Stocks edge higher, S&P 500 and Dow aim for fresh records

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Stock-market benchmarks lacked direction on Monday afternoon, as investors waited to see if the Dow Jones Industrial Average and the S&P 500 will build on last week’s record finish.

What are major indexes doing?

  • The Dow Jones Industrial Average rose 88 points, or 0.3%, to trade near 32,864.
  • The S&P 500 was up 12 points, or 0.3%, near 3,955.
  • The Nasdaq Composite gained 84 points, or 0.6%, to 13,404.

On Friday, stocks ended a volatile week on a positive note, with the Dow and S&P 500 closing at records, while the Nasdaq Composite logged a weekly gain of 3.1% after slipping into correction territory, a fall of 10% from a recent peak, earlier in the week.

The small-cap Russell 2000

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also scored a record close on Friday.

What’s driving the market?

Stocks bounced between positive and negative territory Monday, after recording solid gains last week as President Joe Biden signed a $1.9 trillion COVID-19 relief package into law and investors shook off a sixth straight week of rising Treasury yields.

“With the Fed still pumping over $5 billion daily into markets, and Congress passing multi trillion-dollar bills with only the thought of raising offsetting revenue, there is plenty of fuel for higher prices,” said James Meyer, chief investment officer for Tower Bridge Advisors.

Although, with investors keenly focused on Wednesday’s scheduled policy briefing, following the U.S. central bank’s Federal Open Market Committee’s two-day gathering, it could be a few lackluster days of trading for U.S. equities ahead of the update.

“The big event this week is the FOMC meeting,” Jimmy Chang, chief investment officer at Rockefeller Capital Management, told MarketWatch. “I think the focus will be on whether Fed officials update their assessment of the economy, given that the $1.9 trillion stimulus spending has now passed.”

“Many economists and strategists are now raising their growth estimates for the year,” Chang said, adding that markets will be looking for clues to the Fed’s thinking on inflation expectations, as well as benchmark rates, particularly with 10-year Treasury yields hovering around 1.61%.

Those rising yields have been seen as the main fuel behind a rotation away from previously highflying, large-cap growth stocks toward more cyclically sensitive, value-oriented stocks. In theory, higher bond yields make it tougher to justify stretched valuations for the most expensive stocks, while expectations for a broader economic reopening make cyclical stocks more attractive.

Read: Value stocks are making a comeback. Don’t get left behind, these analysts say

Early last week, the Nasdaq slipped into correction territory, defined as a pullback of 10% from a recent peak, but subsequently has bounced back. Monday saw a continuation of that trend, with tech shares mostly outperforming the rest of the market.

Treasury yields were lower Monday, with the rate on the 10-year Treasury note

down 3 basis points but still near its highest levels in around a year. Yields and bond prices move in opposite directions.

No monetary-policy changes are expected Wednesday, but Powell likely will once again face questions about rising bond yields, boosted by expectations for a pickup in inflation.

Read: Fed to stay dovish next week as Powell channels his inner Gary Cooper calm

Powell “is likely to emphasize that significant uncertainties remain and that large gaps persist between the current and pre-COVID economies, particularly with respect to the labor market,” said Brett Ryan, senior U.S. economist at Deutsche Bank, in a note.

Related: Here’s why bond investors are calling for the Fed to give banks relief on capital rules

“As such, Powell is likely to reiterate that any discussion of tapering is ‘premature’ and that it will likely be ‘some time’ before the committee can assess when ‘substantial further progress’ will be achieved, he wrote.

Also see: Markets set up for disappointment from Fed meeting as bond yields renew rise

The Empire State Manufacturing Index rose to a reading of 17.4 in March from 12.1 in the prior month, the New York Fed said Monday. This is the highest level of the index since last July and the ninth consecutive reading above zero, which indicates an expansion of activity.

Which companies are in focus?

  • Shares of Lordstown Motors Corp. rose 6.4% after the electric truck maker responded to a bearish short seller report by saying it remains on track to start production of its Endurance electric pickup truck in September 2021.
  • Shares of electric-vehicle maker Tesla Inc. were up 1.5% after the Washington Post reported that there were around 450 coronavirus cases at the company’s Fremont, Calif., production plant after it reopened in defiance of local health regulations last May. Separately, in an SEC filing, Tesla said Elon Musk’s title changed from chief executive to Technoking of Tesla, while Zach Kirkhorn’s title changed from chief financial officer to Master of Coin. Tesla said Musk would retain his position as CEO and Kirkhorn would retain his position as CFO.
  • Shares of JetBlue Airways Corp.  jumped 5.7% Monday, after the air carrier provided an upbeat first-quarter revenue outlook.
  • Shares of DraftKings Inc.  took a 2% hit after the digital sports-gambling company announced plans to offer $1 billion worth of convertible debt.
  • United Airlines Holdings Inc. stock soared 8.8% in Monday trading after the company said in a filing that it expects core cash flow to be positive for the month of March.
  • Eli Lilly & Co.’s stock fell 9.2% after it shared additional clinical data about its Alzheimer’s disease drug candidate.

Which assets are on the move?

  • Gold futures closed near a two-week high, up about 0.6% to settle at $1,729.20 on Comex. Crude oil futures fell 0.2% to $65.50 a barrel on the New York Mercantile Exchange after the global benchmark earlier rose above $70 a barrel.
  • In Europe, the Stoxx Europe 600 index was flat, while the U.K.’s FTSE 100 closed down 0.2%. The Japanese Nikkei gained 0.2% and the Shanghai Composite slipped 1%.
  • The ICE U.S. Dollar Index a gauge of the greenback’s strength against its major rivals, was up 0.1%.

Read next: Americans ready to pour $40 billion into bitcoin and the stock market as stimulus checks arrive: survey

William Watts contributed reporting

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