Equity futures and government bonds climbed Monday as investors waited for a string of Federal Reserve speakers and manufacturing sector data.
Futures pegged to the S&P 500 were up nearly 1% and contracts for the Nasdaq-100 were up 1.2% after a week of heavy charges on technology stocks. The broad boom came as yields on 10-year Treasury bonds, the benchmark for borrowing costs in global debt markets, fell to 1.445% from 1.459% on Friday. Yields fall when bond prices rise.
Stocks, especially technology company stocks, have been plagued by volatile movements in government bond markets during recent trading sessions. A rise in interest rates last week cast doubt on the prospect of a long run of low interest rates, which supported a surge in stock prices over the past year.
Monday’s drop in interest rates helped revive investor demand for stocks. But money managers remained wary of further spikes that could lead to new volatility in stock prices. Investors will later analyze a speech by Fed Governor Lael Brainard for clues as to whether the central bank will cut back at higher interest rates.
“This week takes center stage,” said Andrea Carzana, a fund manager for London-based Columbia Threadneedle Investments. If the Fed does not seek to dampen expectations of higher inflation, yields could continue to rise, which, according to Mr Carzana, would rattle the stock market.
“I expect turbulence or volatility to last until we have a better understanding of where the central banks are,” he said.
Ahead of the bell in New York, shares of Johnson & Johnson rose more than 3%. The company’s Covid-19 vaccine got green light from the Centers for Disease Control and Prevention on Sunday. The U.S. Food and Drug Administration cleared the use of the single dose on Saturday.
Shares of United Airlines were up nearly 4%. The Justice Department said late Friday on Friday that the airline had agreed to pay more than $ 49 million to settle criminal charges and civil claims related to postal contract fraud.
Fed officials have suggested so far that the rise in revenues reflects expectations of an economic recovery fueled by the vaccine program and the likelihood of additional fiscal stimulus. President Biden over the weekend urged the Senate to take swift action after the House passed its $ 1.9 trillion Covid-19 aid package.
Democrats are rushing to finalize 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 wave of coronavirus and is poised for recovery in 2021, investors are wondering if one more large dose will trigger a spike in inflation and a further rise in yields.
“Reflation concerns boil down to the degree of incentives,” said Brian O’Reilly, head of market strategy at Mediolanum International Funds. “The market is rightly starting to wonder how much is too much.”
Ms. Brainard will speak at an Institute of International Bankers conference on financial stability at 9:05 a.m. ET. John Williams of the New York Fed, Loretta Mester of Cleveland Fed and Neel Kashkari of Minneapolis Fed will also appear in public.
The February production index reading from the Institute for Supply Management is scheduled for 10 a.m. and is expected to show another month of robust growth in activity in US factories.
The corporate earnings season is coming to a halt and Zoom Video Communications and Novavax will report quarterly results after markets close.
Oil markets resumed their rally ahead of a meeting of the Organization of Petroleum Exporting Countries and its partners on Thursday. Brent crude futures, the benchmark in the international energy markets, rallied 1.2% to $ 65.15 a barrel, expanding their advance to 26% this year.
Analysts expect the cartel, which has held back millions of barrels of crude oil a day since last spring to drive prices up, will agree to boost production in April.
Improving investor sentiment stimulated foreign markets. The Stoxx Europe 600 jumped 1.7%, led by stocks of retail and travel and leisure companies whose fortunes depend on the reopening of economic activity.
In Asia, Japan’s Nikkei 225 was up 2.4% at close and China’s Shanghai Composite Index added 1.2%.
Traders worked on the floor of the New York Stock Exchange on Friday.
Photo:
Courtney Crow / Associated Press
According to a private survey of manufacturers, China’s manufacturing activity slowed in February, with the lowest growth rate in nine months. Yet it was the 10th consecutive month in which the Caixin index remained above 50, which distinguishes between expansion and contraction.
Write to Joe Wallace at [email protected]
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