Traders work on the floor of the New York Stock Exchange.
NYSE
U.S. stock futures jumped Sunday night when a new stimulus package from Washington was finalized this week.
Forward contracts linked to the Dow Jones industrial average rose 219 points, or 0.7%. Those for the S&P 500 and the Nasdaq 100 composition achieved 0.5% and 0.6%, respectively.
The futures contract came after the Senate passed a $ 1.9 billion economic relief and stimulus bill on Saturday, paving the way for the expansion of unemployment benefits, another round of stimulus controls and aid to state and local governments. The Democratic House is expected to approve the bill later this week. President Joe Biden is expected to sign it into law before the March 14 unemployment benefits program expires.
The new round of government spending could cause ripples in the U.S. treasury market, where standard yields have risen sharply for ten years in recent weeks. The yield rose to 1.62% on Friday after the calendar year started below the 1% mark.
The rapid shift in the securities also unnerved equity investors, which contributed to weak – valued equities.
Forward contracts linked to the 10-year treasury price fell 0.2% on Sunday night with the opening of trading, meaning higher returns.
“Ten-year returns have finally caught up with other asset markets. This puts pressure on valuations, especially for the most expensive stocks that have reached values with nosebleeds,” Mike Wilson, Morgan Stanley’s chief US strategist, said in a note.
The stock market begins Friday with an afternoon show that took a bit of the sting out of a tough week for high-flying momentum names. The tech Nasdaq posted a week-to-date loss of 2.1%, while the S&P 500 rose 0.8%. The Dow, which is more dependent on cyclical equities, rose 1.8%.
The Friday turnaround does not indicate that the recent weakness for the market is over, but the divergence between technological and cyclical plays shows that the bullish story remains intact, Morgan Stanley’s Wilson said.
“The bull market is still under cover, with value and cycles ahead. Growth stocks could rejoin the party once the valuation correction and repositioning is complete,” Wilson said.
On the economic front, investors will be looking at wholesale stock data from Monday, January. Several economic measures in the past few weeks have shown a recovery that is taking up steam, including a better-than-expected work report in February released on Friday.