U.S. stock-market benchmarks rose to kick off trade in March, as a gauge of manufacturing activity showed the economy was picking up steam at the start of the year.
Strategists also attributed the enthusiasm to a cool-down in the rapid rise in bond yields that had unsettled the bullish mood on Wall Street last week as rising bond yields threaten to offset the easy-money policies implemented by the Federal Reserve.
Read: As rising Treasury yields spook stock investors, March looms like a lion
How are stock benchmarks performing?
- The Dow Jones Industrial Average DJIA rose 694 points, or 2.2%, to 31,627.
- The S&P 500 SPX climbed 86 points, or 2.3%, to 3897
- The Nasdaq Composite COMP added 317 points, or 2.4%, to 13,509.
Last week, the Dow DJIA put in a weekly decline of 1.8%, the S&P 500 SPX fell 2.5%, and the Nasdaq Composite Index COMP was off 4.9% over the period. For the month, the Dow gained 3.2%, the S&P 500 rose 2.6% in February, and the Nasdaq eked out a gain of 0.9%.
What’s driving the market?
Stock markets were trading sharply higher to start the week and month after last week’s rocky trading highlighted the challenges presented by a normalization of interest rates.
On Monday, a combination of strong economic data and a stabilization in the bond-market helped to tilt investors’ attention back on the brightening prospects for the U.S. economy.
The Institute for Supply Management said its manufacturing index rose to 60.8% last month from 58.7% in January, matching a two-year high. Any reading above 50% represents an expansion in economic activity.
“Increasingly, it appears that the economy sidestepped a feared hard landing despite a period of soft consumer spending that contributed to negative conditions for parts of the service sector and a surge in layoffs. If anything, it appears that manufacturers may have benefited from consumer spending habits that favored goods over services in recent months,” wrote Jim Baird, chief investment officer at Plante Moran Financial Advisors.
Monday’s moves higher were also attributed to a pullback in bond yields, as central banks across the world pushed back against higher rates. The Reserve Bank of Australia increased its buying of longer-dated debt, while the European Central Bank policy maker Francois Villeroy de Galhau said the ECB “can and must react” against any undue tightening of financial conditions.
Market participants are making the case that the surge in bond yields and the selloff in stocks, due to higher borrowing costs that rising rates imply, may have been overdone last week.
Sebastien Galy, senior macro strategist at Nordea Asset Management, wrote that the so-called tantrum by markets may have found some momentary stabilization.
“This is most likely the end of this temper tantrum and presents opportunities for investors faced with dislocated markets,” he said, in a Monday note.
However, the issues with rising rates, which the Federal Reserve has suggested is healthy because it reflects the hope for a better economy in the future, aren’t likely to just fade away.
“The odds are that in the second half of the year, when the economy fares better, this theme of a temper tantrum will once again kick in sending shock waves into growth,” Galy wrote.
The Centers for Disease Control and Prevention advisory panel voted unanimously to recommend the use of Johnson & Johnson’s JNJ one-shot coronavirus vaccine, coming after the Food and Drug Administration greenlighted the COVID vaccine, which is considered by some medical professionals a potential game-changer in getting people inoculated against the deadly pathogen.
J&J’s vaccine is fridge stable for three months and requires half the dose of competitors Pfizer-BioNTech and Moderna, which must be stored at subzero temperatures. Some 4 million doses of the J&J vaccine are ready to be shipped soon, according to reports.
Also over the weekend, the House passed the Biden administration’s $1.9 trillion COVID relief bill, which must be considered by the Senate. Some lawmakers are aiming finish the aid package before March 14, when some federal unemployment assistance expires.
Markets may glean more insights from Fed officials. Fed Gov. Lael Brainard spoke on Monday, calling for more reforms to the structure of money-market funds and the Treasurys market.
Which stocks are in focus?
- Twitter Inc. TWTR announced a $1.25 billion convertible bond offering in a private placement Monday, with the proceeds to be used to pay any sums due on its 1% convertible senior notes due 2021 and for general corporate purposes.
- Shares of Apple Inc. AAPL rose over 3% after all 270 of its stores in the U.S. were open to the public for the first time since last March.
- The group of “meme” stocks, led by videogame retailer GameStop Corp. GME that have been volatile in recent weeks as investors on a Reddit subgroup have egged each other on, were active again in premarket trade Monday. GameStop shares were up 3.6%, while shares of AMC Entertainment Holdings Inc. AMC, the world’s biggest cinema chain, were up 2.5%. BlackBerry Ltd BB was up 4.1%.
- Rocket Lab USA Inc. announced Monday it will be going public through a special-purpose acquisition company, or SPAC, called Vector Acquisition Corp. VACQ, in a deal that values the launch and space systems company at $4.1 billion.
- Shares of NavSight Holdings Inc. NSH rallied 7% on Monday, after the SPAC announced a merger that will take space-based data and analytics company Spire Global Inc. public.
- Shares of Royal Caribbean Group RCL fell 1.2% after the cruise operator said it has commenced a $1.5 billion public stock offering.
- Walmart Inc. WMT said Monday it would scrap a $35 minimum for Express delivery, a service that is currently offered in nearly 3,000 of its stores.
- CAE Inc. CAE announced Monday an agreement to buy L3Harris Technologies Inc.‘s LHX military training business for $1.05 billion.
Which assets are on the move?
- The 10-year Treasury note yield BX:TMUBMUSD10Y was down 2.5 basis points to 1.439%, as Treasury markets started to stabilize after last week’s turbulent trading. Bond prices move inversely to yields.
- Gold futures GC00 were up 0.6% to $1,738.90 an ounce on the New York Mercantile Exchange. U.S. benchmark crude futures CL were up 0.4% to $61.73 a barrel.
- The Stoxx Europe 600 benchmark XX:SXXP rose 1.8%, and the London’s FTSE 100 UK:UKX was up 1.7%. The Nikkei 225 JP:NIK jumped 2.4%, while the Shanghai Composite CN:SHCOMP gained 1.2%.
- The dollar strengthened against its major rival currencies, with the ICE U.S. Dollar Index DXY up 0.1%,
