Sun, April 14, 2024

Wall Street scores strong rises as Bond market calms down

The Slump in Stock Futures, Wall Street Anticipation

Wall Street has closed the first session of the week with substantial increases. 

Nasdaq composite increased by 3%. The S&P 500 climbed up 2.4%. Meanwhile, the Dow Jones Industrial Average traded up 1.95%.

Among the Dow Jones leaders, Apple (AAPL) raised 5.4% Monday. Meanwhile, Microsoft (MSFT) surged nearly 2%. 

Tesla (TSLA) raced more than 6% higher yesterday, closing a two-day slide.

Zoom Video(ZM) increased 10%. Nio (NIO), a Chinese EV leader, lost its earnings on Monday.

On Tuesday, ahead of the stock market open, Dow Jones futures and S&P 500 futures dropped around 0.35%. 

The rise in bond yields: opportunity or threat for stocks?

The bond market calmed down on Monday. The yield on the 10-year American bond has slowed its climb and was trading at 1.44%, after skyrocketing last week to 1.61%. 

There are some experts worried about a possible rebound in inflation greater than expected. Still, the general feeling is that the bonds adjust their price and profitability to a scenario of greater economic growth, which will ultimately be positive for the stock markets, despite that a specific scare is not ruled out.

Morgan Stanley analysts are not concerned about this phenomenon. On the contrary, they consider it positive since historically, world stocks performed better when yields and inflation expectations rose together.

According to their forecasts, the bond yields will not rise too much, and will even end the year at current levels (1.44% for the 10-year US bond). Thus, the assets that can best behave in this environment are American banks and equities in the eurozone.

Today, the US Center for Disease Control and Prevention has unanimously approved recommending the use of the Johnson & Johnson single-dose Covid-19 vaccine. Little by little, the country is controlling the pandemic, which anticipates substantial economic growth by 2021.

Analysts at Credit Suisse anticipate that the US economy’s growth will skyrocket to 7% – 8% in 2021 due to the fiscal stimulus promoted by the Biden Administration.

The House of Representatives has already approved the $1.9 trillion plan. Although, it is expected to be reviewed to gain Senate support. The goal is to approve it before March 14, when current incentives for the unemployed expire.

US manufacturing activity surged in February 

Activity in the domestic manufacturing sector increased strongly in the US. The rise in commodity prices boosted it.

The Institute for Supply Management’s (ISM) manufacturing index surged to a reading of 60.8 in February from 58.7 in January. 

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