Increase futures stock, putting the S&P 500 on track for a new record

Shares have risen in recent trading sessions, placing volatility triggered by fluctuations in GameStop and other individual stocks in the rearview mirror. Investors are focusing on the prospect of a new batch of government spending. They say this could boost growth at a time when large companies are reporting solid profits, but the broader economic outlook is uneven.

Democrats won a series of votes last week, unblocking a process called reconciliation, which will allow the party to approve President Biden’s $ 1.9 trillion aid plan without Republican support in the Senate. Parliamentarians aim to finalize and vote on a draft aid law before the end of February.

The combination of strong quarterly earnings reports from some of the largest US companies and the possibility of a greater easing of the economy has given markets a blow, according to Daniel Morris, chief market strategist at BNP Paribas Asset Management.

“It’s like your day and Christmas the same day, and the markets are happy,” Mr Morris said.

Another round of stimulus spending in the US, a net importer, would also be an advantage for overseas stock markets, according to Mr Morris. “If you have growth engines in the US and China this year, it helps everyone,” he said.

Markets were also supported by an optimistic set of earnings for the holiday quarter from large US companies. Toy maker Hasbro is set to appear Monday before the opening bell. The commercial real estate company Simon Property Group and the gaming company Take-Two Interactive Software will follow after the markets close.

Of the 295 companies on the S&P 500 that had reported by the beginning of Monday, 81% exceeded analysts’ expectations for higher earnings, according to FactSet.

Shares favored by online merchants gathering on Reddit have increased in premarket trading. GameStop added about 12%, BlackBerry 6.4% and AMC Entertainment Holdings 3.1%.

Oil markets continued to rise, pushing future Brent crude oil contracts above $ 60 a barrel for the first time since the pandemic began in January 2020. The international energy benchmark rose 1.4% to $ 60.17 on the barrel. Futures for West Texas Intermediate, the main crude oil class in the US, rose 1.3% to $ 57.55 a barrel, extending an advance driven by declining crude oil supplies.

In another sign of growing optimism among investors, the yield on 10-year treasury bills rose to 1.2% from 1.168% on Friday. Yields, which rise as bond prices fall, usually gain when money managers become more optimistic about the outlook for growth and inflation.

A measure of inflation expectations, known as 10-year returns and based on the difference between the Treasury’s nominal and inflation-protected yields, rose by more than 2.2%, the highest level since 2014.

“It simply came to our notice then [expectations] this looks dramatic, ”said Kit Juckes, a macro strategist at Société Générale. “The levels themselves, not so much.”

Auctions for US government bonds on Tuesday, Wednesday and Thursday will be seen as a litmus test for investors’ appetite for Treasurys, Mr Juckes said.

Treasury Secretary Janet Yellen told CNN on Sunday that the United States could return to full employment next year if lawmakers adopt Mr Biden’s stimulus package.

Democrats are still debating who should be eligible for $ 1,400 direct checks and whether they can pass a $ 15 minimum wage as part of the pandemic stimulus package. Many Republicans have criticized Mr. Biden’s plan as too broad and expensive after Congress approved a $ 900 billion aid plan in December.

Government bond yields have also risen in Europe. The yield on German 10-year packages, the continent’s risk-free benchmark asset, rose to minus 0.421%, the highest level since September last year, from minus 0.442% on Friday.

Stocks have advanced in overseas markets. Shares of banks and core resource companies led to gains in Europe, leading to a 0.5% increase in the pan-continental Stoxx Europe 600.

Among individual European shares, Dialog Semiconductor rose 17% after the UK manufacturer agreed to be bought by Japanese company Renesas Electronics in a deal that would value the company at around 4.9 billion euros (5.9 billion). billion dollars).

In Asia, the Shanghai Composite Index ended 1% higher. Nikkei 225 rose 2.1% to close after Nikkei Asia reported that Japan will consider lifting the coronavirus emergency in some prefectures before a new deadline.

Shares of the SoftBank Group rose more than 4% in Tokyo after the tech giant climbed markets to a quarterly profit of $ 11 billion, largely amid investment gains.

Write to Joe Wallace at [email protected]