By Joe Wallace and Alexander Osipovich
U.S. stocks surged Monday as a weekslong advance in government
bond yields stalled, easing investors' jitters over rising interest
rates.
The Dow Jones Industrial Average soared 681 points, or 2.2%, in
midday trading, while the S&P 500 climbed 2.2%. Both indexes
were on track for their biggest one-day gains since November. The
technology-heavy Nasdaq Composite was up 2.3%.
The gains marked a robust rebound after all three indexes
declined last week, weighed down by losses among tech stocks.
Monday's advance came as the yield on 10-year Treasury notes,
the benchmark borrowing cost in U.S. debt markets, slipped to
1.431% 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 long period of low interest rates underpinned
the stock market's boom over the past year, by making it less
attractive for investors to put money in bonds. Last week's climb
in yields called that into question. It also raised the specter
that the U.S. Federal Reserve might put an end to easy-money
policies to combat inflation.
"You can see a lot of sensitivities in the market to inflation
pressures, " said Christopher Smart, chief global strategist at
Barings.
Monday's gains were broad, with all 11 sectors of the S&P
500 rising at least 1%. Tech stocks rebounded after last week's
bruising selloff, with Apple climbing 4% and Tesla up 5.4%.
In corporate news, Exxon Mobil shares advanced 5.8% after the
oil major, which has been under pressure from activist investors,
added two new board members.
Perrigo shares rose 6.7% after the pharmaceuticals company said
it expects earnings and sales to increase in the 2021 fiscal year
and agreed to sell its Generic Rx Pharmaceuticals business to
Altaris Capital Partners for roughly $1.55 billion.
United Airlines shares rose 5.7%. The Justice Department said
late Friday that the airline had agreed to pay more than $49
million to settle criminal charges and civil claims relating to
fraud on postal service contracts.
Shares of Johnson & Johnson gained 1%. The company's
Covid-19 vaccine received a green light from the Centers for
Disease Control and Prevention Sunday. The U.S. Food and Drug
Administration authorized use of the single-dose shot on
Saturday.
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.
With the economy showing signs that it has weathered the third
wave of coronavirus and is primed to rebound in 2021, investors are
questioning whether another big dose of spending will fuel
inflation and put further upward pressure on yields.
"The concern on the reflation front boils down to the extent of
stimulus, " said Brian O'Reilly, head of market strategy for
Mediolanum International Funds. "The market is beginning to rightly
question how much is too much."
New data showed robust growth in activity at U.S. factories last
month. The Institute for Supply Management's February manufacturing
index came in at 60.8 in February, up from 58.7 in January and
beating economists' expectations of 58.9. Any level above 50
indicates an expansion of activity.
Commodity prices have also fueled inflation concerns. Futures on
Brent crude oil, the international energy benchmark, rose 0.8% on
Monday to $64.93 a barrel.
The gains came as the Organization of the Petroleum Exporting
Countries and its partners are set to meet Thursday. 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.
The U.S. Federal Reserve has so far voiced little concern about
inflation, focusing instead on the need to keep the economic
recovery on track. Fed officials have suggested that the recent
climb in yields reflects expectations for an economic recovery
fueled by coronavirus vaccinations and the likelihood of additional
fiscal stimulus.
Still, investors are keeping a close eye on the central bank,
with several top Fed officials slated to make public appearances
later this week.
"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.
The corporate earnings season is winding down, with Zoom Video
Communications and Novavax scheduled to report quarterly results
after markets close.
Improving investor sentiment buoyed overseas markets. The Stoxx
Europe 600 was up 1.8%, led higher by shares of travel-and-leisure
companies, whose fortunes hinge on the reopening of economic
activity.
In Asia, Japan's Nikkei 225 rose 2.4% and China's Shanghai
Composite Index added 1.2%.
Write to Joe Wallace at Joe.Wallace@wsj.com and Alexander
Osipovich at alexander.osipovich@dowjones.com
(END) Dow Jones Newswires
March 01, 2021 12:08 ET (17:08 GMT)
Copyright (c) 2021 Dow Jones & Company, Inc.