By Alexander Osipovich and Joe Wallace
U.S. stocks surged Monday, giving the S&P 500 its best day
in nearly nine months, as a weekslong advance in government-bond
yields stalled and eased investors' jitters over rising interest
rates.
The broad stock market index soared 90.67 points, or 2.4%, to
3901.82, its biggest one-session rise in percentage terms since
June 5.
The Dow Jones Industrial Average climbed 603.14 points, or 1.9%,
to 31535.51, while the technology-heavy Nasdaq Composite jumped
396.48 points, or 3%, to 13588.83.
The gains marked a strong rebound after all three indexes
declined last week, weighed down by losses among tech stocks.
Monday's advance came as the yield on 10-year Treasury notes, the
benchmark borrowing cost in U.S. debt markets, slipped to 1.444%
from 1.459% Friday. Yields fall when bond prices rise.
Stocks, and particularly shares of tech companies, have been
buffeted by sharp moves in government-bond markets in recent
trading sessions. Rising long-term interest rates brought by an
improving economy tend to make tech and other growth stocks less
attractive to investors.
Even with Monday's gains, the Nasdaq is down 3.6% from its
record close of Feb. 12. The retreat in tech stocks has pulled
Apple down 3.7% since the start of the year, while Amazon.com is
off 3.4% and electric car maker Tesla is up just 1.8%
year-to-date.
Shares of both Apple and Tesla surged more than 5% on Monday,
while Amazon added 1.7%.
A long period of low interest rates underpinned the stock
market's boom over the past year by making it less attractive for
investors to put money in bonds. The recent run-up in yields
threatened to undermine that pillar of the monthslong stock
rally.
It also raised the specter that the U.S. Federal Reserve might
put an end to easy-money policies to combat inflation -- even
though the Fed itself has played down such concerns.
"Today is kind of a reckoning with the reality that the Fed's
not moving anytime soon," said Mike Dowdall, a portfolio manager at
BMO Global Asset Management.
"It's really hard to paint a negative picture of this market,"
he added, pointing to the ramp-up in coronavirus vaccinations and
the prospect of further fiscal stimulus from Washington.
"Everyone's chasing their shadows and saying it's rates here, it's
inflation there. But those just aren't real."
The Senate is preparing to move ahead this week with President
Biden's sweeping coronavirus relief package. The House passed the
$1.9 trillion package over the weekend, and Senate approval appears
more likely after senators dropped a proposed minimum-wage increase
that some centrist Democrats had opposed.
Democrats are racing to finish the package before March 14, when
certain types of federal unemployment assistance are set to
expire.
Some investors remain concerned that resurgent bond yields and
mounting inflation pressures could still derail the stock market,
especially with the prospect of massive spending from Mr. Biden's
relief package.
"The concern on the reflation front boils down to the extent of
stimulus, " said Brian O'Reilly, head of market strategy for
Mediolanum International Funds. "The market is beginning to rightly
question how much is too much."
Monday's gains were broadly shared across the market, with all
11 sectors of the S&P 500 posting gains. Tech stocks were the
best performers, with the sector rising 3.2%.
In corporate news, Exxon Mobil shares advanced $2.03, or 3.7%,
to $56.40 after the oil major, which has been under pressure from
activist investors, added two new board members.
Boeing shares rallied $12.38, or 5.8%, to $224.39 after United
Airlines said it was buying 25 new 737 MAX jets, a boost for the
aircraft maker that is still trying to recover from the jet's
nearly two-year grounding.
Class B shares of Warren Buffett's Berkshire Hathaway climbed
$8.70, or 3.6%, to $249.21 after the conglomerate on Saturday
posted an increased fourth-quarter profit and reported that it had
bought back nearly $25 billion in shares last year, a
larger-than-usual buyback for Berkshire.
Shares of Johnson & Johnson added 86 cents, or 0.5%, to
$159.32 after the U.S. over the weekend authorized its single-shot
coronavirus vaccine.
Data released Monday showed that activity at U.S. factories grew
last month at its fastest pace since the onset of the pandemic. The
Institute for Supply Management's February manufacturing index
climbed to 60.8 in February from 58.7 in January, beating
economists' expectations of 58.9. Any level above 50 indicates an
expansion of activity.
Several top Fed officials are scheduled to make public
appearances later this week, and investors will be monitoring them
closely to see they voice any concerns about bond yields.
"This week is key," said Andrea Carzana, a fund manager for
London-based Columbia Threadneedle Investments. If the Fed doesn't
seek to tamp down expectations of higher inflation, yields could
continue to rise, rattling the stock market, according to Mr.
Carzana.
"I'm expecting turbulence or volatility to remain with us until
we have a better understanding of where central banks stand," he
said.
In commodities, futures on benchmark Brent crude oil fell 1.1%
to settle at $63.69 a barrel, ahead of a planned Thursday meeting
of the Organization of the Petroleum Exporting Countries and its
partners. Analysts say it is likely that the cartel will announce
some type of production increase, or at least a further retreat
from previously agreed production cuts. Oil prices have been
steadily recovering in recent months as vaccinations have raised
hopes of a post-pandemic revival of travel.
Improving investor sentiment buoyed overseas stock markets. The
Stoxx Europe 600 gained 1.8%, boosted by shares of
travel-and-leisure companies, whose fortunes hinge on the reopening
of economic activity.
In Asia, Japan's Nikkei 225 rose 2.4%, while China's Shanghai
Composite Index added 1.2%.
Write to Alexander Osipovich at alexander.osipovich@dowjones.com
and Joe Wallace at Joe.Wallace@wsj.com
(END) Dow Jones Newswires
March 01, 2021 16:52 ET (21:52 GMT)
Copyright (c) 2021 Dow Jones & Company, Inc.