US equity futures rose on Monday, suggesting that major indices will extend their rally after both the Dow Jones Industrial Average and the S&P 500 closed at a record high last week.
Dow futures rose 0.4%, suggesting that top stocks in companies sensitive to the economic recovery will expand their gains. Contracts tied to the S&P 500 were up 0.3%. Nasdaq-100 futures were up 0.3%, pointing to moderate gains for the tech sector.
Last week, the stock market resumed its rally on a firmer footing after weeks of being hit by sharp movements in the US government bond market. The yield on 10-year Treasuries has risen over the past week. six weeks in a row, their longest winning streak since December 2016. Some money managers worry that inflation will rise sharply, which could lead the central bank to consider raising interest rates in the next two years. .
Federal Reserve officials have repeatedly tried to quell those fears, reiterating that they will keep monetary policy loose for the foreseeable future to help the job market rebound. Investors await the next monetary policy statement from the Federal Reserve on Wednesday for further guidance on the health of the economy and the views of policy makers on rising bond yields and the outlook for inflation.
“The fear factor is now gone, so the markets are now finding a balance. Bond yields will go up, but central banks are not backing down, ”said Carsten Brzeski, ING Groep.‘s
Global Head of Macro Research. “The Fed meeting will clearly be crucial and essential in terms of educating markets more about what the Fed is doing.”
Investors have been taking money out of safe government bonds as the economic outlook improves. They have also started to move away from the tech sector towards energy producer and bank stocks in recent weeks, which tend to benefit from an economic recovery. Optimism about the rebound has been fueled by a faster-than-expected vaccine launch and the passage of additional $ 1.9 trillion fiscal stimulus.
“With the reopening of the economy, this fiscal stimulus in the form of controls will have a stronger impact on consumption,” Brzeski said. That’s important because consumer spending accounts for more than two-thirds of US economic output. “Lower-income households will spend almost all of this check,” he added.
Some money managers worry that the big fiscal package could lead to considerably higher inflation and, for an extended period, force the Fed to raise interest rates sooner than policy makers have suggested they would.
The 10-year Treasury yield fell to 1.611% on Monday. It ended Friday at 1,634%, the highest since February 6, 2020.
“The Fed needs to send a message here that it is still aware of the substantial progress that is required before the economy returns to pre-pandemic conditions, but still, it is not going to be too forceful because some of these moves are justified on the fundamentals, ”said James Ashley, director of international market strategy at Goldman Sachs Asset Management. “That’s right, how do you calibrate that message in a way that’s neither too moderate nor too aggressive?”
Over the weekend, bitcoin crossed $ 60,000 for the first time on Saturday. On Monday, it fell back to trade near $ 56,020.86.
Abroad, the Stoxx Europe 600 pancontinental rose 0.5%.
Asia’s major equity benchmarks ended the day on a mixed note. The Shanghai Composite Index fell nearly 1% and South Korea’s Kospi ended 0.3% lower. Japan’s Nikkei 225 rose 0.2% and Hong Kong’s Hang Seng Index gained 0.3%.
Write to Caitlin Ostroff at [email protected]
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