U.S. Stock Futures Rise as Bonds Rally
March 01 2021 - 5:19AM
Dow Jones News
By Joe Wallace
Stock futures and government bonds climbed Monday as investors
awaited a slate of Federal Reserve speakers and data on the
manufacturing sector.
Futures tied to the S&P 500 rose 1.2% and contracts for the
Nasdaq-100 advanced 1.5% after a bruising week for technology
stocks. The broad advance came as the yield on 10-year Treasury
notes, the benchmark borrowing cost in global debt markets, slipped
to 1.416% from 1.459% Friday. Yields fall when bond prices
rise.
Stocks, and particularly shares of tech companies, have been
buffeted by volatile moves in government-bond markets in recent
trading sessions. A lurch higher in yields last week called into
question the prospect of a long period of low interest rates, which
had underpinned the past year's booming rally in stocks.
Monday's decline in yields helped revive investors' demand for
stocks. But money managers remained wary of further spikes that
could spark fresh volatility in share prices. Investors will later
parse a speech by Fed governor Lael Brainard for clues about
whether the central bank will push back against higher yields.
"This week is key," said Andrea Carzana, a fund manager for
London-based Columbia Threadneedle Investments. If the Fed doesn't
seek to tamp down expectations of higher inflation, yields could
continue to rise, rattling the stock market, according to Mr.
Carzana.
"I'm expecting turbulence or volatility to remain with us until
we have a better understanding of where central banks stand," he
said.
Fed officials have so far suggested the climb in yields reflects
expectations for an economic recovery fueled by the vaccine program
and the likelihood of additional fiscal stimulus. President Biden
over the weekend urged the Senate to take quick action after the
House passed his $1.9 trillion Covid-19 relief package.
Democrats are racing to finish the package before March 14, when
certain types of federal unemployment assistance are set to
expire.
It is the pace at which yields have jumped, rather than their
outright level, that has unsettled many investors. "I still think
equities are more attractive than bonds, especially if you believe
there will temporarily be some inflation," Mr. Carzana said, adding
that stocks offer more protection against rising prices.
Ms. Brainard is due to address a conference of the Institute of
International Bankers on financial stability at 9:05 a.m. ET. The
New York Fed's John Williams, Cleveland Fed's Loretta Mester and
Minneapolis Fed's Neel Kashkari are also scheduled to make public
appearances.
The reading from the Institute for Supply Management's February
manufacturing index is due out at 10 a.m., and is expected to show
another month of robust growth in activity at U.S. factories.
The corporate earnings season is winding down, with Zoom Video
Communications and Novavax scheduled to report quarterly results
after markets close.
Oil markets resumed their rally ahead of a meeting of the
Organization of the Petroleum Exporting Countries and its partners
on Thursday. Brent-crude futures, the benchmark in international
energy markets, rose 1.7% to $65.52 a barrel, extending their
advance this year to 27%.
Analysts expect the cartel, which has held back millions of
barrels of crude oil a day since last spring to bolster prices, to
agree to boost production in April.
Improving investor sentiment buoyed overseas markets. The Stoxx
Europe 600 jumped 1.7%, led higher by shares of retail and
travel-and-leisure companies, whose fortunes hinge on the reopening
of economic activity.
In Asia, Japan's Nikkei 225 rose 2.4% by the close and China's
Shanghai Composite Index added 1.2%.
China's manufacturing activity eased in February, posting the
slowest rate of expansion in nine months, according to a private
survey of manufacturers. Still, it was the 10th consecutive month
in which the Caixin index held above the 50 mark, which separates
expansion from contraction.
Write to Joe Wallace at Joe.Wallace@wsj.com
(END) Dow Jones Newswires
March 01, 2021 05:04 ET (10:04 GMT)
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