Nasdaq rises as yields pull back but Dow industrials under pressure

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U.S. stock benchmarks traded mixed Monday, following losses for all three major indexes last week as investors weighed brightening economic prospects against worries that interest rates will climb sooner than anticipated.

Investors will be attentive to comments from a parade of speakers from the Federal Reserve, including those from Chairman Jerome Powell throughout the day.

How are stock benchmarks performing?
  • The Dow Jones Industrial Average DJIA, +0.08% traded 101 points, or 0.3%, lower at about 32,527.
  • The S&P 500 SPX, +0.42% added 4 points, or less than 0.1%, to reach 3,918.
  • The Nasdaq Composite Index COMP, +0.78% advanced 100 points to reach around 13,314, a gain of 0.8%.

On Friday, the Dow put in a weekly decline of 0.5%, the S&P 500 and the Nasdaq both slid 0.8%.

What’s driving the market?

Equity markets have been fixated on rates, with a modest pullback of the 10-year Treasury yield TMUBMUSD10Y, 1.699% to start March’s last full week of trading in helping to boost technology-related stocks, which were big winners amid the COVID-19 pandemic but have been under pressure more recently as yields have risen.

The 10-year Treasury yield stood at around 1.68%, down from 1.729% Friday.

Investors have been skittish about the outlook for buying stocks because fiscal stimulus, state reopenings and vaccine rollouts are likely to lead to a major upswing for the economy and higher interest rates, as falling bond prices push yields higher and make speculative and high-growth assets look less compelling.

“Watch out for further gains for US yields, as this could negatively impact the relatively lower-yielding growth stocks and buck-denominated metals in the weeks ahead,” wrote Fawad Razaqzada, market analyst at ThinkMarkets, in a Monday note.

“However, if yields were to reverse then that should provide a positive backdrop for these markets,” the analyst said.

Last week’s slide lower for major benchmarks came after the Federal Reserve appeared to strike a dovish tone at its policy meeting on Wednesday but bond yields rose on expectations for economic recovery and inflation this year.

Richmond Federal Reserve Bank President Thomas Barkin, speaking at a virtual event hosted by Credit Suisse Asian Investment Conference, said that he’s hopeful that the U.S. is “on the brink of completing this recovery.”

“Vaccines are rolling out, case rates and hospitalizations are falling, excess savings and fiscal stimulus should help fund pent-up demand from consumers who’re exhausted by isolation and freed up by vaccines and warmer weather,” he said.

Markets have also been fretting about the central bank’s decision to sunset a yearlong reprieve that had eased capital requirements for big banks. That disappointed investors who had hoped for an extension, raising worries that appetite for bond prices may take a leg lower, putting further pressure on yields, if banks aren’t able to exclude assets like Treasurys from their so-called supplementary leverage ratios.

Market participants may get another chance to hear from Fed Chairman Jerome Powell when he speaks at an event hosted by the Bank for International Settlements on innovation in the digital age.

On the public health front, AstaZeneca AZN, +2.78% on Monday said that its COVID-19 vaccine was shown to be safe and 79% effective in preventing symptomatic disease in final-stage U.S. clinical trials. The U.S. trial indicated no increased chance of blood-clotting, which had led to the suspension of the vaccine in parts of Europe.

In economic news, Chicago Fed national activity index fell to -1.09 in February, the first negative reading since last April.

Looking ahead, investors await data on existing home sales at 10 ET,

Which stocks are in focus?
  • Canadian Pacific Railway Ltd. CP, -2.66% is offering to buy Kansas City Southern KSU, +13.41% in a deal valued at $25 billion. Canadian Pacific’s stock was down 2.2%, while those for Kansas were up around 14%.
  • Tesla Inc. TSLA, +3.61% bull Cathie Wood of Ark Investment released a new four-year target fr the electric-vehicle maker of $3,000 a share. Shares of the company were up over 5%.
  • Shares of AstraZeneca AZN, +2.78% were up 1.8% after studies confirmed it was safe and 79% effective.
How are other markets faring?
  • The yield on the 10-year Treasury note TMUBMUSD10Y was down 3.3 basis point to 1.69%.
  • The ICE U.S. Dollar Index DXY, a measure of the U.S. currency against a basket of six major rivals, was down 0.1%.
  • Oil futures were lower, with the U.S. crude benchmark contract CL.1 losing 7 cents, or 0.1%, to $61.39 a barrel.
  • Gold futures GC00 shed 0.6% to $1,731 an ounce on Comex.
  • In Europe, the Stoxx 600 SXXP rose less than 0.1% and London’s FTSE 100 UKX was trading 0.3%.
  • In Asian equity markets, the Shanghai Composite SHCOMP rose 1.1%, while Hong Kong’s Hang Seng Index HSI lost 0.4% and Japan’s Nikkei 225 NIK tumbled 2.1%.