U.S. stocks advanced and the dollar softened on Tuesday as robust economic data helped alleviate recession fears stoked investors' risk appetite.
All three major U.S. stock indexes were green from the starting bell, with tech-related megacaps – particularly those involved in the recent AI mania – putting the Nasdaq out front.
An unexpected jump in new orders for U.S.-made durable goods, along with robust readings on new home sales and consumer confidence, helped sooth worries over a looming recession amid the Federal Reserve's efforts to toss cold water on demand in order to rein in inflation.
"We got a ton of data, shows the economy pretty strong," said Jay Hatfield, portfolio manager at InfraCap in New York.
"We're in a trading range as we head into a holiday week and we expect to trade a bit sideways into July," Hatfield added. "The rally will broaden as we go into earnings season."
The solid data would appear to pave the way for another 25 basis point interest rate hike at the end of the Federal Reserve's July meeting.
Financial markets are pricing in a 74.4% likelihood of that occurring, according to CME's FedWatch tool. The question remains whether the Fed will call it a day or tighten further in September and beyond.
The Fed Chairman Jerome Powell's European counterpart, European Central Bank President Christine Lagarde said on Tuesday said the ECB is unable to announce an end to rate hikes in the face of stubbornly high inflation.
The Dow Jones Industrial Average rose 114.07 points, or 0.34%, to 33,828.78, the S&P 500 gained 16.75 points, or 0.39%, to 4,345.57 and the Nasdaq Composite added 64.21 points, or 0.48%, to 13,399.99.
European stocks softened as hawkish comments from Lagarde offset gains in luxury goods and financials due to hopes of policy stimulus from China.
The pan-European STOXX 600 index lost 0.05% and MSCI's gauge of stocks across the globe gained 0.38%.
Emerging market stocks rose 0.61%. MSCI's broadest index of Asia-Pacific shares outside Japan closed 0.82% higher, while Japan's Nikkei lost 0.49%.
The greenback softened against a basket of world currencies as the euro and the yen strengthened.
The dollar index fell 0.22%, with the euro up 0.43% to $1.0951.
The Japanese yen weakened 0.34% versus the greenback at 144.04 per dollar, while sterling was last trading at $1.2736, up 0.19% on the day.
U.S. Treasury yields edged higher as strong economic data eased recession fears.
Benchmark 10-year notes last fell 13/32 in price to yield 3.7678%, from 3.719% late on Monday.
The 30-year bond last fell 13/32 in price to yield 3.8413%, from 3.819% late on Monday.
Crude prices pared their losses after U.S. economic indicators surprised to the upside, ahead of energy demand data expected later in the session.
U.S. crude fell 0.37% to $69.11 per barrel and Brent was last at $74.24, down 0.15% on the day.
Gold prices softened as robust economic reports dulled the safe-haven metal's luster.
Spot gold dropped 0.3% to $1,917.19 an ounce.
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