US stocks and bonds rallied Friday, with both the S&P 500 Index and Dow Jones Industrial Average reaching new highs, as US inflation data came in short of Federal Reserve expectations, spotlighting the concerns of some central bankers about additional interest rate hikes.
Treasuries notched their first weekly gain in three, bolstered by Fed Chair Janet Yellen's gradualist tone on policy tightening as inflation languishes below the central bank's 2 per cent target. Oil and gold advanced. A gauge of the US dollar fell for the fifth straight day, its longest losing streak in two months.
The recent pace of inflation in the world's largest economy has become even more pertinent since Yellen hinted in congressional testimony this week that sluggish price increases have structural causes. The soft June consumer price index number added to more than a quarter of shaky growth figures at a time when some Fed officials are hinging their support for further rate rises on the inflation outlook.
Retail sales also unexpectedly dropped in June for a second month of declines, signalling that consumers are providing only modest support for the US economy and suggesting a weaker than hoped for rebound in the gross domestic product in the second quarter.
Major financial firms JPMorgan Chase & Co and Citigroup reported earnings.
