Equity futures are on the rise, putting S&P 500 on track for a new record

Shares have rallied higher during recent trading sessions, putting the volatility caused by swings in GameStop and other individual stocks in the rearview mirror. Investors are focused on the prospect of a new set of government spending. They say this could boost growth at a time when large companies are reporting robust earnings, but the broader economic outlook is patchy.

Democrats took a string of votes last week to unlock a process called reconciliation that allows the party to approve President Biden’s $ 1.9 trillion emergency plan without Republican backing in the Senate. House lawmakers aim to finalize and vote on an emergency relief bill by the end of February.

According to Daniel Morris, chief market strategist at BNP Paribas Asset Management, the combination of strong quarterly results from some of the largest US companies and the possibility of more relief for the economy has given markets a chance.

“It’s like your birthday and Christmas on the same day, and the markets are all happy,” said Mr. Morris.

A new round of stimulus measures in the US, a net importer, would also be a boon to foreign stock markets, according to Mr Morris. “If your growth engines in the US and China are doing really well this year, it will help everyone,” he said.

Markets were also buoyed by positive results from major US companies for the holiday quarter. Toy manufacturer Hasbro reports on Monday prior to the opening bell. Commercial real estate company Simon Property Group and games company Take-Two Interactive Software will follow after markets close.

Of the 295 companies on the S&P 500 that reported early Monday, 81% had exceeded analyst expectations for earnings growth, according to FactSet.

Stocks favored by online traders who collect on Reddit surged in premarket trading. GameStop added approximately 12%, BlackBerry 6.4% and AMC Entertainment Holdings 3.1%.

Oil markets continued to rally, pushing Brent crude oil futures above $ 60 a barrel for the first time since the pandemic began in January 2020. The international energy benchmark rose 1.4% to $ 60.17 a barrel. Futures for West Texas Intermediate, the leading grade of US crude oil, rose 1.3% to $ 57.55 a barrel, extending the march due to declining crude oil supplies.

In another sign of growing investor optimism, 10-year Treasury yields rose to 1.2% from 1.168% on Friday. Yields, which rise as bond prices fall, tend to improve when money managers become more optimistic about the outlook for growth and inflation.

A measure of inflation expectations, known as 10-year breakevens and based on the difference between nominal and inflation-protected Treasury rates, rose above 2.2%, the highest level since 2014.

‘It is the speed at which inflation moves [expectations] that looks dramatic ”, says Kit Juckes, macro strategist at Société Générale. “The levels themselves, not so much.”

Auctions for US Treasury bonds on Tuesday, Wednesday and Thursday will be seen as a litmus test of investor appetite for Treasurys, Mr Juckes said.

Treasury Secretary Janet Yellen told CNN on Sunday that the US could be fully operational again next year if lawmakers approve Mr Biden’s stimulus package.

Democrats are still debating who should qualify for $ 1,400 direct checks and whether they can meet a $ 15 minimum wage as part of the pandemic-related stimulus package. Many Republicans have criticized Mr. Biden’s plan as too broad and expensive after Congress approved a $ 900 billion contingency plan in December.

Government bond yields also rose in Europe. The return on 10-year German bunds, the continent’s risk-free benchmark, rose slightly to minus 0.421%, the highest level since September last year, from minus 0.442% on Friday.

Stocks advanced in overseas markets. Shares of banks and base companies led to gains in Europe, pushing the pan-continental Stoxx Europe 600 up 0.5%.

Among individual European stocks, Dialog Semiconductor was up 17% after the UK-based manufacturer agreed to be bought by Japan’s Renesas Electronics in a deal that would value the company at approximately € 4.9 billion ($ 5.9 billion).

In Asia, the Shanghai Composite Index ended 1% higher. The Nikkei 225 rose 2.1% at the close after Nikkei Asia reported that Japan will consider lifting the coronavirus emergency in some prefectures ahead of a new deadline.

Shares of SoftBank Group rallied more than 4% in Tokyo after the giant technology investor drove the markets to a quarterly profit of $ 11 billion, largely thanks to investment gains.

Write to Joe Wallace at [email protected]