© Reuters
By Noreen Burke
Investing.com – The stock market upheaval due to the rapid rise in treasury yields continues to be a major focus for markets in the coming week, especially as stronger economic data pushes up treasury yields even higher. Investors will focus on Friday’s job report, which is expected to show that virus restrictions held a lid on job growth in February. There will also be close monitoring by several Federal Reserve speakers, including Chairman Jerome Powell. The OPEC + coalition is expected to moderate oil production at its meeting on Thursday, with prices near 13-month highs. In Europe, the UK budget is available on Wednesday, while economic data in the eurozone will show how the economy is coping with the ongoing pandemic restrictions. This is what you need to know to start your week.
- Tug of war between stocks, rising bond yields
The shift to energy, financial and other stocks benefiting from the economic reopening has accelerated, while the rapidly rising Treasury yields are putting pressure on technological stocks that have been driving market gains for years.
Technical stocks are particularly sensitive to rising returns because their value relies heavily on future earnings, which are discounted deeper as interest rates rise.
A resounding sounding Fed, coupled with expectations for more stimulus, has raised yields higher and raised concerns about inflation, and the two-track market is likely to continue, at least in the short term.
Meanwhile, the earnings season is coming to an end, but retailers will still report on it Target (NYSE :), Kohl’s (NYSE 🙂 and Nordstrom (NYSE 🙂 due to figures Tuesday, followed by Costco (NASDAQ 🙂 on Thursday.
- February work report
With President Joe Biden’s $ 1.9 billion coronavirus relief package on Friday’s non-farming report for February, it will show how the recovery in the labor market is progressing.
Government data late last week showed that initial jobless claims have unexpectedly declined to the lowest in three months, suggesting that the slowing infection rate is enabling the labor market to gain some traction. Retail sales also recovered in January.
Economists expect the US economy to create new jobs in February, after rising to 49,000 in January. But the winter storms that have swept through the South could complicate the picture.
- Powell Speech
With the rapid rise in treasury yields hoping, stock market investors can hope that Fed officials will address the sales in the treasury.
Fed Chairman Jerome Powell will speak on Thursday about the economy during an online event hosted by the Wall Street Journal. So far, there has been little sign of anxiety among Fed officials about higher Treasury returns.
Last week, Powell said the increase was the result of a stronger economy, but added that the pace of economic recovery has slowed in recent months, reiterating that monetary policy will remain easy for some time to come.
Other Fed officials who have acted include New York Fed President John Williams, Fed Governor Lael Brainard, Atlanta Fed President Raphael Bostic, San Francisco President Mary Daly, the president of Philadelphia, Patrick Harker, and the president of the Chicago Fed, Charles Evans.
- OPEC + meeting
With oil prices at their 13-month high, the OPEC + producers’ meeting on Thursday is expected to discuss increasing production from April.
The Organization of Petroleum Exporting Countries and Allies, known as OPEC +, cut production by 9.7 million barrels a day last year as the pandemic devastated global demand.
OPEC + sources reckon that a production increase of 500 000 bpd seems possible without causing stockpiling as economies recover.
Russia would like to increase supply. Saudi Arabia’s voluntary cut of 1 million bpd also expires in March and supply could return from April.
- UK budget, eurozone data
In the UK, Finance Minister Rishi Sunak will promise more budget spending on Wednesday, but that may be the last bit of pandemic-related support he offers. The budget is expected to accumulate more loans, nearly £ 300 billion ($ 418 billion) in COVID spending and tax cuts.
The budget plan will be closely monitored as it is one of the biggest factors determining the pace of economic recovery.
Meanwhile, data on PMIs in the eurozone will show how the economy is doing ahead of the European Central Bank meeting in March.
–Reuters contributed to this report