Nasdaq ends 1.2% higher, Dow and S&P 500 post 2-day slippage as Treasury yields retreat


U.S. stock indexes closed higher on Monday, after losses of all three major indexes last week, with investors weighing the improving economic outlook against fears of a faster-than-expected interest rate hike.

Friday, the Dow Jones fell 0.5% weekly, the S&P 500 and the Nasdaq both slipped 0.8%.

What drove the market?

Technology-related stocks helped push stocks higher on Monday, after the 10-year Treasury yield TMUBMUSD10Y fell slightly,
1.474%
gave a boost at the start of the last full week of trading in March.

High-tech stocks have been the big winners amid the COVID-19 pandemic, but they have also come under pressure in recent months as government bond yields have risen.

The 10-year Treasury yield was around 1.682% on Monday, compared to 1.729% on Friday. The rise in bond yields has been partly welcomed by investors on Wall Street, a sign of the return to the health of the US economy, but caution remains as to whether a further spike in rates could cause turmoil in the markets. financial.

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“Rising yields are not yet too punitive for the economy and risky assets, but 2.5% at 10 years could be a key threshold,” a team led by Jason Pride, chief investment officer, wrote on Monday. of Glenmede’s private banking division. .

Investors have been apprehensive about the prospects for buying shares following further fiscal stimulus, state reopenings and vaccine deployments that could lead to a major economic recovery and lower rates of growth. Higher interest, as falling bond prices push yields higher and make speculative and high – growth assets look less compelling.

“With federal debt now standing at $ 29 trillion and a total debt-to-GDP ratio of an astounding 145%, nominal inflation and interest rates have risen sharply in recent months,” said Phil Orlando, chief equity market strategist at Federated Hermes, in emailed comments.

Orlando also said that significantly higher 10-year Treasury yields “will certainly hurt our ability to service this growing level of debt.”

Concerns over rising US debt levels come as President Joe Biden’s economic team prepares to recommend spend up to $ 3 trillion on a set of efforts to stimulate the economy, reduce carbon emissions and reduce economic inequality, The New York Times reported Monday.

Last week’s drop in major stock indexes came after the Federal Reserve appeared to adopt a conciliatory tone at its policy meeting on Wednesday, but bond yields rose amid expectations of an economic recovery and inflation this year. .

“The Fed itself may remain one of the most important short-term risks, simply because of the market’s (over) reaction to its comments and (in) actions,” wrote Saira Malik, chief investment officer at Nuveen, in comments sent by email.

Richmond Fed Chairman Thomas Barkin, speaking at a virtual event hosted by the Credit Suisse Asian Investment Conference, said he hoped the United States was “close to completing this recovery.” .

“Vaccines are being rolled out, case rates and hospitalizations are declining, excessive savings and fiscal stimulus should help finance pent-up consumer demand,” Barkin said, while describing households as “exhausted from the isolation and released by vaccines and warmer weather “.

Markets have also been watching any reaction from the Treasury market to the central bank’s decision on Friday to end a one-year reprieve that had eased capital requirements for big banks. The move disappointed some investors hoping for an extension, raising fears of a drop in appetite for bond prices, putting additional pressure on yields, if banks are unable to exclude assets like government bonds. Treasury of their so-called additional leverage ratios.

Meanwhile, Fed Chairman Jerome Powell said on Monday that Bitcoin lacks key ingredients that would make it a useful currency, claiming that cryptocurrency is more of a substitute for gold, during a webinar hosted by the Bank for International Settlements on Innovation in the Digital Age.

In terms of public health, AstraZeneca
AZN,
-0.47%
said on Monday that its COVID-19 vaccine was found to be 79% safe and effective in preventing symptomatic disease in late-stage U.S. clinical trials. The US trial showed no increased risk of blood clotting, which had led to the vaccine being suspended in parts of Europe.

The United States, while remaining the world leader in COVID-19 cases, has said its vaccination program is on track to almost tripling its production in March, even as the health situation in Europe is deteriorating.

On the economic news side, the Chicago Fed’s national activity index fell to minus 1.09 in February, the first negative reading since last April.

A report on Sales of existing homes showed total sales fell 6.6% from January to a seasonally adjusted annual rate of 6.22 million, the National Association of Realtors reported on Monday after two consecutive months of gains. Yet compared to a year ago, home sales are up 9.1%.

What actions were the focus of attention?
  • Starbucks Corp. SBUX,
    -0.41%
    stocks rose 1.2% on Monday after the business said it would halve water consumption in its supply chain by 2030.
  • Support.com ‘s stock SPRT,
    -5.39%
    climbed 231.8% on Monday, after the technical support service provider announced an acquisition agreement by Bitcoin mining company Greenidge Generation Holdings Inc.
  • Actions of Dynatrace Inc. DT,
    -3.61%
    added 1.7% and those of ZoomInfo Technologies
    ZI,
    -2.36%
    increased by 12% after Kash Rangan, Analyst at Goldman Sachs launched coverage on both companies with buy ratings.

  • Canadian Pacific Railway Ltd.
    CP,
    -0.47%
    offers to buy Kansas City South
    KSU,
    -0.55%
    in a deal valued at $ 25 billion. Canadian Pacific shares fell 5.8%, while Kansas shares rose 11.1%.
  • Tesla Inc. TSLA,
    -0.16%
    Bull Cathie Wood of Ark Investment has released a new four-year target for the electric vehicle maker of $ 3,000 per share. The company’s shares rose 2.3%.
  • AstraZeneca AZN shares,
    -0.47%
    added 4% after studies have confirmed it to be safe and 79% effective.

How have other markets behaved?
  • The yield on the 10-year Treasury bill TMUBMUSD10Y was down 4.7 basis points to 1.682%, the third highest return of the year.

  • The ICE US dollar index DXY, a measure of the US currency against a basket of six major rivals, fell 0.2%.

  • Oil futures ended lower, with benchmark US crude contract CL.1 dropping 13 cents, or 0.2%, to settle at $ 61.55 a barrel.

  • Gold Futures GC00 fell 0.2% to $ 1,738.10 an ounce on Comex.

  • In Europe, the Stoxx 600 SXXP closed up 0.2% and London’s FTSE 100 UKX gained 0.3%.

  • In Asian stock markets, the Shanghai Composite SHCOMP rose 1.1%, while the Hang Seng index of Hong Kong HSI lost 0.4% and Japan’s Nikkei 225 Nik fell 2.1%.

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