U.S. stocks staged a rebound rally on Monday, with each of the S&P 500, Dow and Nasdaq jumping as retreating Treasury yields and vaccine optimism boosted risk assets.
The S&P 500 surged by more than 2% in its best session since June 2020, and the Nasdaq and small-cap Russell 2000 outperformed with gains of more than 3% each. The financials, information technology and industrial sectors led the S&P 500's comeback after a bout of volatility last week. A sell-off in tech shares sent the Nasdaq down 4.9% last week for its worst weekly performance since October.
But the move higher in risk assets on Monday coincided with steadying across the Treasury yield curve, after central bank officials from the Bank of England to the Reserve Bank of Australia echoed sentiments from the U.S. Federal Reserve and doubled down on commitments to maintain an accommodative policy posturing throughout the global economic recovery.
The yield on the 10-year note retreated to hover below 1.45% after spiking to a one-year high of 1.61% last week. The excessively swift rise in interest rates spooked equity investors last week, with rates impacting a range of both corporate and consumer borrowing costs.
"One key reason for the importance that investor ascribed to expected future growth was the extremely low level of interest rates. As rates have risen, the contribution of equity duration to stock valuations has declined while near-term growth profiles have become more important," Goldman Sachs strategist David Kostin wrote in a note. "Practically, this means that both the improving growth outlook and rising rates have supported the outperformance of cyclicals and value stocks relative to stocks with the highest long-term growth."
Meanwhile, vaccine optimism also helped boost the major stock indexes. A U.S. Food and Drug Administration panel issued an emergency use authorization for Johnson & Johnson's (JNJ) single-dose coronavirus vaccine with unanimous backing, making it the third shot approved for use in the U.S. The company has already begun shipping its COVID-19 vaccine and expects to deliver more than 100 million doses of the single-shot vaccines during the first half of 2021, including more than 20 million by the end of March. Shares of Johnson & Johnson, a Dow component, jumped more than 2% in early trading.
On the stimulus front, the House of Representatives over the weekend advanced a $1.9 trillion COVID-19 stimulus package, which included $1,400 direct checks to most Americans, $400 per week in augmented federal unemployment insurance and $350 billion in state, local and tribal government relief, among other measures. The bill heads to the U.S. Senate, with many lawmakers aiming to pass the bill within the next two weeks, before a mid-March cliff when current pandemic-era federal unemployment benefits are set to expire.
4:04 p.m. ET: Stocks end sharply higher, S&P 500 posts best day since June 2020 while Nasdaq jumps 3%
Here's where markets were trading shortly after noon in New York:
S&P 500 (^GSPC): 3,901.82, +90.67 points (+2.38%)
Dow (^DJI): 31,535.58, +603.21 points (+1.95%)
Nasdaq (^IXIC): 13,588.83, +396.48 points (+3.01%)
12:04 p.m. ET: Stocks surge, Nasdaq gains 2.5%
Here's where markets were trading shortly after noon in New York:
S&P 500 (^GSPC): 3,899.88, +88.73 points (+2.33%)
Dow (^DJI): 31,605.99, +673.62 points (+2.18%)
Nasdaq (^IXIC): 13,525.51, +333.43 points (+2.53%)
Crude (CL=F): $61.44 per barrel, -$0.06 (-0.1%)
Gold (GC=F): $1,733.30 per ounce, +$4.50 (+0.26%)
10-year Treasury (^TNX): -1.8 bps to yield 1.438%
10:38 a.m. ET: Manufacturing sector activity surged in February by the most in three years: ISM
Activity in the domestic manufacturing sector jumped by the most in three years, boosted by a rise in prices paid for raw materials.
The Institute for Supply Management's (ISM) manufacturing index jumped to a reading of 60.8 in February from 58.7 in January. Consensus economists were looking for a tick higher to just 58.9, according to Bloomberg consensus data. Readings above the neutral level of 50 indicate expansion in a sector.
10:30 a.m. ET: Construction spending reaches record high in January amid economic rebound, strong housing market
U.S. construction spending jumped more than expected to reach a record level in January, as construction projects picked up strongly as the economy recovered from the pandemic, and as housing activity remained robust.
Construction spending increased by 1.7% to $1.521 trillion, according to the Commerce Department's monthly report for January, with that level marking the greatest since the start of the government series in 2002. December's construction outlays were revised up to show a 1.1% increase, from the 1.0% rise previously reported. The January jump was more than double the 0.8% rise expected.
Residential projects were an exceptional contributor to the January gain, with spending on these projects rising by 2.5% following a 3.8% jump in December.
9:42 a.m. ET: Bullishness on equities is creeping higher, sending Bank of America's contrarian indicator inches closer still to a 'Sell' signal
Bank of America's Sell Side Indicator, a gauge of bullishness of Wall Street, increased further last month to close in on what the firm considers to be a "sell" signal for equities.
The Sell Side Indicator tracks the average recommended equity allocation by sell-side strategists, with a higher reading serving as a signal of froth and over-exuberance in markets and thereby an indication to sell equities, according to Bank of America. For now, the indicator remains in "Neutral" territory.
"Wall Street strategists continued to increase their recommended equity allocations in February," Bank of America strategist Savita Subramanian wrote in a note Monday morning. The Sell Side Indicator "rose by nearly 1ppt [percentage point] to 59.2% from 58.4%."
"It's the second month in a row of an almost 1ppt jump, bringing recommended equity allocation to almost a 10 year high and just 1.1ppt shy of a 'Sell' signal," Subramanian added. "The last time the indicator was this close to "Sell" was June 2007 after which we generally saw 12-month returns of -13%."
9:31 a.m. ET: Stocks open sharply higher, recovering after last week's losses
Here's where markets were trading just after the opening bell Monday morning:
S&P 500 (^GSPC): 3,854.25, +45 points (+1.18%)
Dow (^DJI): 31,276.00, +364.00 points (+1.18%)
Nasdaq (^IXIC): 13,081.25, +170.25 points (+1.32%)
Crude (CL=F): $61.60 per barrel, +$0.10 (+0.16%)
Gold (GC=F): $1,739.00 per ounce, +$10.20 (+0.59%)
10-year Treasury (^TNX): -2.5 bps to yield 1.431%
7:16 a.m. ET: Monday: Stock futures point to a higher open
Here's where markets were trading ahead of the opening bell Monday morning:
S&P 500 futures (ES=F): 3,846.50, up 37.25 points or 0.98%
Dow futures (YM=F): 31,190.00, up 278 points or 0.9%
Nasdaq futures (NQ=F): 13,064.50, up 153.5 points or 1.19%
Crude (CL=F): +$0.60 (+0.98%) to $62.10 a barrel
Gold (GC=F): +$14.40 (+0.83%) to $1,743.20 per ounce
10-year Treasury (^TNX): -2.7 bps to yield 1.429%
Emily McCormick is a reporter for Yahoo Finance. Follow her on Twitter: @emily_mcck
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