Monday March 1st

1-03-2021

Dow futures jump 300 points to start the week as rate fears ease

U.S. stock index futures rose sharply in early morning trading on Monday, as Treasury yields retreated from their highs from last week, easing concerns about inflation and that higher rates would undermine equity valuations. Dow Jones Industrial average futures rose 305 points, or 0.9%. S&P 500 futures gained about 1%. Futures for the Nasdaq-100, the tech heavy index that got hit hard last week, jumped by 1.3%. The 10-year Treasury yield dipped to 1.44% on Monday, off by 2 basis points from Friday and down from its recent high of 1.6% on Thursday, which rattled stocks. There were a broad-based group of stock gainers in the premarket. Economic reopening plays like Carnival Corp and American Airlines were higher by at least 3%. Tech shares like Apple and Tesla were also higher. Last week, stocks were pressured by rising interest rates. Higher interest rates can threaten the dominance of equities, as bonds are viewed as less risky, and compress stock valuation by reducing the value of future cash flows. The Dow Jones Industrial Average and S&P 500 lost and 1.7% and 2.5%, respectively, between Monday and Friday. The technology-heavy Nasdaq Composite dropped more than 4% for the week, suffering its worst one-day sell-off since October on Thursday. Technology companies rely on being able to borrow money for a low rate in order to invest in future growth. “The outsized rotation suggests there could be some tactical reversal if yields settle down,” Keith Parker, equity strategist at UBS, said in a note. “earnings should more than offset rate headwinds through the course of the year albeit with pockets of downdrafts in that uptrend,” Boosting sentiment on the vaccine front, the Centers for Disease Control and Prevention advisory panel voted unanimously Sunday to recommend the use of Johnson & Johnson’s one-shot Covid-19 vaccine for people 18 years of age and older. The company expects to ship out four millions of doses initially. The major averages rose for the month of February, bolstered by a strong earnings season, positive news on the vaccine rollout and hopes of anther stimulus package. The House passed a $1.9 trillion Covid relief bill, the American Rescue Plan Act of 2021, early Saturday. The Senate will now consider the legislation.  The Dow gained 3.15% for its third positive month in four in February. The S&P 500 gained 2.61% and the Nasdaq Composite gained nearly 1% for its fourth positive month in a row. February’s final read for Markit’s U.S. manufacturing purchasing managers’ index for February comes out on Monday at 9:45 a.m. ET. Economists polled by Dow Jones are expecting a read of 58.5, the same as December’s read of 58.5. Stocks in Asia-Pacific rose on Monday, as data releases showed China’s manufacturing activity growth slowing in February. In Japan, the Nikkei 225 jumped 2.41% to close at 29,663.50, as the index recovered partially from its nearly 4% plunge on Friday. The Topix index gained 2.04% to finish its trading day at 1,902.48. Mainland Chinese stocks also saw robust gains on the day, as the Shanghai composite gained 1.21% to 3,551.40 while the Shenzhen component jumped 2.412% to 14,857.34. Hong Kong’s Hang Seng index advanced 1.63% to close at 29,452.57. South Korea’s markets were closed on Monday for a holiday. Oil prices rose more than $1 on Monday on optimism in the global economy thanks to progress in a huge U.S. stimulus package and on hopes for improving oil demand as vaccines are rolled out. Brent crude futures for May rose 63 cents, or 0.98%, to $65.05 per barrel. U.S. West Texas Intermediate (WTI) crude futures jumped 58 cents, or 0.94%, to $62.08 per barrel. Gold jumped over 1% on Monday as a retreat in U.S. Treasury yields pushed investors to bullion again as a refuge from inflation following the passage of a $1.9 trillion U.S. stimulus package. Spot gold was up 0.8% to $1,746.46 per ounce at 1033 GMT, after rising as much as 1.5% to $1,759.53 earlier in the session. U.S. gold futures rose 0.8 % to $1,742.60 per ounce.