Futures move higher after the close of Dow’s record

The stock market last week resumed its rally on a firmer footing after weeks of being hit by sudden movements in the US government bond market. 10-year Treasury yields rose for six consecutive weeks, the longest series of gains since December 2016. Some money managers have become worried that inflation will rise sharply, which could cause the central bank to consider raising interest rates over the next two years.

Federal Reserve officials have repeatedly tried to allay such fears and reiterated that they will maintain a weak monetary policy for the foreseeable future to help revive the labor market. Investors are looking at the Federal Reserve’s next monetary policy statement on Wednesday for further guidance on the health of the economy and the views of policymakers on rising bond yields and inflation prospects.

“The fear factor has now disappeared, so the markets are now finding a balance. Bond yields will rise, but central banks will not withdraw “, said Carsten Brzeski, ING GroepS

global head of macro research. “The Fed meeting will be clearly crucial and essential in further educating the markets about what the Fed is doing.”

Investors have taken money out of safe government bonds as the economic outlook brightens. Also, in recent weeks, they have begun to move away from the technology sector and become stocks of energy producers and banks, which tend to benefit from an economic recovery. Optimism over the recovery was driven by a faster-than-expected release of the vaccine and the passage of an additional $ 1.9 trillion fiscal stimulus.

“With the reopening of the economy, this fiscal stimulus in the form of checks will have a stronger impact on consumption,” Mr Brzeski said. This is important because consumer spending accounts for more than two-thirds of US economic output. “Low-income households will spend almost all of this check,” he added.

Some money managers are worried that the large fiscal package could lead to sharply higher inflation and, for an extended period of time, forcing the Fed to raise interest rates sooner than policy makers have suggested.

The 10-year Treasury yield fell to 1.611% on Monday. It closed at 1.634% on Friday, the highest since February 6, 2020.

“The Fed needs to send a message here that it is still aware of the substantial progress that is needed before the economy is brought back to pre-pandemic conditions, but at the same time, it will not be too strong, because some of these moves are justified on the basis of fundamentals, ”said James Ashley, head of international market strategy at Goldman Sachs Asset Management. “That’s how you calibrate that message in a way that isn’t too obscene or too clever.”

Over the weekend, bitcoin passed $ 60,000 for the first time on Saturday. On Monday, it returned to trading close to $ 56,020.86.

Abroad, mainland Stoxx Europa 600 rose 0.5%.

Asia’s main equity benchmarks ended the day on a mixed note. The Shanghai Composite Index fell nearly 1%, and Kospi in South Korea closed 0.3% lower. The Japanese Nikkei 225 rose 0.2% and Hong Kong’s Hang Seng gained 0.3%.

Write to Caitlin Ostroff to [email protected]