Risk Assets Keep Moving Higher

U.S. stocks advanced on the expectation that the Fed will maintain its current bond-purchase program longer than some had speculated over the previous week. The S&P 500 advanced +0.37, fading into the close, with financials and healthcare leading the way higher and consumer staples and REITs lagging. VIX cash declined -0.3 points to 14.53, closing near the lows of the day. Initial jobless claims totaled 354K versus the estimate of 340K with the prior period revised to 344K from 340K; holiday closures prevented five states from completing a full count. The second of three 1Q U.S. GDP estimates showed 2.4% annualized growth versus the median estimate of 2.5% as slower inventory building and cutbacks in government spending overshadowed the biggest gain in consumer purchases since 2010. Consumer spending, which represents about 70% of the economy, increased a revised 3.4% annualized rate in Q1, higher than the 3.3% estimate. April pending home sales rose 0.3% MoM versus estimates calling for an increase of 1.5%. Crude oil, gold, and copper all moved higher, while the dollar index declined moderately. Treasuries advanced as higher yields lured more investors to the government’s auction of $29B in seven-year notes, with the securities drawing a high yield of 1.496%, the most since March 2012 when the yield was 1.59% at an auction; the bid-to-cover ratio was 2.7, in line with the 2.67 average at the past 10 auctions. Yields on tens fell -1bp to 2.11%, while thirties rose +1bp to 3.28%.

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