Stocks are under pressure at the beginning of the week as bond yields rise in hopes of a global economic recovery around the corner. This hope has been raised by ongoing COVID-19 vaccines around the world and the Biden administration’s planned $ 1.9 billion relief program.
The yield on the standard ten-year treasury TMUBMUSD10Y,
rose to 1.377%, after rising 14.5 basis points last week, as investors continue to flee bonds amid fears inflation will heat up. Yields move in the opposite direction of prices.
The testimony of Federal Reserve Jerome Powell before Tuesday and Wednesday before Congress will therefore be closely watched.
In us call of the day, Fundstrat Global Advisors said there are many reasons – seven in fact – to buy shares. Thomas Lee, founder of Fundstrat, said there was concern about Powell’s testimony, but he advocated a “buy the dip” strategy.
‘A part of this [apprehension] reflects the fact that bond yields have risen steadily and equity investors are nervous that the bond market may reach a “breaking point” during [Powell’s] Lee said shares could have acted “nervously” in and during the testimony.
“The bigger story arc, in our view, is that equities have multiple positive supports and that this constructive background is likely to prevent a greater risk aversion,” he added.
The first major reason is that Washington is moving forward with President Joe Biden’s fiscal relief package and that it has been strongly supported by Finance Minister Janet Yellen. Second, the Fed had a big policy, Lee said, and he was willing to be patient. The reopening of the US economy is another reason to be positive around equities, with strong economic momentum. JPMorgan JPM,
said in a note on Friday that the V-shaped recovery would fare better than that of China, which Lee merely described by the word “wow.”
There is a perception gap between policymakers and the incoming data around COVID-19 – with daily business falling below 50,000 this week – and once the gap is closed, it will be more positive for equities, the note reads.
Millennials who are constantly allocating assets to equities offer more optimism, he noted, as evidenced by the increase in the opening of retail brokerage accounts. “Bonds also become less attractive vehicles for total returns as inflation expectations increase, which increases the attractiveness of equities,” he said. Finally, the VIX Volatility Index VIX,
Fundstrat says it is steadily declining, which has historically led to huge stock gains, especially for cyclics.
The markets
US futures contracts ES00,
NQ00,
showed lower early Monday, with Dow futures YM00,
0.5% lower, implying a 170-point loss for the Dow Jones Industrial Average DJIA,
at the open. European equities also declined in early trading as investors moved away from bonds and picked up commodities amid hopes of a strong economic recovery. The encouragement of vaccines has led to Asian markets being mostly higher overnight.
The buzz
Tesla TSLA,
may have already made $ 1 billion profit from its investment in bitcoin BTCUSD,
according to estimates by leading technology analyst Dan Ives. The electric car company said in a submission on February 8 that they had bought $ 1.5 billion in bitcoin.
Federal Aviation Regulators Order United Airlines UAL,
to intensify inspections of all Boeing 777s BA,
with the type of engine that had a catastrophic outage under Denver, Colorado on Saturday.
The US moved closer to the ‘devastating’ milestone of 500,000 COVID-19 deaths on Sunday. According to data from Johns Hopkins University, the death toll stood at 498,879 late Sunday.
The COVID-19 vaccine from the drug company Pfizer PFE,
and its partner BioNTech BNTX,
is up to 85% effective after the first dose, a study using Israel’s vaccination found.
The dividends paid by US companies last year reached a record 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 announce England’s road map outside the closure later Monday. More than 17.5 million people – a third of adults – had at least one vaccine and the government hopes to vaccinate all adults by the end of July.
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