Health care and technology companies helped drive stocks higher on June 10, bringing the S&P 500 index to a record high and out of the red for the week.
The benchmark index climbed 0.5 percent, putting it on track for its third straight weekly gain. Bond yields initially rose, then mostly fell after a much-anticipated report showing a big jump in inflation last month.
While investors have been concerned about inflation for weeks, the May report seemed to reinforce the growing consensus that any increase in inflation will be temporary.
"Keep in mind that as we start to make our way back to a full economic recovery, there is pent-up demand and supply constraints from raw material and labor shortages," said Mike Loewengart, a managing director at E-Trade Financial. "This creates the type of inflation that the Fed believes is transitory, meaning it too shall pass. Whether or not they are correct remains to be seen."
Bond yields rose after the inflation data, then fell broadly by late afternoon. The yield on the 10-year Treasury note slipped to 1.45 percent from 1.49 percent late Wednesday.
Organon jumped 6.6 percent for the biggest gain in the S&P 500 and Pfizer rose 2.2 percent as health care stocks led the market higher.
Technology and communication stocks also rose, including Microsoft and Activision Blizzard, Banks, industrial and materials companies were among the decliners.
Investors reacted positively to more data that showed continued improvement in the labor market. The number of Americans who filed for unemployment benefits last week fell by 9,000 to 376,000, another pandemic low.
Stocks have been meandering all week as investors looked ahead to another inflation snapshot. The worry is that if signs of inflation are more than transitory, as the Federal Reserve has suggested, it could prompt central banks to withdraw stimulus from the economy to combat rising prices.
"The inflation outlook has rightfully been top of mind since last month's blowout report," Ryan Detrick, market strategist at LPL Financial wrote in a research note. "Under the hood, though, we think the picture is a bit more sanguine than the headlines would suggest, and still believe inflation will be relatively well-contained over the intermediate-to-long term."
Investors will see next week how the Fed is reading the latest inflation barometer and what monetary policy changes, if any, the central bank may consider. The Fed's policymaking committee is due to deliver its latest economic and interest rate policy update next Wednesday afternoon.
Markets will also be tuning in this weekend for any developments at the summit of the Group of Seven in Britain. At the top of the leaders' agenda is helping countries recover from the coronavirus pandemic, which has killed more than 3.7 million people and wrecked economies.
The G-7 leaders are meeting for three days at a British seaside resort. It's the first such gathering since before the pandemic.