Stocks rose after strong economic reports revived speculation the Federal Reserve will be able to engineer a soft landing even if it keeps interest rates higher for longer. The euro fell on bets the European Central Bank will stay on hold after hiking on Thursday.

All major groups in the S&P 500 advanced as the gauge topped 4,500. The Dow Jones Industrial Average added 1 per cent. Earlier in the day, equity futures pared gains as retail sales and producer prices beat estimates. Arm Holdings Plc surged 25 per cent in its trading debut. Ford Motor Co. and General Motors Co. underperformed, with Detroit carmakers facing the threat of a strike. Traders also braced for Friday’s triple witching options event, which has the potential to trigger volume spikes and volatility.

“Stocks are higher after another round of impressive US economic data suggests the consumer is still doing just fine,” said Edward Moya, senior market analyst for the Americas at Oanda. “Wall Street seems content with the risk of one more Fed rate hike as consumer resilience is expected to gradually weaken. While the U.S. growth story is still alive, the outlook for Europe remains uninspiring as stagflation risks grow.”

The latest data reinforce our view the US economy is headed for a period of moderate growth, avoiding a recession over the coming 12 months, according to Solita Marcelli, chief investment officer for the Americas at UBS Global Wealth Management.

“That should support equities,” she noted. “However, uncertainty is likely to keep broad equity markets choppy.”

There are still suggestions of an overheating economy that will encourage Fed hawks who believe strong growth today will lead to higher inflationary pressures,” according to Will Compernolle, macro strategist at FHN Financial.

“The odds are still heavily in favor of the Fed leaving rates unchanged next week, but the dot plot showing another increase later this year,” he noted.

Bond traders have spent most of the last two months worrying about persistent inflation and an economy that seems to be running hot, according to Chris Zaccarelli, chief investment officer at Independent Advisor Alliance. The most-recent economic data just reinforced that, he noted.

“The Fed has indicated that they want to slow down the pace of rate increases, and for that reason they are still likely to keep rates unchanged at next week’s meeting, but all of the data that is coming in higher than expected is going to put pressure on them to raise rates again at the following meeting,” Zaccarelli added.

Bridgewater Associates LP founder Ray Dalio said he doesn’t want to own bonds and prefers cash, highlighting difficulties investors face as global central banks try to manage inflation. Meantime, the Fed’s former Vice Chair Richard Clarida said fiscal policy risk is more likely to drive up US bond yields than further tightening from the central bank.

Corporate Highlights

• T-Mobile U.S. Inc. is in discussions with a unit of Tillman Global Holdings LLC to build out a fiber-optic network, setting the stage for the No. 2 US wireless carrier to enter the landline broadband business.
• Walt Disney Co. expects to fall tens of millions of subscribers short of its last publicly stated 2024 target for the Disney+ streaming service, according to people familiar with the matter.
• Bloomberg News also reported the company has held exploratory talks about selling its ABC network and TV stations to local broadcaster Nexstar Media Group Inc.
• Citigroup Inc. sold a preferred equity offering on Thursday.
• Delta Air Lines Inc. reduced its expectations for third-quarter profit on higher fuel prices and larger-than-expected maintenance costs, but it reaffirmed its full-year guidance on earnings.
• Microsoft Corp.’s attempt at avoiding deeper European Union scrutiny of its Teams video-conferencing app fell flat with the bloc’s antitrust enforcers readying a formal complaint against the firm’s conduct.

Key events this week:

• U.S. retail sales, PPI, business inventories, initial jobless claims, Thursday
• China property prices, retail sales, industrial production, Friday
• U.S. industrial production, University of Michigan consumer sentiment, Empire Manufacturing index, Friday

Some of the main moves in markets:

Stocks

• The S&P 500 rose 0.8 per cent as of 4 p.m. New York time
• The Nasdaq 100 rose 0.8 per cent
• The Dow Jones Industrial Average rose 1 per cent
• The MSCI World index rose 0.8 per cent

Currencies

• The Bloomberg Dollar Spot Index rose 0.3 per cent
• The euro fell 0.8 per cent to $1.0643
• The British pound fell 0.7 per cent to $1.2408
• The Japanese yen was little changed at 147.45 per dollar

Cryptocurrencies

• Bitcoin rose 1.8 per cent to $26,695.3
• Ether rose 2.1 per cent to $1,637.03

Bonds

• The yield on 10-year Treasuries advanced four basis points to 4.29 per cent
• Germany’s 10-year yield declined six basis points to 2.59 per cent
• Britain’s 10-year yield declined seven basis points to 4.28 per cent

Commodities

• West Texas Intermediate crude rose 2.2 per cent to $90.46 a barrel
• Gold futures were little changed

This story was produced with the assistance of Bloomberg Automation.

--With assistance from Isabelle Lee, Felice Maranz and Edward Dufner.