Equity futures and government bonds climbed on Monday as investors waited on a lead speaker from the Federal Reserve and data on the manufacturing sector.
The futures contract linked to the S&P 500 rose by about 1% and the contracts for the Nasdaq-100 rose by 1.1% after a bruising week for technology stocks. The big progress comes when yields on 10-year treasury notes, the standard borrowing cost in global debt markets, fell from 1.445% on Friday to 1.436%. The yield decreases when the price of bonds rises.
Stocks, and especially shares of technology companies, have been plagued in recent trading sessions by volatile movements in government bond markets. An increase in higher yields last week questioned the prospect of a long period of low interest rates, which supported the past year’s strong growth in equities.
Monday’s drop in returns revived investors’ demand for shares. But money managers remain wary of further rises that could cause new volatility in stock prices. Investors will later elicit a speech by Fed Governor Lael Brainard for clues as to whether the central bank will push back at higher returns.
“This week is the most important,” said Andrea Carzana, a fund manager at Columbia Threadneedle Investments in London. If the Fed does not try to weaken expectations of higher inflation, yields could continue to rise, causing the stock market to rattle, according to Mr. Carzana.
“I expect turbulence or volatility will remain with us until we gain a better understanding of where central banks stand,” he said.
Before the clock in New York, the shares of Johnson & Johnson rose by more than 2%. The company’s Covid-19 vaccine received a green light from the Centers for Disease Control and Prevention on Sunday. The U.S. Food and Drug Administration allowed the use of the single dose on Saturday.
United Airlines shares rose 4%. The Justice Department said late Friday that the airline had agreed to pay more than $ 49 million to settle criminal charges and civil claims related to fraud on postal service contracts.
Fed officials have so far suggested that the rise in yields reflects expectations for an economic recovery fueled by the vaccination program and the likelihood of additional fiscal stimulus. President Biden urged the Senate over the weekend to act quickly after the House passed its $ 1.9 billion Covid-19 aid package.
Democrats are rushing to complete the package before March 14, when certain types of federal unemployment benefits expire.
As the economy is already showing signs that it has weathered the third wave of coronavirus and would like to recover in 2021, investors are questioning whether another large dose will cause an increase in inflation and a further rise in yields.
“The concern about the reflection front comes down to the degree of stimulus,” said Brian O’Reilly, head of marketing for Mediolanum International Funds. “The market is rightly starting to question how much is too much.”
Me. Brainard to address a conference of 9 institutes for international bankers on financial stability. John Williams of the New York Fed, Loretta Mester of Cleveland Fed and Neel Kashkari of Minneapolis Fed will also appear in public.
The Institute of Supply Management’s production index reading in February is due to take place at 10:00 this week and is expected to show another month of strong growth in US factories.
The corporate earnings season is declining, with Zoom Video Communications and Novavax reporting quarterly results after the market closed.
The oil markets resumed their march ahead of a meeting of the Organization of the Petroleum Exporting Countries and its partners on Thursday. Brent crude futures, the benchmark in international energy markets, rose 1% to $ 65.05 a barrel, extending their advance to 26% this year.
Analysts expect the cartel, which has been holding back millions of barrels of crude oil a day since last spring to boost prices, to agree to increase production in April.
The improvement in investor sentiment has driven overseas markets. The Stoxx Europe 600 climbed 1.2%, led higher by shares of travel and leisure businesses, whose happiness depends on the reopening of economic activity.
In Asia, Japan’s Nikkei 225 rose 2.4% at the close and the Chinese Shanghai Composite Index rose 1.2%.
Traders worked on the floor of the New York Stock Exchange on Friday.
Photo:
Courtney Crow / Associated Press
Manufacturing activity in China declined in February, according to a private survey among manufacturers. It was, however, the 10th consecutive month in which the Caixin index was kept above the 50-point mark, separating the expansion from the contraction.
Write to Joe Wallace by [email protected]
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