Equity futures fell on Monday after a session in which the broader market reached new highs, while traders on Tuesday looked forward to retail sales data and a Federal Reserve policy meeting later this week.
During Monday’s regular session, Wall Street plunged into an awkward, directionless trade as investors struggled to balance economic optimism against the Treasury’s rising yields.
The Dow Jones industrial average rose more than 100 points, and the S&P 500 index also reached a new high, bolstered by the signing of a new $ 1.9 billion stimulus bill ready to spend on consumer spending. to spur and stimulate economic growth. Most Americans are ready to receive $ 1400 stimulus checks, which began arriving over the weekend, and Wall Street economists have already begun to increase their estimate of gross domestic product (GDP) for the rest of the year, amid of the expectations that the stimulus will trigger a recovery of the consumer. .
Nevertheless, Washington’s aggressive spending and super-accommodative monetary policy have increasingly drawn attention to runaway deficit spending – which is at least part of the reason why government borrowing costs are starting to rise, even though the Federal Reserve is still committed to promoting growth. by lower yields and higher inflation.
The central bank will rule on monetary policy on Wednesday, which is expected to confirm a bias for easy policy.
Last week, the 10-year treasury yield rose to a pre-pandemic of about 1.6%, by about 50 basis points in a month. Another warning sign appeared via Bitcoin (BTC-USD), where prices were higher than $ 60,000 over the weekend, a new record high before comparing gains on Monday.
With a large amount of fiscal and monetary stimulus activity, BlackRock economists expect a much stronger economic restart after the Covid than we would expect in a normal recovery. The rapid upward adjustment in US Treasury yields and a more subdued movement in inflation-adjusted yields make sense in this regard, and are still in line with our new nominal theme “of higher prices and government liquidity, the firm noted.
“The restructuring strengthens our attitude to risk over the next six to twelve months, and allows us to lean further into cyclical assets” such as equities and private equity, “BlackRock added.
Goldman Sachs economists predicted Friday that the fiscal bailout package would give the economy another impetus in 2021, and it was estimated that gross domestic product would expand by 6% in the first quarter. For this reason, markets this week will be closely watching the remarks of Fed Chairman Jerome Powell for tips on whether the central bank is worried about movements in the bond market and an economy that could overheat.
However, Goldman noted that ‘Fed officials are unlikely to see much of an issue [with rising rates] at a time when financial conditions remain easy, activity increases and powerful growth impulses are introduced to support the economy throughout the year. ‘
Meanwhile, technology stocks have underperformed the broader market, as the gradual reopening of states and localities – and a COVID-19 mass vaccination effort gathering steam – have encouraged investors to pursue the so-called “stay at home” industries big names like Amazon (AMZN), Netflix (NFLX), Apple (AAPL) and Facebook (FB). Rising interest rates have boosted volatility in the technology sector, amid expectations of higher borrowing costs posed by growth companies.
One of the most watched economic reports this week is the February Department of Commerce’s February print. Consensus economists are looking for retail sales that retreated in February after rising the most in seven months in January.
Specifically, retail sales are expected to have fallen 0.7% month-on-month after rising 5.3% in January.
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6:45 p.m. ET Monday: Stock contracts mixed
Here’s where markets traded Monday night:
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S&P 500 futures (ES = F): 3953.75, -4.50
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Dow futures (YM = F): 32800, -50
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Nasdaq futures (NQ = F): 13061.75, -7.50
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Javier David is an editor of Yahoo Finance. Follow Javier on Twitter: @TeflonGeek
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