Stock and government bond futures rose Monday as investors waited for a list of speakers from the Federal Reserve and data on the manufacturing sector.
S&P 500 futures rose nearly 1% and Nasdaq-100 contracts advanced 1.2% after a tough week for tech stocks. The broad advance came when the yield on 10-year Treasuries, the benchmark cost of borrowing in global debt markets, fell to 1,445% from 1,459% on Friday. Yields fall when bond prices rise.
Stocks, and in particular tech stocks, have been hit by volatile moves in government bond markets in recent trading sessions. An upward jolt in yields last week called into question the prospect of a long period of low interest rates, which had underpinned the rally in stocks over the past year.
The drop in yields on Monday helped jump-start investor demand for stocks. But money managers were wary of new spikes that could spark new volatility in share prices. Later, investors will scrutinize a speech by Fed Governor Lael Brainard for clues as to whether the central bank will reject higher returns.
“This week is key,” said Andrea Carzana, fund manager at London-based Columbia Threadneedle Investments. If the Fed does not seek to lower expectations of higher inflation, yields could continue to rise, shaking the stock market, according to Carzana.
“I hope that the turbulence or volatility will remain with us until we have a better understanding of the position of central banks,” he said.
Before the bell in New York, Johnson & Johnson shares were up more than 3%. The company’s Covid-19 vaccine received a green light from the Centers for Disease Control and Prevention on Sunday. The US Food and Drug Administration authorized the use of the single-dose injection on Saturday.
Shares of United Airlines rose almost 4%. The Justice Department said late Friday that the airline had agreed to pay more than $ 49 million to settle criminal charges and civil claims related to fraud in postal services contracts.
Fed officials have so far suggested that the increase in yields reflects expectations for an economic recovery fueled by the vaccine program and the likelihood of additional fiscal stimulus. Over the weekend, President Biden urged the Senate to take swift action after the House passed its $ 1.9 trillion Covid-19 aid package.
Democrats are rushing to finish the package by March 14, when certain types of federal unemployment assistance expire.
With the economy already showing signs that it has weathered the third coronavirus wave and is poised to bounce back in 2021, investors are wondering if another big dose will produce a surge in inflation and a further rise in yields.
“The concern on the reflation front comes down to the scope of the stimulus,” said Brian O’Reilly, head of market strategy at Mediolanum International Funds. “The market is rightly beginning to question how much is too much.”
Ms. Brainard will address an Institute of International Bankers conference on financial stability at 9:05 am ET. John Williams of the New York Fed, Loretta Mester of the Cleveland Fed and Neel Kashkari of the Minneapolis Fed are also scheduled to make public appearances.
The February Manufacturing Index reading from the Institute for Supply Management will be released at 10am, and is expected to show another month of strong growth in activity at US factories.
The corporate earnings season is drawing to a close, with Zoom Video Communications and Novavax scheduled to report quarterly results after the markets close.
Oil markets resumed their rally ahead of a meeting of the Organization of the Petroleum Exporting Countries and its partners on Thursday. Brent crude futures, the benchmark in international energy markets, rose 1.2% to $ 65.15 a barrel, extending their advance this year to 26%.
Analysts expect the cartel, which has held millions of barrels of crude oil a day since last spring to boost prices, will agree to boost production in April.
Improving investor sentiment boosted foreign markets. The Stoxx Europe 600 jumped 1.7%, driven by shares in retail and travel and leisure companies, whose fate depends on the reopening of economic activity.
In Asia, Japan’s Nikkei 225 rose 2.4% at the close and China’s Shanghai Composite Index added 1.2%.
China’s manufacturing activity eased in February, posting the slowest rate of expansion in nine months, according to a private survey of manufacturers. Still, it was the 10th month in a row that the Caixin index remained above the 50 mark, separating expansion from contraction.
Write to Joe Wallace at [email protected]
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