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U.S. stocks mostly gained ground late Monday morning, overlooking weakness in tech-related shares, which are viewed as most vulnerable as government bond yields extend their climb following the Senate’s passage of a $1.9 trillion COVID-19 relief package.
What are major benchmarks doing?
- The Dow Jones Industrial Average DJIA, +1.35% gained 450 points, or 1.4%, to trade near 31,950.
- The S&P 500 SPX, +0.37% added 25 points, 0.7%, to about 3,867.
- The Nasdaq Composite COMP, -0.94% bounced between small gains and losses, down 28 points, or 0.2%, to about 12,897, at last check.
Stocks are coming off a volatile week that ended Friday with a sharp rebound from the previous session’s rout. The moves left the Dow with a weekly gain of 1.8%, while the S&P 500 rose 0.8%. The tech-heavy Nasdaq Composite posted its biggest intraday rebound in a year on Friday, but suffered a weekly fall of 2.1%.
What’s driving the market?
Expectations that aggressive fiscal spending, coupled with a rapidly reopening economy as vaccine rollouts continue, have fueled expectations for at least a near-term surge in inflation. That, in turn, has contributed to a rise in bond yields, while also helping fuel a rotation away from growth-oriented stocks with high valuations toward stocks left behind in the stock market’s post-COVID recovery.
“This is what I call a stealth correction,” said Keith Lerner, chief market strategist for Truist Advisory Services. “Money isn’t leaving the market, it’s adjusting,” he said, adding that the reset has been concentrated in areas viewed as most frothy.
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But after a few weeks of intense selling, some of last year’s highfliers may be oversold, Lerner told MarketWatch, and the correction may be nearly over. “I think we’ll start to see the 10-year stabilize. The overall trends still look fine as a whole. This is a grind-higher market: two steps forward, one step back.”
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“Despite the indices having occasional stellar days, the overall trend of the market remains in a pullback phase that has yet to be completed,” said Peter Cardillo, chief market economist at Spartan Capital Securities, in a note.
“The adjustment to higher yields, however, has created new leadership resulting in an uneven market performance that will continue until yields begin to level off. We
reiterate that the pullback is likely to result in an 8% -10% decline from the market’s 52-week highs,” Cardillo wrote.
The 10-year Treasury yield TMUBMUSD10Y, 1.601% touched the highest level in over a year Friday before pulling back somewhat, booking its fifth straight weekly rise. Yields, which move in the opposite direction of prices, continued to increase, with the rate on the 10-year note up nearly 4 basis points at 1.604%.
The Senate on Saturday narrowly passed a $1.9 trillion COVID-19 relief package, which now goes back to the Democratic-controlled House. The House is expected to approve it by the end of the week, giving President Joe Biden an early legislative victory.
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The economic calendar is light. Wholesale inventories gained 1.3% for the month in January, as expected.
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Which companies are in focus?
- DuPont Inc. DD, +2.50% announced an agreement Monday to buy Laird Performance Materials from private-equity firm Advent International for $2.3 billion in cash. DuPont shares rose 1.8%.
- Shares of GameStop Corp. GME, +31.01% surged more than 30% after the company appointed a strategy committee that included Chewy Inc. co-founder Ryan Cohen.
- General Electric Co. GE, +3.97% is nearing a $30 billion-plus deal to combine its aircraft-leasing business with Ireland’s AerCap Holdings NV, The Wall Street Journal reported, citing people familiar with the talks. GE shares gained 3.2%.
- Shares of Athene Holding Ltd. ATH, +6.91% jumped nearly 8% in midday trade Monday, after the company announced it had agreed to be acquired by investment manager Apollo Global Management Inc.
- AMC Entertainment Holdings Inc. AMC, +11.30% shares were 12% higher after scoring a price-target increase from Wedbush.
How are other assets faring?
- The dollar was trading up 0.4%, as measured by the ICE U.S. Dollar Index DXY, +0.47%, to 92.34.
- Oil futures ticked lower, with the U.S. benchmark CL.1, -1.38% trading down 0.8%, near $65.57 a barrel. Crude prices surged Sunday night, with global benchmark Brent crude BRN00, -1.38% briefly topping $71 a barrel after Saudi Arabia said its biggest oil storage facility and export terminal suffered drone and missile attacks by Yemen’s Houthi rebels.
- Gold futures GC00, -1.28% lost 1.2%, to trade near $1,678.90, as rising yields took some of the luster from the precious metal.
- European stocks jumped, with the pan-European Stoxx 600 index SXXP, +2.10% up 2.2% and London’s FTSE 100 UKX, +1.34% 1.4% higher.
- Stocks pulled back in Asia: the Shanghai Composite SHCOMP slid 2.3%, Hong Kong’s Hang Seng Index HSI lost 1.9%, and China’s CSI 300 000300 tumbled 3.5%. Japan’s Nikkei 225 NIK shed 0.4%.
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