Futures higher as Dow eyes fresh record at 33K; yields steady

Stock futures traded firmly in the green on Monday, indicating a higher open on Wall Street, with investors testing the upside on stocks even as Treasury yields creep higher.

On Friday, major benchmarks ended a mixed session with the Dow Jones Industrial Average jumping by nearly 300 points and the S&P 500 Index also inching to a new high, bolstered by the signing of a new $1.9 trillion stimulus bill that’s poised to spur consumer spending and ignite economic growth. Most Americans are poised to receive $1,400 stimulus checks, which began arriving over the weekend.

Still, Washington’s aggressive spending spree, and super-accomodative monetary policy, has focused growing attention on runaway deficit spending — which is at least part of the reason why government borrowing costs have begun to spike, even as the Federal Reserve remains committed to fostering growth through lower yields and higher inflation. Last week, the benchmark 10-year Treasury yield spiked to a pre-pandemic high around 1.6%, up about 50 basis points in a month. Another warning sign has emerged via Bitcoin (BTC-USD), where prices over the weekend topped $60,000, a new record high.

On Friday, Goldman Sachs economists projected that the fiscal rescue package would give the economy even greater impetus in 2021, estimating gross domestic product would expand by 6% in the first quarter. For that reason, markets will closely watch testimony this week from Fed Chair Jerome Powell for hints about whether the central bank is growing concerned about moves in the bond market, and an economy that could overheat.

However, Goldman noted that “Fed officials are unlikely to see much of a problem [with rising rates] at a time when financial conditions remain easy, activity is picking up, and powerful growth impulses are set to support the economy all year.”

Meanwhile, technology stocks have underperformed the broader market, as the gradual reopening of states and localities — and a COVID-19 mass vaccination effort that’s gathering steam — has encouraged investors to rotate out of so-called “stay at home” trades favoring big names like Amazon (AMZN), Netflix (NFLX), Apple (AAPL) and Facebook (FB). Soaring interest rates has amplified volatility across the tech sector, amid expectations of higher borrowing costs weighing on growth companies.

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Incrementally more positive news on the COVID-19 vaccine front also emerged. Shares of Novavax (NVAX) jumped more than 6% intraday Friday after a final analysis of the drugmaker’s COVID-19 vaccine trial in the UK showed the inoculation was 96.4% effective against mild, moderate and severe diseases caused by the original coronavirus. Analyses also showed the vaccine was 86.3% effective against the variant of the coronavirus circulating in the UK, and 55.4% effective against the variant circulating in South Africa.

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9:31 a.m. ET: Stocks rally at the open: Dow flirts with 33K

 

Here’s where markets were trading Monday morning after the opening bell:

• S&P 500 (^GSPC): 3,945.80, +2.46 (+0.06%)

• Dow (^DJI): 32,869.72, +91.08 (+0.28%)

• Nasdaq (^IXIC): 13,315.81, -4.06(-0.03%)

• Crude (CL=F): $65.57 per barrel, -0.04 (-0.06%)

• Gold (GC=F): $1,728.40 per ounce, +8.60(+0.50%)

• 10-year Treasury (^TNX): flat, yielding 1.6350

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8:30 a.m. ET: Manufacturing sector flexes muscle

The Empire State manufacturing survey’s rose, checking in at a better-than-expected 17.4 in March. Peering deeper into the data, economists noted a mixed outlook from survey participants as shipments rose but new orders and employment moderating.

According to JPMorgan’s Daniel Silver:

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7:30 a.m. ET Monday: Stock futures point to a mixed open as tech stocks drop

Here’s where markets were trading Friday morning:

• S&P 500 futures (ES=F): 3,947.00, +4.75 (+0.12%)

• Dow futures (YM=F): 32,858.00, +86.00 (+0.26%)

• Nasdaq futures (NQ=F): 12,954.75, +21.25 (+0.16%)

• Crude (CL=F): $65.57 per barrel, -0.04 (-0.06%)

• Gold (GC=F): $1,728.40 per ounce, +8.60(+0.50%)

• 10-year Treasury (^TNX): flat, yielding 1.6350

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Javier David is an editor for Yahoo Finance. Follow Javier on Twitter: @TeflonGeek

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