Stocks are under pressure early in the week as bond yields soar in the hope that a global economic recovery is underway. That hope has been sparked by the continued rollout of COVID-19 vaccines around the world and the Biden administration’s planned $ 1.9 trillion utility program.
The return on the benchmark 10-year Treasury TMUBMUSD10Y,
rose to 1.377%, after an increase of 14.5 basis points last week, as investors continue to flee from bonds fearing inflation will rise. Revenues move in the opposite direction of prices.
The testimony of Jerome Powell, chairman of the Federal Reserve, before Congress on Tuesday and Wednesday will therefore be closely monitored.
In our call of the dayFundstrat Global Advisors said there were plenty of reasons – seven in fact – shares were a buy. Fundstrat founder Thomas Lee said there were fears for Powell’s testimony, but he advocated a “buy the dip” strategy.
Part of this [apprehension] reflects the fact that bond yields have been steadily rising and that equity investors fear that the bond market may hit some sort of ‘breaking point’ during [Powell’s] testimony, ”Lee said, noting that it was possible that shares in and during the testimony could be` `nervous. ”
“The bigger storyline, in our view, is that stocks have multiple positive points of support and that this constructive backdrop is likely to prevent a greater risk spillover effect,” he added.
The first major reason is that Washington is making progress on President Joe Biden’s fiscal package and has been strongly supported by Treasury Secretary Janet Yellen. Second, the Fed has spoken out in its policy stance, Lee said, and was willing to be patient. The reopening of the US economy is another reason to be positive about equities, with strong economic momentum. JPMorgan JPM,
said in a note on Friday that the US ‘V-shaped’ recovery would outperform China’s, which Lee simply described with the word ‘wow’.
There is a perception gap between policymakers and the incoming data around COVID-19 – with daily cases set to drop below 50,000 this week – and once that gap narrows, it will be more positive for stocks, the note added.
Millennials steadily allocating their assets to equities are creating more optimism, he noted, as evidenced by the recent surge in brokerage openings. “Bonds also become less attractive total return instruments as inflation expectations increase, increasing the attractiveness of stocks,” he said. Finally, the VIX volatility index VIX,
is steadily declining, leading to large equity gains historically, especially for cyclical stocks, Fundstrat said.
The markets
US Equity Futures ES00,
NQ00,
pointed lower on Monday, with Dow futures YM00,
0.5% lower, which means a loss of 170 points for the Dow Jones Industrial Average DJIA,
at the open. European equities also fell early in trading as investors abandoned bonds and bought commodities in hopes of a strong economic recovery. By encouraging the introduction of vaccines, Asian markets rose overnight.
The buzz
Tesla TSLA,
may have already made $ 1 billion in profit from its investment in bitcoin BTCUSD,
according to estimates by leading technology analyst Dan Ives. The electric car company said in a February 8 filing that it had purchased $ 1.5 billion worth of bitcoin.
Federal aviation regulators order United Airlines UAL,
to intensify the inspections of all Boeing 777s BA,
with the type of engine that suffered a catastrophic failure over Denver, Colorado on Saturday.
The US got closer to the “devastating” milestone of 500,000 COVID-19 deaths on Sunday. According to data from Johns Hopkins University, the death toll on Sunday was 498,879.
The COVID-19 vaccine from pharmaceutical company Pfizer PFE,
and its partner BioNTech BNTX,
is up to 85% effective after the first dose, according to a study using data from the rollout of vaccines in Israel.
Dividends paid by US companies last year hit an all-time high – by 2.6% to $ 503.1 billion – despite the devastation caused by the COVID-19 pandemic, according to a report by Janus Henderson Investors.
British Prime Minister Boris Johnson will reveal England’s roadmap later on Monday. More than 17.5 million people – one third of adults – have had at least one vaccination syringe, and the government hopes to vaccinate all adults by the end of July.
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