Stock Futures Rise After Dow’s Record Close

The stock market resumed its rally on a firmer basis last week after weeks of being rocked by sharp moves in the US government bond market. The yield on 10-year Treasuries has climbed for six straight weeks, its longest winning streak since December 2016. Some fund managers fear a sharp rise in inflation, which could prompt the central bank to consider a move. increase interest rates over the next two years. .

Federal Reserve officials have repeatedly tried to allay these fears and reaffirmed that they will keep monetary policy loose for the foreseeable future to help the labor market recover. Investors look to the Federal Reserve’s upcoming monetary policy statement on Wednesday for more information on the health of the economy and the views of policymakers on rising bond yields and the outlook for inflation.

“The fear factor is now gone, so the markets are now finding a balance. Bond yields will rise, but central banks will not fall, ”said Carsten Brzeski, ING Groepof

global head of macro research. “The Fed meeting will clearly be crucial and essential to educate markets more about what the Fed is doing.”

Investors pulled money from safe government bonds as the economic outlook improved. In recent weeks, they have also started to shift away from the tech sector to the stocks of power producers and banks, which tend to benefit from an economic recovery. Optimism over the rebound was driven by a faster-than-expected rollout of vaccines and the passage of an additional $ 1.9 trillion in fiscal stimulus.

“With the reopening of the economy, this fiscal stimulus in the form of checks will have a stronger impact on consumption,” Brzeski said. This is important because consumer spending accounts for over two-thirds of US economic output. “Low-income households will spend almost all of this check,” he added.

Some fund managers fear that the broad budget package will cause inflation to rise sharply and, for an extended period, force the Fed to raise interest rates sooner than policymakers have suggested.

The yield on 10-year Treasury bills fell to 1.611% on Monday. It ended at 1.634% on Friday, the highest since February 6, 2020.

“The Fed needs to send a message here that it is still aware of the substantial progress that is needed before the economy returns to pre-pandemic conditions, but also, it will not be too aggressive because some of these measures are warranted. on fundamentals, ”said James Ashley, head of international market strategy at Goldman Sachs Asset Management. “So it is, how do you calibrate this message in a way that is neither too accommodating nor too hawkish.”

Over the weekend, bitcoin crossed $ 60,000 for the first time on Saturday. On Monday, it returned to trading close to $ 56,020.86.

Overseas, the pan-continental Stoxx Europe 600 index rose 0.5%.

The major equity benchmarks in Asia ended the day on a mixed note. The Shanghai Composite Index fell nearly 1% and South Korea’s Kospi closed down 0.3%. Japan’s Nikkei 225 rose 0.2% and the Hong Kong Hang Seng index rose 0.3%.

Write to Caitlin Ostroff at [email protected]