The Dow Jones Industrial Average topped the 32,000 milestone Monday, despite climbing government bond yields and weakness in tech-related shares, following the Senate’s passage over the weekend of a $1.9 trillion COVID-19 relief package.
What are major benchmarks doing?
- The Dow DJIA, +1.50% soared 640 points, or 2%, to trade near 32,139, heading toward its first close ever above the 32,000 mark.
- The S&P 500 SPX, +0.22% added 26 points, 0.7%, to trade near 3,868.
- The Nasdaq Composite COMP, -1.49%, after bouncing between small gains and losses, was down 122 points, or 1%, to about 12,795.
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?
The Dow Jones Industrial Average surged more than 600 points Monday despite expectations that aggressive fiscal spending, coupled with a rapidly reopening economy as vaccine rollouts continue, could result in a near-term surge in inflation.
That, in turn, has contributed to a rise in government 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.”
Billionaire investor David Tepper, founder of Appaloosa Management, on Monday also called for bonds to stabilize, predicting renewed buying interest from Japan following the recent rise in yields. Tepper, whose remarks often move market, said it was “very difficult to be bearish” on equities.
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Renewed optimism around shares of financial companies, including Goldman Sachs Group Inc GS, +1.98% and American Express Co. AXP, +2.18%, which would benefit from rising rates and an accelerated reopening of the economy, helped fuel the Dow’s ascent.
The Centers for Disease Control and Prevention said Monday that Americans who have been fully vaccinated against COVID-19 can gather in small groups, indoors, but warned that masks and social-distancing precautions still should be observed in public to prevent spreading the disease.
At the same time, worries about “runaway inflation” have been a stumbling block for stocks as of late, wrote Lindsey Bell, chief investment strategist at Ally Invest, warning that “there could be more market weakness ahead as investors grapple with the short- and long-term effects of stimulus,” in a note Monday.
The 10-year Treasury yield TMUBMUSD10Y, 1.599% 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 6 basis points at 1.6%.
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 for Monday was light. Wholesale inventories gained 1.3% for the month in January, as expected.
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Which companies are in focus?
- Mission Produce Inc. AVO, +2.44% shares were up 2.4% after the company said was entering the mango category, as the recently public Hass avocado company said it was “prime position” to enter the market for the most consumed fruit in the world.
- Second Sight Medical Products Inc. EYES, +66.15% shares soared 85% on heavy volume Monday, bringing its two-day gain above 700%, after the Food and Drug Administration approved the company’s Argus 2s Retinal Prosthesis System for the treatment of retinitis pigmentosa.
- DuPont Inc. DD, +2.53% announced an agreement Monday to buy Laird Performance Materials from private-equity firm Advent International for $2.3 billion in cash. DuPont shares rose 3.2%.
- Shares of GameStop Corp. GME, +25.25% surged 32% after the company appointed a strategy committee that included Chewy Inc. co-founder Ryan Cohen.
- General Electric Co. GE, +4.30% 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 5.1%.
- Shares of Athene Holding Ltd. ATH, +6.69% jumped 7% Monday, after the company announced it had agreed to be acquired by investment manager Apollo Global Management Inc.
- AMC Entertainment Holdings Inc. AMC, +11.32% shares were nearly 13% 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, +0.40%, to 92.31.
- Oil futures ticked lower, with the U.S. benchmark CL.1, -2.04% trading down 2.17%, near $6472 a barrel. Crude prices surged Sunday night, with global benchmark Brent crude BRN00, -2.05% 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, -1.27% lost 1.2%, to trade near $1,679, 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% closing up 2.1% and London’s FTSE 100 UKX, +1.34% ended 1.3% 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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William Watts provided additional reporting
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