Dow industrials closed slightly higher on Monday, posting a fourth straight day of gains, as energy and bank stocks rose as Treasury yields rebound. But the shift in rates has also caused headwinds for rate-sensitive sectors of the market, including technology.
On Friday, the Dow Jones rose 33 points, or 0.1%, to 34,798, the S&P 500 rose 7 points, or 0.15%, to 4,455, while the Nasdaq lost 5 points, or 0, 03%, at 15048.
Rising bond yields served as a catalyst for stocks on Monday, with the benchmark 10-year Treasury rate briefly exceeding 1.5%, its highest since June, according to FactSet. Yields and prices move in opposite directions.
Rising yields can increase the discount rate of stocks related to technology and highly valued sectors, while also helping to boost stocks of financials whose business models benefit from higher long-term rates. Goldman Sachs Group Inc. stocks rose 2.3%, while the ETF SPDR Financial Sector increased by 1.3%. The benchmark US oil index CLX21 stood at $ 75.45 per barrel on Monday, near a 3-year high.
An energy crisis that swept the world was another catalyst for stocks on Monday. Power shortages have led to forced production cuts at factories in China, while in the UK a shortage of truck drivers has resulted in hoarding and lower inventory at gas stations.
Goldman Sachs analysts raised their oil price forecast to $ 90 a barrel, citing the impact of what it called the most bullish hurricane in U.S. history on supply. The Energy Select Sector SPDR ETF jumped 3.4% as oil prices continued to climb.
“This is because of supply constraints and high demand,” said Kent Engelke, chief economist strategist at Capitol Securities Management, adding that unlike the Arab oil embargo of the 1970s, the shortages of current energy sources follow actions taken by Western governments to reduce carbon emissions and reduce fossil fuels. the fuel industry, in particular by making lending in the sector âprohibitiveâ for banks.
âBut the technology is not there yet,â Engelke said of alternatives to solar and wind power.
The energy disruptions have highlighted what is a growing problem for the global economy, which is that supply has not recovered as quickly as demand in various markets. Wholesale Costco last week, said it was placing limits on purchases of toilet paper and water.
Durable goods orders jumped 1.8% in August, largely on increased demand for Boeing airliners, but continued supply shortages held back automakers and continued to dampen economic recovery American. Economists polled by the Wall Street Journal expected an increase of 0.6%.
Investors continued to be wary of the impact of China’s Evergrande debt problems on the world’s second-largest economy, while elections in Germany, Europe’s No.1 economy, have so far failed to produce of decisive result in what should be months. coalition talks.
Time is also running out for Congress to pass a funding measure to avoid a midnight government shutdown on Thursday, with the stalemate in Washington also raising concerns about a possible U.S. default this fall.
See: What happens if the United States defaults on its debt?
Wall Street also heard from a number of Federal Reserve officials. Chicago Fed Chairman Charles Evans in a speech Monday morning said he was more concerned that the economy was not producing enough inflation rather than heating up too much.
New York Fed Chairman John Williams has said he doesn’t expect the recent spike in inflation to last, predicting it will drop to around 2% next year, but has also said that a reduction of the $ 120 billion in monthly central bank bond purchases could soon be guaranteed.
Read: Fed Williams predicts US inflation to cool to 2% in 2022
But Fed Governor Lael Brainard adopted a more accommodating tone on Monday, saying the central bank should keep interest rates low and that the spike in inflation seen this year was transient and the labor market was far from being cured.
Investors were also keeping an eye on Europe. âThe absence of a clear winner in the German election combined with a new batch of speeches from most central bankers could slow the rally,â Pierre Veyret, technical analyst at ActivTrades, said in a note. In addition, investors’ eyes are cautiously watching the situation in China as the energy and liquidity crises worsen, increasing fears of a ripple impact on other economies.
In public health news, the chief executive of Pfizer Inc. said the company expects to submit data from late-stage trials of its COVID-19 vaccine in children aged 5 to 11 to the Food and Drug Administration within days, giving hope that another key patient group will soon be eligible for injections.
Which companies were the center of attention?
- Swedish electric car manufacturer Polestar Performance AB said on Monday it would go public through a merger with a special purpose acquisition company Gores Guggenheim Inc. in a deal with an implied enterprise value of around $ 20 billion. Gores Guggenheim shares rose 4.7%.
- In a Monday blog post, Facebook Inc. that he was putting a “pause” on efforts to create a version of Instagram for children under 13. Shares edged up 0.2%.
- Public Service Enterprise Group said on Monday it would increase its annual dividend by 12 cents per share to $ 2.16 per share from the first quarter of 2022 and repurchase $ 500 million of shares after the sale of $ 1.9 billion of dollars from its Fossil unit to ArcLight Capital Partner LLC, as announced in August. Shares rose 0.9%.
- Beyond Meat Inc. BYND announced Monday that it is expanding the availability of Beyond Breakfast Sausage Classic Patties to more than 1,500 Walmart Inc. WMT stores and Beyond Breakfast Sausage Spicy Patties to more than 1,300 stores. Share share climbed 3.4%.
- Actions of Acceleron Pharma inc. XLRN gained more than 6.7% on Monday after Bloomberg reported on Friday that an anonymous buyer was planning to spend $ 11 billion to buy the company.
- Actions of Intra-Cellular Therapies Inc. ITCI gained 2.8% on Monday after the company said clinical data showed its experimental treatment for bipolar disorder reduced depressive symptoms.
How did the other assets behave?
- The yield on the 10-year T-bill TMUBMUSD10Y rose 2.3 basis points to around 1.482% on Monday from 1.459% on Friday.
- The ICE US Dollar Index DXY, a measure of the currency against a basket of rivals, rose less than 0.1%.
- Oil futures rallied, with the US benchmark CL00 closing 2% higher to a nearly three-year high of $ 75.45 a barrel. GC00 gold futures rose less than 0.1% to $ 1,752 an ounce.
- In Asia, Hong Kong’s Hang Seng HSI index rose less than 0.1%, while China’s CSI 300,000,300 index climbed 0.6%. The Nikkei 225 NIK index closed slightly lower.
- In Europe, the Stoxx Europe 600 SXXP index closed 0.2% lower, while the FTSE 100 UKX index rose 0.2%.
Steve Goldstein contributed reporting