On Monday, at the trading day’s opening, US stock futures pointed to gains from overnight trading. They kept on last week’s rally that led the Dow and S&P 500 to reach record highs.
Dow futures increased by 105 points. S&P 500 futures advanced by 0.25% and Nasdaq 100 futures added 0.2%.
Last week, the Dow Jones Industrial Average gained 4%, and the S&P 500 gained 2.6%. On Friday, the S&P 500 and the Dow both closed at record highs.
The Fed’s next action may take the bonds to all-time highs
In recent weeks, a jump in bond yields has challenged stock growth. The US 10-year Treasury reached its highest level in more than a year on Friday. The benchmark Treasury note touched 1.642%, its highest level since February 2020.
The bond market is once again at the center of everyone’s attention, as any movement in it can knock down earnings in the equity market. And even more so when the next FED meeting is next Wednesday.
Although experts do not expect the Fed’s economists to take any special measures, any central bank comment can send the bond market up or down.
According to Bloomberg analysts, the value of bonds and market cycles could lead to higher market growth. Mainly because investors worldwide are betting on a positive development regarding the launch of the Coronavirus vaccine. Besides, the arrival of more financial aid from the United States and other governments worldwide will further hasten the opening of international trade.
During the week, the Fed meeting could be the one that ends up catapulting the bond market even more, especially if the central bank modifies the outlook on interest rates. However, experts see this as a very unlikely case.
Analysts expect bond volatility this week
Rising bond earnings in recent months have been the main enemy of the equity market. Valuations of Apple, Tesla, and Amazon have started to see a lag as investors shift to bonds.
Analysts expect bond volatility this week. If returns go up, it will be harder for big tech companies and other growth stocks to gain traction.
Scott Redler, the chief strategist of T3 Trading Group, partner at T3live.com, stated that future interest rate volatility and bond returns could be a turning point for the stock market, driven mainly by big techs.
Powell may be the determining factor in the future of bonds when big tech is getting more comfortable.
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