Stock futures fell on Monday after a session in which the broader market hit new records, with traders looking at retail sales data on Tuesday and a Federal Reserve policy meeting later this week. .
During Monday’s regular session, Wall Street rebounded from unstable and directionless trading, as investors struggled to balance economic optimism with steadily rising Treasury yields.
The Dow Jones Industrial Average rose more than 100 points and the S&P 500 Index also advanced to a new high, driven by the signing of a new $ 1.9 trillion stimulus account that is designed to stimulate consumer spending and stimulate economic growth. Most Americans are about to receive $ 1,400 stimulus checks, which started arriving over the weekend, and Wall Street economists have already started raising their estimates of gross domestic product (GDP) for the rest of the year, in expectations that the stimulus will trigger a consumer recovery.
Still, Washington’s wave of aggressive spending and supercompatible monetary policy have increasingly drawn attention to the uncontrolled deficit – which is at least part of the reason why government borrowing costs have started to rise, even with the Federal Reserve while remaining committed to promoting growth through lower yields and higher inflation.
The central bank will issue its verdict on monetary policy on Wednesday, which is widely expected to confirm a trend towards easier policy.
Last week, the 10-year reference Treasury yield reached a pre-pandemic high of around 1.6%, up about 50 basis points in a month. Another warning sign came via Bitcoin (BTC-USD), where prices over the weekend exceeded $ 60,000, a new record high before slashing those gains on Monday.
With large amounts of fiscal and monetary stimulus impeding activity, BlackRock economists are predicting “a post-Covid economic restart that is much stronger than what we would expect in a normal recovery. The rapid upward adjustment in US Treasury yields and a more moderate movement in inflation – adjusted yields make sense in this regard and are still consistent with our new nominal theme “of higher prices and government liquidity, the company noted.
“The restart reinforces our pro-risk stance over the next six to 12 months and makes us lean even more towards cyclical assets,” like stocks and private equity, added BlackRock.
On Friday, Goldman Sachs economists projected that the fiscal bailout package would give the economy even greater momentum in 2021, estimating that gross domestic product would increase by 6% in the first quarter. For this reason, markets will follow closely the comments of Fed Chairman Jerome Powell this week for clues as to whether the central bank is worrying about movements in the bond market and an economy that may overheat.
However, Goldman noted that “Fed officials are unlikely to see a major problem [with rising rates] at a time when financial conditions remain easy, activity is recovering and powerful growth impulses are set to support the economy throughout the year. “
Meanwhile, technology stocks outperformed the broader market, as the gradual reopening of states and localities – and a mass vaccination effort by COVID-19 that is gaining momentum – has encouraged investors to abandon so-called “stay at home” businesses in favor of big names like Amazon (AMZN), Netflix (NFLX), Apple (AAPL) and Facebook (FB). The rise in interest rates has increased volatility across the technology sector, amid expectations of higher borrowing costs weighing on growing companies.
One of the most watched economic reports this week will be the Commerce Department’s February retail sales impression on Tuesday. Consensus economists expect retail sales to decline in February, after a sharp seven-month high in January.
Specifically, retail sales must have fallen 0.7% month-on-month, after the 5.3% increase in January.
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6:45 p.m. ET Monday: Mixed-stock futures
This is where the markets were trading on Monday night:
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S&P 500 Futures (ES = F): 3953.75, -4.50
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Dow Futures (YM = F): 32800, -50
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Nasdaq Futures (NQ = F): 13061.75, -7.50
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Javier David is an editor at Yahoo Finance. Follow Javier on Twitter: @TeflonGeek
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