Stock futures surge after Senate passes $ 1.9 trillion Covid relief bill, Dow futures rise 200 points

U.S. equity futures surged on Sunday night as a new stimulus package from Washington headed for final pass this week.

Futures contracts linked to the Dow Jones Industrial Average jumped 219 points, or 0.7%. Those of the S&P 500 and Nasdaq 100 composite rose 0.5% and 0.6% respectively.

The move came after the Senate passed a $ 1.9 trillion stimulus and economic relief bill on Saturday, paving the way for unemployment benefit extensions, another round of stimulus checks and aid to state and local governments. The Democratic-controlled House is expected to pass the bill later this week. President Joe Biden is expected to sign it into law before unemployment assistance programs expire on March 14.

The new wave of government spending could cause ripples in the US Treasury market, where the benchmark 10-year yield has risen sharply in recent weeks. The yield rose to 1.62% on Friday after starting the calendar year below 1%.

The bond’s rapid movement also confused equity investors, contributing to the weakness of high valued stocks.

10-year Treasury futures fell 0.2% on Sunday night as markets opened, implying higher yields.

“10-year yields have finally caught up with other asset markets. This puts pressure on valuations, especially for more expensive stocks that had hit disappointing valuations,” said Mike Wilson, chief equity strategist. American at Morgan Stanley, in a note.

The stock market came out of a rally Friday afternoon that took some of the sting of a tough week for top-flight momentum names. The high tech Nasdaq finished with a loss of 2.1% year-to-date, while the S&P 500 gained 0.8%. The Dow Jones, more dependent on cyclicals, rose 1.8%.

Friday’s turnaround doesn’t mean the recent market weakness is over, but the divergence between tech and cyclical games shows the bullish story remains intact, Morgan Stanley’s Wilson said.

“The bull market continues to be under the hood, with value and cyclics leading the way. Growth stocks can join the party once the valuation correction and repositioning is complete,” Wilson said.

Economically, investors will have a snapshot of data on wholesale stocks from January on Monday. Several economic measures in recent weeks have shown an accelerating recovery, including a better-than-expected employment report in February released on Friday.