Stock futures soar, putting S&P 500 underway for new record

The stock rose in the last trading sessions, putting volatility caused by GameStop swings and other individual stocks in the rear view mirror. Investors are focusing on the prospect of a new batch of government spending. They say it could boost growth at a time when big companies are reporting robust profits, but the broader economic outlook is uneven.

Democrats took a series of votes last week unblocking a process called reconciliation, which will allow the party to approve President Biden’s $ 1.9 trillion relief plan without Republican Senate support. House legislators plan to finalize and vote on a relief bill before the end of February.

The combination of strong quarterly earnings reports from some of the largest American companies and the possibility of further relief for the economy has given the markets a shot in the arm, according to Daniel Morris, chief market strategist at BNP Paribas Asset Management.

“It’s like it’s your birthday and Christmas on the same day, and the markets are all happy,” said Morris.

Another round of stimulus spending in the U.S., a net importer, would also be a boon to foreign stock markets, according to Morris. “If you have your growth engines in the US and China doing really well this year, it helps everyone,” he said.

The markets were also driven by an optimistic set of profits for the holiday quarter of major US companies. Toy maker Hasbro is due to report ahead of the opening bell on Monday. Real estate company Simon Property Group and gaming company Take-Two Interactive Software will move on after the markets close.

Of the 295 companies in the S&P 500 that reported earlier Monday, 81% exceeded analysts’ expectations for earnings growth, according to FactSet.

The shares preferred by online traders who meet on Reddit have risen in the premarket. GameStop added about 12%, BlackBerry 6.4% and AMC Entertainment Holdings 3.1%.

The oil markets continued to rise, pushing Brent oil futures above $ 60 a barrel for the first time since the pandemic began in January 2020. The international energy benchmark rose 1.4% to $ 60.17 the barrel. Futures contracts for West Texas Intermediate, the main US oil category, rose 1.3% to $ 57.55 a barrel, extending an advance driven by reduced oil supply.

In another sign of growing optimism among investors, the yield on 10-year Treasury bills rose to 1.2% from 1.168% on Friday. Yields, which rise as bond prices fall, typically rise when money managers become more optimistic about the prospects for growth and inflation.

A measure of inflation expectations, known as 10-year breakevens and based on the difference between nominal yields and Treasury yields protected against inflation, rose above 2.2%, its highest level since 2014.

“It is the speed of the inflation movement [expectations] that looks dramatic, ”said Kit Juckes, macro strategist at Société Générale. “The levels themselves, not so much.”

The US government bond auctions on Tuesday, Wednesday and Thursday will be seen as a test of investor appetite for Treasury bills, said Juckes.

Treasury Secretary Janet Yellen told CNN on Sunday that the United States could return to full employment next year if lawmakers pass Biden’s stimulus package.

Democrats are still debating who should be eligible for $ 1,400 direct checks and whether they can approve a $ 15 minimum wage as part of the pandemic-related stimulus package. Many Republicans criticized Biden’s plan as too broad and expensive after Congress passed a $ 900 billion aid plan in December.

Yields on government bonds have also increased in Europe. Yield on 10-year German bonds, the continent’s benchmark risk-free asset, rose to minus 0.421%, its highest level since September last year, from minus 0.442% on Friday.

The shares advanced in foreign markets. Shares in banks and resource companies led gains in Europe, pushing the pan-continental Stoxx Europe 600 up 0.5%.

Among European individual stocks, Dialog Semiconductor jumped 17% after the British manufacturer agreed to be bought by Japanese Renesas Electronics in a deal that would value the company at around € 4.9 billion ($ 5.9 billion).

In Asia, the Shanghai Composite Index ended 1% higher. The Nikkei 225 rose 2.1% at the close after Nikkei Asia said Japan would consider lifting the coronavirus state of emergency in some prefectures before a new deadline.

SoftBank Group’s shares rose more than 4% in Tokyo after the tech giant invested the markets in quarterly earnings of $ 11 billion, largely due to investment gains.

Write to Joe Wallace at [email protected]