Traders on the floor of the New York Stock Exchange.
US stock futures traded a little higher early Monday, indicating a cautious opening later in the day. It was followed by last week’s rally which took the Dow and S&P 500 to record highs.
Dow futures implied an opening profit of more than 100 points. S&P 500 futures and Nasdaq 100 futures were also slightly higher.
Stocks rose last week, with the Dow Jones Industrial Average rising 4% and the S&P 500 rising 2.6%. The S&P 500 and the Dow both closed at record highs on Friday.
The Nasdaq Composite was up 3% last week despite a sell-off on Friday triggered by rising interest rates. The surge in bond yields has challenged growth stocks for the past few weeks, sending investors into cyclical pockets of the market. The Nasdaq is up less than 1% this month, while the Dow and S&P are up 6% and 3.5%, respectively.
The 10-year US Treasury Department hit its highest level in more than a year on Friday. The benchmark Treasury note reached 1.642%, its highest level since February 2020.
The small-cap benchmark Russell 2000 rose more than 7% last week as investors switched to smaller stocks that benefited from a strong economic comeback.
Last week, investors welcomed the $ 1.9 trillion stimulus package signed by President Joe Biden. The IRS began processing direct payments of $ 1,400 on Friday and checks were written to bank accounts over the weekend. The bill will also allocate nearly $ 20 billion for Covid-19 vaccinations and $ 350 billion for state, local, and tribal government actions.
Investors will prepare for the Tuesday and Wednesday meeting of the Federal Open Market Committee where the Federal Reserve will make its rate decision. The bond market in the coming week is likely to orientate itself on the Fed.
The central bank is expected to recognize much better economic growth. Bond professionals are also watching to see if Fed officials will tweak their interest rate outlook, which now doesn’t include rate hikes through 2023.
Goldman Sachs chief economist David Kostin told clients on Sunday that he expects interest rates to continue to rise in the coming months and that investors “constantly grapple with fears of economic overheating and a tightening of the Fed.”
On the vaccine front last week, Biden announced that he would instruct states to question all adults for the vaccine by May 1. Biden also made a goal of allowing Americans to meet in person with friends and loved ones in small groups to celebrate the Fourth of July.