markets

Stocks Rally, Bonds Climb With Fed's Powell on Tap: Markets Wrap

Updated on
  • Gold and oil rise, dollar steady, ruble gains on S&P upgrade
  • Fed Chair Jerome Powell is due to speak on Tuesday, Thursday
Paul Richards of Medley Global Advisors and Nick Bennenbroek of Wells Fargo discuss monetary policy expectations.

U.S. stocks rose to a nearly four-week high Monday as continuing gains in Treasuries pushed yields further below 2.9 percent, alleviating investor angst that higher rates will accelerate fiscal tightening. Oil climbed with gold.

The S&P 500 Index gained for a third day and the Dow Jones Industrial Average climbed to its highest level in almost a month, buoyed by strength in technology and financial shares. Volume was lower than usual as investors await the first public comments from Federal Reserve Chairman Jerome Powell on Tuesday. The 10-year yield fell for a third straight day, reaching a two-week low. The dollar was little changed.

“There was a lot of talk from various Federal Reserve related folks last week and that provided to a certain extent a sense of calm that we won’t see rates spike in the second half of this year,” said Matt Schreiber, president and chief investment strategist at WBI Investments. “The market freaked out when they thought Jerome Powell might raise rates faster than expected -- his first comments are eagerly anticipated here.”

Powell may help set a new direction for investors at a time when some of the biggest names in markets are at odds over the implications of this month’s surge in U.S. bond yields. Morgan Stanley put out a bullish call on Treasuries Monday, countering warnings on the securities from Goldman Sachs Group Inc. and Warren Buffett.

“Investors are starting to realize and understand that this former low rate, low inflation environment is evolving,” Erik Knutzen, multi-asset class chief investment officer at Neuberger Berman Group, said by phone. “Rates are going to higher levels, inflation is going to higher levels, and as long as rates and inflation, and to a certain extent the dollar, don’t move too far too fast, then this can continue to be a reasonably good environment for equities and for credit.”

Overseas, the Stoxx 600 Index reached its highest level in three weeks. The pound and euro fluctuated, and Russia’s ruble appreciated the most among emerging market currencies after S&P Global Ratings boosted its credit score to investment grade.

Meanwhile, Bank of Japan Governor Haruhiko Kuroda said the central bank has no plan to overhaul its current form of easing, adding that he saw no need to do another comprehensive assessment of the effectiveness of the bank’s policies. Oil futures edged lower after Saudi Oil Minister Khalid Al-Falih said OPEC and its allies may ease output curbs in 2019 in a way that won’t disturb the market. Bitcoin erased its decline and broke above $10,000.

Terminal users can read more in our markets blog.

Here are some key events scheduled for this week:

  • Powell testifies before a House panel on Tuesday. He’ll discuss the Fed’s Semi-Annual Monetary Policy Report and the state of the economy. Powell returns on March 1 before a Senate committee.
  • Companies announcing earnings this week include: Vale, BASF, Standard Chartered, Bayer, Lowe’s, Galaxy Entertainment Group, Anheuser-Busch InBev, Peugeot, WPP, and London Stock Exchange Group.
  • U.K. Prime Minister Theresa May delivers a speech on Britain’s relationship with the European Union after Brexit.
  • A barrage of data is expected out of Japan including retail sales and industrial production Wednesday, and capital spending Thursday.
  • Bank of Korea has policy decision and briefing on Tuesday.
  • In China, the official and Caixin purchasing managers’ indexes on Wednesday and Thursday respectively may show growth momentum slowed slightly in February, though the signal may be clouded by the holidays.

These are the main moves in markets:

Stocks

  • The S&P 500 rose 1.2 percent to 2,779.59, its highest level in almost a month.
  • The Stoxx Europe 600 climbed 0.5 percent to the highest in more than three weeks.
  • Germany’s DAX Index gained 0.4 percent to the highest in almost three weeks.
  • The MSCI All-Country World Index added 0.9 percent.

Currencies

  • The Bloomberg Dollar Spot Index was essentially flat.
  • The euro added 0.1 percent to $1.2312.
  • The Japanese yen was little changed at 106.92 per dollar.
  • The British pound declined less than 0.1 percent to $1.3962.

Bonds

  • The yield on 10-year Treasuries dropped one basis point to 2.86 percent, the lowest in almost two weeks.
  • Germany’s 10-year yield slid less than a basis point to 0.65 percent, reaching the lowest in a month on its fifth straight decline.

Commodities

  • West Texas Intermediate crude rose 0.7 percent to $63.98 a barrel, the highest in three weeks.
  • Gold increased 0.4 percent to $1,333.46 an ounce.

— With assistance by Adam Haigh, and Natasha Doff

    Before it's here, it's on the Bloomberg Terminal. LEARN MORE