U.S. stock futures soared on Monday, suggesting that major indices will extend their high after the Dow Jones Industrial Average and S&P 500 closed last week at a record high.
Dow futures were up 0.4%, suggesting that top-tier stocks in companies sensitive to economic recovery will increase their gains. Contracts linked to the S&P 500 increased by 0.3%. Nasdaq-100 futures rose 0.3%, pointing to discrete gains for the technology sector.
The stock market last week resumed its recovery on a firmer basis, after weeks of being hit by strong movements in the US government bond market. Yield on 10-year Treasury bills has risen for six consecutive weeks, its longest winning streak since December 2016. Some money managers were concerned about the sharp rise in inflation, which could lead the central bank to consider raising rates. interest rates over the next two years.
Federal Reserve officials have repeatedly tried to allay these fears and reiterated that they will keep monetary policy loose in the near future to help the labor market recover. Investors are looking forward to the Federal Reserve’s next monetary policy statement on Wednesday for more guidance on the health of the economy and policymakers’ views on rising bond yields and inflation prospects.
“The fear factor is gone, so the markets are now finding a balance. Bond yields will rise, but central banks are not retreating, ”said Carsten Brzeski, ING Groepin
global head of macro research. “The Fed meeting will be clearly crucial and essential in terms of further educating the markets about what the Fed is doing.”
Investors have been withdrawing money from safe government bonds as the economic outlook improves. They have also started to distance themselves from the technology sector and enter stocks of energy producers and banks in recent weeks, which tend to benefit from an economic recovery. Optimism about the recovery was driven by a faster-than-expected vaccine launch and the approval of an additional $ 1.9 trillion in fiscal stimulus.
“With the reopening of the economy, this fiscal stimulus in the form of checks will have a stronger impact on consumption,” said Brzeski. This is important because consumer spending accounts for more than two-thirds of the United States’ economic output. “Low-income families will spend almost all of this check,” he added.
Some financial managers are concerned that the big fiscal package could lead to much higher inflation and, for an extended period, forcing the Fed to raise interest rates earlier than policymakers have suggested.
Yield on 10-year Treasury bonds fell on Monday to 1.611%. It ended Friday at 1.634%, the highest value since February 6, 2020.
“The Fed needs to send a message here that it is still aware of the substantial progress that is needed before the economy returns to pre-pandemic conditions, but equally, it will not be very strong because some of these measures are guaranteed based on the fundamentals,” said James Ashley, head of international market strategy at Goldman Sachs Asset Management. “So it is, how do you calibrate that message in a way that is neither too dovish nor too hawkish.”
Over the weekend, bitcoin surpassed $ 60,000 for the first time on Saturday. On Monday, it dropped to close to $ 56,020.86.
Abroad, the pan-continental Stoxx Europe 600 rose 0.5%.
The main stock benchmarks in Asia ended the day on a mixed note. The Shanghai Composite Index fell by almost 1% and South Korea’s Kospi closed 0.3% below. Japan’s Nikkei 225 rose 0.2% and Hong Kong’s Hang Seng Index rose 0.3%.
The stock market resumed its high last week.
Photograph:
Nicole Pereira / Associated Press
Write to Caitlin Ostroff at [email protected]
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