Traders work on the floor of the New York Stock Exchange.
US equity futures rose Sunday night as a new stimulus package from Washington headed for final approval this week.
Futures contracts linked to the Dow Jones Industrial Average increased 219 points, or 0.7%. Those of the S&P 500 and the Nasdaq 100 composite gained 0.5% and 0.6%, respectively.
The move in futures came after the Senate passed a $ 1.9 trillion economic relief and stimulus bill on Saturday, paving the way for extensions to unemployment benefits, another round of stimulus controls and helps state and local governments. The Democratic-controlled House is expected to pass the bill later this week. President Joe Biden is expected to sign it into law before unemployment assistance programs expire on March 14.
The new round of government spending could cause ripples in the US Treasury market, where the benchmark 10-year yield has risen sharply in recent weeks. The yield rose as high as 1.62% on Friday after starting the calendar year below the 1% mark.
The rapid movement in the marked bond has also puzzled equity investors, contributing to the weakness of highly valued stocks.
10-year linked futures contracts fell 0.2% Sunday night at the opening of trading, implying higher returns.
“The 10-year yields have finally caught up with other asset markets. This is putting pressure on valuations, especially for more expensive stocks that had reached bleeding valuations,” said Mike Wilson, chief US equity strategist at Morgan Stanley, at a note.
The stock market is emerging from an evening rally on Friday that took some of the pain out of a difficult week for high-flying momentum names. The high-tech Nasdaq ended 2.1% loss for the week, while the S&P 500 gained 0.8%. The Dow, more reliant on cyclical stocks, was up 1.8%.
Friday’s trend reversal does not indicate that the recent market weakness is over, but the divergence between technology and cyclical plays shows that the bullish story remains intact, Morgan Stanley’s Wilson said.
“The bull market remains under the hood, with value and cyclicals leading the way. Growth stocks may rejoin the party once the valuation correction and repositioning is complete,” Wilson said.
On the economic front, investors will take a look at wholesale inventory data for January on Monday. Several economic measures in recent weeks have shown a recovery that is gathering momentum, including a better-than-expected February jobs report released on Friday.