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.

Advertisement

Major financial firms JPMorgan Chase & Co and Citigroup reported earnings.

JPMorgan, the biggest bank in the US, posted the highest annual profits ever for a US bank over the past 12 months. And Citigroup topped earnings estimates, powered by strength in its investment banking group.

Here are the main moves in markets:

Stocks

- The S&P 500 rose 0.5 per cent to an all-time high of 2,459.27.

- The Dow Jones Industrial Average gained 0.4 per cent to 21,637.74, also a record. The Nasdaq 100 increased 0.8 per cent.

- The Stoxx Europe 600 added 0.2 per cent for a weekly advance of 1.8 per cent.

Currencies and Bonds

- The Bloomberg Dollar Spot Index declined 0.7 per cent, close to its lowest level since September.

- The pound added 1.3 per cent to $1.3108, and the euro gained 0.6 per cent to $1.1469.

- Benchmark 10-year US Treasury yields fell two basis point to 2.32 per cent. Sovereign yields across Europe also declined, with the benchmark bond yield dropping less than one basis point and French peers two basis points lower.

Commodities

- West Texas Intermediate crude rose 1.1 per cent to $46.60 a barrel for a weekly advance of more than 5 per cent.

- Gold increased 0.9 per cent to $1,228.61 an ounce.

- Zinc snapped a three-week streak of gains after inventories available to investors on the London Metal Exchange surged by the most on record.