Dow trades higher, buoyed by Boeing, but Nasdaq Composite pivots lower as Treasury yields edge up

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By Mark DeCambre and Steve Goldstein

Biden set to sign infrastructure spending bill

The Dow and the S&P 500 rose tentatively Monday morning, but the Nasdaq Composite was facing some early pressure to start the week, as investors remain focused on rising inflation and its impact on yields for government debt and borrowing costs.

What’s happening

The major U.S. benchmarks each snapped a stretch of five straight weekly gains on Friday, though the retreat was modest, leaving the S&P 500 just 0.4% away from a record close.

What’s driving markets

Stocks were trading on a relatively bullish footing on Monday, with a report on New York state manufacturing activity boosting sentiment on Wall Street.

The New York Fed’s Empire State manufacturing business conditions index rose 11.1 points to 30.9 in November, the regional Fed bank said Monday. Economists had expected a reading of 22, according to a survey by The Wall Street Journal.

“Despite ongoing supply-chain challenges, growth in manufacturing in New York state gained momentum this month…There were substantial increases in both new orders and shipments. In a sign that labor supply may be increasing, the index for the number of employees rose to a record high,” wrote economists Nancy Vanden Houten and Greg Daco of Oxford Economics.

The upbeat manufacturing report comes after the University of Michigan consumer-sentiment survey released Friday showed inflation data weighing on consumer attitudes, though it isn’t clear that will translate into weaker spending. The Chicago Fed ‘s advance retail trade summary forecasts a 2.6% jump in retail sales excluding auto, far stronger than the 1% gain seen in an economist poll. The retail sales report is due Tuesday.

Strong third-quarter earnings have been a pillar of this recent run-up in equities, with consumers central to the economic rebound from the debilitating COVID-19 crisis.

“The strong demand from households despite depressed attitudes suggests that heavy fiscal support and highly accommodative financial conditions are outweighing the constraining influence of weak sentiment. If fiscal support and monetary accommodation are strong enough to counter depressed attitudes, they are probably strong enough to push inflation higher,” said Michael Moran, chief economist at Daiwa Capital Markets America.

The inflation backdrop makes the next choice of Federal Reserve chair all the more important politically for President Joe Biden. The Wall Street Journal reported he may choose between renominating Chairman Jerome Powell or choosing Fed. Gov. Lael Brainard as early as this week. Biden interviewed both candidates last week; the meeting with Brainard was described by people familiar with the matter as going better than expected, the report said.

Biden is due to sign the infrastructure bill into law in a signing ceremony Monday afternoon. He’s also due to hold a virtual meeting with Chinese President Xi Jinping in the evening.

Meanwhile, European Central Bank President Christine Lagarde told the European Parliament that the central bank expects inflation to moderate next year, though prices will take longer to decline than originally expected. European inflation data is due for release this week.

-Mark DeCambre

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(END) Dow Jones Newswires

11-15-21 1110ET

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