The Stock Market Climbed Because Tumbling Bond Yields Don’t Mean What They Used To

Weekly jobless claims tumbled to 576,000, the lowest level of the pandemic, consumer inflation rose in March at a quicker-than-expected 2.6% year over year, and March’s retail sales, boosted by government payouts, surged 9.8% over February’s.

The ratio of the price of copper to the price of gold has risen to near its highest level since 2018, another sign that investors aren’t worrying about growth yet.

It’s also possible that after yields nearly doubled to start the year, investors were simply waiting to see that the move higher was over before buying again.

Some investors believe that inflation is coming, so they’re buying cyclical stocks, observes Evercore ISI technical analyst Rich Ross, while others believe inflation will be transitory—to borrow the Fed’s favorite word—and are buying growth stocks.

Rather than watching yields, investors should keep an eye on the price of oil, according to Thomas Lee, head of research at Fundstrat Global Advisors, who points to the connection between oil prices and the reopening trade.

Now, oil is picking up steam again, and if it continues to rise, cyclical stocks should, too.

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