U.S. stock benchmarks turned higher Monday, following losses for all three major indexes last week as investors weighed brightening economic prospects against worries that interest rates will climb sooner than anticipated.
Investors will be attentive to comments from a parade of speakers from the Federal Reserve, including those from Chairman Jerome Powell throughout the day.
How are stock benchmarks performing?
- The Dow Jones Industrial Average DJIA,
+0.07% traded 43 points, or 0.1%, higher at about 32,664. - The S&P 500 SPX,
+0.59% added 24 points, or 0.6%, to reach 3,936. - The Nasdaq Composite Index COMP,
+1.22% advanced 159 points to reach around 13,374, a gain of 1.2%.
On Friday, the Dow put in a weekly decline of 0.5%, the S&P 500 and the Nasdaq both slid 0.8%.
What’s driving the market?
Equity markets have been fixated on rates, with a modest pullback of the 10-year Treasury yield TMUBMUSD10Y,
The 10-year Treasury yield stood at around 1.68%, down from 1.729% Friday.
Investors have been skittish about the outlook for buying stocks because fiscal stimulus, state reopenings and vaccine rollouts are likely to lead to a major upswing for the economy and higher interest rates, as falling bond prices push yields higher and make speculative and high-growth assets look less compelling.
Last week’s slide lower for major benchmarks came after the Federal Reserve appeared to strike a dovish tone at its policy meeting on Wednesday but bond yields rose on expectations for economic recovery and inflation this year.
“The Fed itself may remain one of the most important risks in the near term, simply due to market (over) reaction to its comments and (in)actions,” wrote Saira Malik, chief investment officer at Nuveen, in emailed comments.
“Investor fears over ‘disorderly’ rate growth and the Fed’s ability and willingness to react has created rapid bouts of volatility, such as what occurred on Thursday,” Malik wrote.
Richmond Fed President Thomas Barkin, speaking at a virtual event hosted by Credit Suisse Asian Investment Conference, said that he’s hopeful that the U.S. is “on the brink of completing this recovery.”
“Vaccines are rolling out, case rates and hospitalizations are falling, excess savings and fiscal stimulus should help fund pent-up demand from consumers who’re exhausted by isolation and freed up by vaccines and warmer weather,” Barkin said.
Markets have also been fretting about the central bank’s decision to sunset a yearlong reprieve that had eased capital requirements for big banks. That disappointed investors who had hoped for an extension, raising worries that appetite for bond prices may take a leg lower, putting further pressure on yields, if banks aren’t able to exclude assets like Treasurys from their so-called supplementary leverage ratios.
Market participants may get another chance to hear from Fed Chairman Jerome Powell when he speaks at an event hosted by the Bank for International Settlements on innovation in the digital age.
On the public health front, AstraZeneca AZN,
In economic news, Chicago Fed national activity index fell to -1.09 in February, the first negative reading since last April.
Meanwhile, a report on existing home sales showed total sales dropped 6.6% from January to a seasonally adjusted annual rate of 6.22 million, the National Association of Realtors reported Monday, following two straight months of gains. Still, compared with a year ago, home sales are up 9.1%.
Which stocks are in focus?
- Canadian Pacific Railway Ltd. CP,
-3.81% is offering to buy Kansas City Southern KSU,+12.53% in a deal valued at $ 25 billion. Canadian Pacific’s stock was down 2.2%, while those for Kansas were up around 14%. - Tesla Inc. TSLA,
+5.80% bull Cathie Wood of Ark Investment released a new four-year target fr the electric-vehicle maker of $ 3,000 a share. Shares of the company were up over 5%. - Shares of AstraZeneca AZN,
+2.60% were up 1.8% after studies confirmed it was safe and 79% effective.
How are other markets faring?
- The yield on the 10-year Treasury note TMUBMUSD10Y was down 3.3 basis point to 1.69%.
- The ICE U.S. Dollar Index DXY, a measure of the U.S. currency against a basket of six major rivals, was down 0.1%.
- Oil futures were lower, with the U.S. crude benchmark contract CL.1 losing 7 cents, or 0.1%, to $ 61.39 a barrel.
- Gold futures GC00 shed 0.6% to $ 1,731 an ounce on Comex.
- In Europe, the Stoxx 600 SXXP rose less than 0.1% and London’s FTSE 100 UKX was trading 0.3%.
- In Asian equity markets, the Shanghai Composite SHCOMP rose 1.1%, while Hong Kong’s Hang Seng Index HSI lost 0.4% and Japan’s Nikkei 225 NIK tumbled 2.1%.
