Stocks opened strong Monday and continued to rally all the way into the close as President Biden's $1.9 trillion stimulus program advanced to the Senate, notes Jon Markman of Pivotal Point.
The Dow rose by 2%, ending with a 603 point gain. The S&P 500 rose 2.4%, and the Nasdaq 100 rose 2.9% -- all undoing a good part of last week’s losses. Financials and technology were the biggest gainers, with all sectors in the green on Monday.
All of the talk a few days ago about rising bond yields and impending stock market doom now seems silly – though of course we knew that. The S&P 500 is still stuck in a trading range. The top is 3,950. There is critical support at 3,812, the 50-day moving average. I’m guessing the index will remain with that range for another few days to consolidate the gains.
Breadth favored advancers over decliners 6-1, and there were 429 new highs and 49 new lows. Topping the new highs list were Comcast (CMCSA), Deere & Co (DE), Micron Tech (MU), Cummins (CMI), American International Group (AIG), Etsy (ETSY), and DraftKings (DKNG). Nice mix of old and new.
The US 10-year note yield finished at 1.42% after touching a high of 1.61% on Thursday. The sharp rise in yields last week triggered valuation concerns, especially among technology shares, which have been market leaders in the pandemic environment.
The COVID-19 relief package has been passed in the House of Representatives and is now headed to the Senate. It includes means-tested payments of up to $1,400, boosts unemployment payments, and offers additional support for food stamps. The stimulus, which may lose $15 minimum wage proposal during the Senate approval process, has the potential to boost inflation, which drove the sharp rally in government bond yields in recent weeks.
In other economic news, the Institute for Supply Management's US manufacturing index rose to 60.8 in February from 58.7 in January, compared with expectations for a decline to 58.6 in a survey compiled by Bloomberg. There were gains in the measure for new orders, production, employment, and prices. This is awesome; readings above 50 mark expansion.
In company news, Johnson & Johnson (JNJ) rose by 0.5% as the drug maker commenced the rollout of its one-dose coronavirus vaccine, which is the third to be approved for emergency use in the US, to distribution centers and pharmacies across the country. They don’t get to gouge customers as much as they would normally because it’s a bad look during a pandemic. As a result, the vaccine makers are not rip-roaring winners, which is a shame for shareholders I guess but good otherwise.
The best performing megacap was Boeing (BA), with shares up by 6%. Morgan Stanley adjusted its price target on the stock to $250 from $230 while maintaining the overweight rating. What a long, strange trip it has been for BA shareholders but now turbulence is stabilizing.
Learn more about Jon Markman at Pivotal Point.