By Alexander Osipovich and Joe Wallace 

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 643 points, or 2.1%, in afternoon trading, putting the index on track for its biggest one-day increase since November. The S&P 500 climbed 2.3%, while the technology-heavy Nasdaq Composite was up 2.5%.

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 1.446% 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 -- even though the Fed itself has played down such concerns.

"Today is kind of a reckoning with the reality that the Fed's not moving anytime soon," said Mike Dowdall, a portfolio manager at BMO Global Asset Management.

"It's really hard to paint a negative picture of this market," he added, pointing to the ramp-up in coronavirus vaccinations and the prospect of further fiscal stimulus from Washington. "Everyone's chasing their shadows and saying it's rates here, it's inflation there. But those just aren't real."

The Senate is preparing to move ahead this week with President Biden's sweeping coronavirus relief package. The House passed the $1.9 trillion package over the weekend, and Senate approval appears more likely after senators dropped a minimum-wage increase that some centrist Democrats had opposed.

Democrats are racing to finish the package before March 14, when certain types of federal unemployment assistance are set to expire.

Some investors remain concerned that resurgent bond yields and mounting inflation pressures could still derail the stock market, especially with the prospect of massive spending from Mr. Biden's relief package.

"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."

Monday's gains were broadly shared across the stock market, with all 11 sectors of the S&P 500 in positive territory. Tech stocks rebounded after last week's bruising selloff, with Apple climbing 4.3% and Tesla gaining 5%.

In corporate news, Exxon Mobil shares advanced 4.3% after the oil major, which has been under pressure from activist investors, added two new board members.

Boeing shares rallied 5.3% after United Airlines said it was buying 25 new 737 MAX jets, a boost for the aircraft maker that is still trying to recover from the jet's nearly two-year grounding.

Class B shares of Warren Buffett's Berkshire Hathaway climbed 3.8% after the conglomerate on Saturday posted an increased fourth-quarter profit and reported that it had bought back nearly $25 billion in shares last year, a larger-than-usual buyback for Berkshire.

Shares of Johnson & Johnson added 1.1% after the U.S. over the weekend authorized its single-shot coronavirus vaccine.

Fresh data released Monday showed that activity at U.S. factories grew last month at its fastest pace since the onset of the pandemic. The Institute for Supply Management's February manufacturing index climbed to 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.

The corporate earnings season is winding down, with Zoom Video Communications and Novavax scheduled to report quarterly results after markets close.

Several top Fed officials are scheduled to make public appearances later this week, and investors will be monitoring them closely to see they voice any concerns about bond 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.

In commodities, futures on benchmark Brent crude oil fell 1.3% on Monday to $63.56 a barrel.

Improving investor sentiment buoyed overseas markets. The Stoxx Europe 600 gained 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%, while China's Shanghai Composite Index added 1.2%.

Write to Alexander Osipovich at alexander.osipovich@dowjones.com and Joe Wallace at Joe.Wallace@wsj.com

 

(END) Dow Jones Newswires

March 01, 2021 14:16 ET (19:16 GMT)

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