Stocks rose on Monday. Tech stocks were the big winners as the bond market showed concern about the economy.
The yield curve continued to fall. That means short-term interest rates are catching up with long-term rates. The 2-year Treasury yield rose 0.06 percentage point to 2.34%, while the 10-year yield fell 0.02 percentage point to 2.46%. At this time, that indicates recent inflation could hurt long-term economic demand. Therefore, it is not a surprise to see that the Dow Jones, which is made up of economically sensitive stocks, has the worst performance of the three major indices.
“Perhaps more challenging is yield curve inversion, a traditional hallmark of past recessions,” wrote Louis Navallier, founder of Navallier & Associates.
Technology stocks outperformed on Monday, continuing a recent trend. The Nasdaq is up 14% since March 14, the lowest point of its recent decline. That’s better than the S&P 500’s 9.7% gain since its recent low earlier this month.
concern that the The next Federal Reserve interest rate hikes will slow the economy has been helping tech stocks. When that happens, the most economically sensitive stocks often underperform, while investors flock to fast-growing innovators found in the technology sector. And when economic demand slows, inflation usually eventually does too, limiting any rise in long-term bond yields. Lower bond yields make future earnings more valuable, and many technology and growth stocks are valued on the basis that they will generate sizeable earnings many years into the future.
“Rate hike expectations continue to march higher, leading to… [economic] growth,” wrote Dennis DeBusschere, founder of 22VResearch. “As that happens, growth stocks will benefit.”
As for the S&P 500, a rally to 4,587.77 would mark a 10% gain from its closing low this year, marking the end of the correction, although others define exiting correction territory as the index returning to its peak. maximum time, which reached the beginning of January. When the S&P 500 hit its closing low in early March, it was deep in correction territory, defined as down 10% or worse. The index has recovered some of its recent losses to currently trade at 4,575.52, although it was never in bear market territory, defined as a 20% drop.
The other big move came in the oil market, where the price of WTI crude fell around 9% to just over $103 a barrel. That’s still above the $89 level it was at in February, just before Russia invaded Ukraine, but below the multi-year high of $130 reached in early March. The weight of the oil price, at the moment, is a wave of Covid-19 in China that has caused new lockdown measures in Shanghai, the city and largest financial center, suppressing demand for crude.
Markets want to see oil and gas prices fall, which would encourage more consumer spending. As oil fell further throughout the day, the Dow gained a bit.
Looking to the broader market, this week will be an important one for markets as they try to assess the state of the economy.
The biggest release comes on Friday, when the Bureau of Labor Statistics releases the March jobs report. Economists expect 460,000 jobs to be added, down from February’s result of 678,000. But the expected figure for March is nothing to scoff at, and a strong labor market will only encourage the Fed to raise interest rates by half a percentage point, rather than a quarter point, in May to combat high inflation.
“A strong report (and especially low unemployment) will put pressure on the Fed to hike 50 bps in May and perhaps June,” wrote Tom Essaye, founder of Sevens Report Research.
That kind of aggressiveness from the Fed is well understood by the markets right now. Earlier this month, the central bank presented plans to raise rates seven times this year and more next yearand Fed governors have been talking about the possibility of even more in recent days.
Elsewhere, markets will get an idea this week of how much consumers are spending. Nominal consumer spending, which represents the prices paid by consumers, hits the wires on Thursday. Economists expect spending to have gained 0.7% month-on-month in February, versus a 2.1% rise in January.
Abroad, the pan-European
rose 0.1%, and the
it ended less than 0.1% higher, paring earlier losses.
In the digital asset space,
and other cryptocurrencies continued their price momentum from late last week with a firm rally on Monday. The price of Bitcoin, the largest crypto, is up around 2% to near $48,000, having traded just above $40,000 last week.
Here are seven stocks in motion on Monday:
Apple (AAPL) gained 0.5% after initially falling. This followed a report from Nikkei Asia that said
Apple plans do about 20% less than iPhone SE Next room. Monday was Apple’s 10th consecutive profit, its longest winning streak since October 2010, when it also rose for 10 straight trading days. Shares of the tech giant’s suppliers also fell, with
Qorve (QRVO) drops 1.5% and
Qualcomm (QCOM) initially lower, then rose 0.3%.
Stocks in cigarette manufacturers
Phillip Morris (PM) and
altria (MO) were down 1.5% and 3%, respectively, as
walmart (WMT) plans to end cigarette sales in some US stores, The Wall Street Journal reported, citing people familiar with the matter.
deere and company (DE) shares fell 0.9% even after JPMorgan upgraded to Neutral from Underweight.
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