Fed report on Friday emphasized that further rate increases are in store.

Traders are still optimistic because even the most hawkish Fed officials haven’t suggested that rates could need to go beyond levels already baked in, said Priya Misra, global head of rates strategy at TD Securities. Swap markets have been pricing a peak Fed policy rate of 5.5 per cent in September. 

“I think they stay at 5.5 per cent and we have to see how data evolves in the second quarter,” she said on Bloomberg Television.

Misra also added that robust data doesn’t mean the Fed’s persistent tightening isn’t working.

“It takes a long time,” she said. “Policy only turned restrictive last year.”

Risk sentiment also received a boost on Friday from forecast-beating factory data from China. Oil gained for the fourth day, with confidence in China’s robust rebound supporting prices. 

Some of the main moves in markets:

Stocks

• The S&P 500 rose 1.6 per cent as of 4 p.m. New York time
• The Nasdaq 100 rose 2 per cent
• The Dow Jones Industrial Average rose 1.2 per cent
• The MSCI World index rose 0.4 per cent

Currencies

• The Bloomberg Dollar Spot Index fell 0.5 per cent
• The euro rose 0.3 per cent to US$1.0634
• The British pound rose 0.8 per cent to US$1.2041
• The Japanese yen rose 0.7 per cent to 135.85 per dollar

Cryptocurrencies

• Bitcoin fell 4.8 per cent to US$22,296.29
• Ether fell 5 per cent to US$1,558.57

Bonds

• The yield on 10-year Treasuries declined 10 basis points to 3.96 per cent
• Germany’s 10-year yield declined four basis points to 2.72 per cent
• Britain’s 10-year yield declined three basis points to 3.85 per cent

Commodities

• West Texas Intermediate crude rose 2 per cent to US$79.74 a barrel
• Gold futures rose 1.1 per cent to US$1,861.30 an ounce