The S&P 500 remained near all-time highs Thursday, after a hot inflation report failed to coax the bond bears out of hiding as yields fell, suggesting that the idea of "don't fight the Fed" is gaining popularity once again.
The S&P 500 rose 0.49% to remain close to its earlier intraday record high of 4,249.97. The Dow Jones Industrial Average was up 0.22%, or 76 points, and the Nasdaq Composite was up 0.72%.
The Labor Department said on Thursday its consumer price index rose 0.6% last month after edging up 0.9% in April. The uptick in consumer prices in May lifted the year-on-year increase in the CPI to 5% from 4.2% in April, the highest rate since the 1980s.
But Treasury yields fell as the hottest inflation report in decades failed to revive fears that the Federal Reserve will tighten policy sooner.
The bond vigilantes – who were betting against the Federal Reserve view of transitory inflation – have been reining in their bearish bets on bonds on concerns the Fed may not be as behind the curve as feared.
"[I]f you're betting against the Fed you tend to not be accurate," Johan Grahn, Head of ETF Strategy at Allianz said in an interview with Investing.com on Thursday. "If you are accurate and it's typically for a short, short moment, then everybody else would bet in the same direction so it's a really slippery slope to go down."
There appears to be good reason to refrain from betting against the Fed's call on inflation. The economy is opening up, driving consumers back to areas that were shuttered during the pandemic such as restaurants and international travel, but this spike in prices doesn't matter yet as wages aren't rising.
"The decision making is happening at the consumer level, but it's not to spend more money necessarily, it's more about deciding where to spend the money, " Grahn added. "The consumer will have to decide whether they want to get on two flights for $300 apiece, for example, or if they want to get on one flight, which could now be $450 apiece instead."
Megacap tech stocks flourished against the backdrop of falling rates, keeping the broader market grinding higher.
Apart from Apple (NASDAQ:AAPL), the Fab 5 including Google-parent Alphabet (NASDAQ:GOOGL), Amazon.com (NASDAQ:AMZN), Microsoft (NASDAQ:MSFT), and Facebook (NASDAQ:FB) were in the green.
Health care stocks, however, were the standout performer on the day, led by a jump in Bristol-Myers Squibb Company (NYSE:BMY) and Bio-Rad Laboratories Inc (NYSE:BIO).
Bristol-Myers Squibb jumped more than 3% after reporting a positive update from a late-stage trial of its cancer drug Breyanzi.
Energy stocks were higher as oil prices recovered from an intraday dip following signs Iranian nuclear deal talks could resume after the U.S. lifted sanctions on several former Iranian officials and energy firms.
In meme mania news, GameStop (NYSE:GME), fell 25% after a slew of updates including second-quarter results that topped expectations, the appointment of two former Amazon executives, and plans to sell another 5 million shares.