(Bloomberg) — Tech companies led U.S. equity gains as a dip in Treasury yields provided a tailwind for stocks.
The S&P 500 Index climbed 0.7% and the Nasdaq 100 fared even better as the 10-year U.S. Treasury yield fell from the highest levels in about 14 months. Small-cap shares underperformed. The bond market remains in focus this week amid a slate of auctions and moves by the Federal Reserve to let a key bank capital exemption lapse.
The dollar weakened slightly and oil edged higher after its worst week since October. Turkey’s markets tumbled after the central bank governor was ousted.
Steadier yields provided relief after last week’s Treasury selloff served as a stark reminder of concern that a stronger economic recovery could fuel inflation, despite reassuring comments from policy makers. At the same time, traders are betting that growth will swell corporate profits as vaccines work to curb the global pandemic.
“The rise in long-term yields has kind of affected every move we’ve seen in equity markets, from the big selloff in the higher growth stuff to the rotation into the more economically sensitive sectors,” said Ross Mayfield, investment strategy analyst at Baird. “Any time there is some rate stabilization, it’s kind of the spark for tech to capture a little bit of gains.”
There’s no sign yet that faster economic growth will deliver unwanted inflation or a need to adjust monetary policy, Federal Reserve Bank of Richmond President Thomas Barkin said Monday. For unwanted inflation to take hold, expectations for price increases would have to really move and begin to get factored into business decisions and wage bargaining, he added.
In European markets Monday, gains in tech were offset by declines in travel firms on the Stoxx 600 Index. Banks exposed to Turkey fell after President Recep Tayyip Erdogan moved to replace the country’s third central bank chief in less than two years, sparking a decline of 7% in the lira. Asian shares slipped.
These are some key events to watch this week:
Fed Chairman Jerome Powell and Treasury Secretary Janet Yellen are expected to make their first joint appearance before the U.S. House Financial Services committee to testify on Fed and Treasury pandemic policies Tuesday.The U.S. Treasury holds auctions of two-, five- and seven-year debt.EIA crude oil inventory report on Wednesday.On Friday, February U.S. personal income and spending data arrives.
These are some of the main moves in financial markets:
The S&P 500 Index increased 0.7% as of 4 p.m. New York time.The Stoxx Europe 600 Index rose 0.2%.The MSCI Asia Pacific Index fell 0.3%.The MSCI Emerging Market Index was little changed.
The Bloomberg Dollar Spot Index slipped 0.1%.The euro strengthened 0.3% to $1.1937.The British pound fell 0.1% to $1.3863.The Japanese yen strengthened 0.1% to 108.79 per dollar.
The yield on 10-year Treasuries fell four basis points to 1.68%.Germany’s 10-year yield declined two basis points to -0.31%.Britain’s 10-year yield decreased two basis points to 0.81%.
West Texas Intermediate crude rose 0.2% to $61.55 a barrel.Gold weakened 0.3% to $1,739.60 an ounce.
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