Technology stocks propelled U.S. stocks higher as Federal Reserve officials reiterated their resolve to lower inflation.

The S&P 500 gained 0.6 per cent — even with financials under pressure — while the tech-heavy Nasdaq 100 rose 0.9 per cent, pushing further into a bull market. Treasuries were little changed and the dollar was weaker against major peers.

The gains come as market watchers digested a round of Fed commentary suggesting more monetary tightening was necessary, even after the collapse of three U.S. banks earlier this month. Boston Fed President Susan Collins said tightening was needed. Richmond Fed President Thomas Barkin said the Fed can raise rates more if inflation risks persist. And Minneapolis Fed President Neel Kashkari said he’s committed to getting inflation back to 2 per cent and that it’s not yet fully clear what impact the financial-system turmoil will have.

“With cracks in the banking system becoming apparent, the Fed’s job has become even harder,” said Jim Baird, chief investment officer at Plante Moran Financial Advisors. “Recession risk remains in focus given the Fed’s historical track record of struggling to tighten policy while easing the economy to a soft landing.”

President Joe Biden’s administration also called on regulators Thursday to tighten the rules for mid-sized banks in response to the recent bank failures. Stress in the financial sector has increased the chance of the Fed tipping the economy into a recession with its rate hikes. However, Collins echoed remarks by Fed Chair Jerome Powell last week that pain in the banking sector may be worth 25 basis points of tightening. Tighter credit conditions could remove the need for more hikes later, she said. Analysts have agreed, saying it could be the equivalent of a far more aggressive hike. 

“The plausible range is anything from nearly zero to 200bp or more in the event that stress were to broaden and deepen,” Krishna Guha, Evercore ISI head of central bank strategy, wrote. “We will all need to update as the data comes in and that updating could be quite rapid.”

Investors expect U.S. rates to sit around 4.3 per cent by the end of the year, around 70 basis points lower than the current level. However, several strategists have said markets are wrong to expect rate cuts this year. The labor market remains robust, though U.S. unemployment claims ticked up for the first time in three weeks. And high inflation — as measured by the so-called PCE Core Deflator due Friday — is expected to have persisted last month.

Elsewhere in markets, oil rebounded, gold gained and Bitcoin traded around US$28,000.

Key events this week:

• China PMI, Friday
• Eurozone CPI, unemployment, Friday
• U.S. consumer income, PCE deflator, University of Michigan consumer sentiment, Friday
• ECB President Christine Lagarde speaks, Friday
• New York Fed President John Williams speaks, Friday

Some of the main moves in markets:

Stocks

• The S&P 500 rose 0.6 per cent as of 4:02 p.m. New York time
• The Nasdaq 100 rose 0.9 per cent
• The Dow Jones Industrial Average rose 0.4 per cent
• The MSCI World index rose 1.2 per cent

Currencies

• The Bloomberg Dollar Spot Index fell 0.4 per cent
• The euro rose 0.6 per cent to US$1.0907
• The British pound rose 0.6 per cent to US$1.2391
• The Japanese yen rose 0.2 per cent to 132.65 per dollar

Cryptocurrencies

• Bitcoin fell 1.5 per cent to US$27,970.47
• Ether fell 1.3 per cent to US$1,780.87

Bonds

• The yield on 10-year Treasuries declined one basis point to 3.55 per cent
• Germany’s 10-year yield advanced five basis points to 2.37 per cent
• Britain’s 10-year yield advanced five basis points to 3.52 per cent

Commodities

• West Texas Intermediate crude rose 1.9 per cent to US$74.34 a barrel
• Gold futures rose 0.7 per cent to US$1,999 an ounce