Gains for stock-market benchmarks accelerated late Monday morning, with the Dow Jones Industrial Average headed for its best day since March, as investors parsed the Federal Reserve’s signaling last week that it may raise rates sooner than investors previously expected.
What are major benchmarks doing?
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The Dow Jones Industrial Average
DJIA,
+1.55%
rose 512 points, or 1.5%, to 33,806, led by gains in Goldman Sachs Group Inc.
GS,
+1.99%
and UnitedHealth Group Inc.
UNH,
+2.20% .
Those gains were propelling the benchmark to its best day on a percentage basis since early March. -
The S&P 500
SPX,
+1.26%
was up 48 points, or 1.2%, at 4,215, looking at its best day since mid-May. -
The Nasdaq Composite Index
COMP,
+0.69%
advanced 68 points, or 0.5%, to trade at around 14,099. -
The small-capitalization Russell 2000 index
RUT,
+1.86%
was up 1.7% at 2,274.
On Friday, the Dow tumbled more than 500 points, leaving the blue-chip index with its biggest weekly fall, a drop of 3.5%, since October. The S&P 500 suffered a weekly tumble of 1.9%, while the Nasdaq Composite gave up just 0.3%.
What’s driving the market?
The S&P 500 and the Dow were jumping higher on Monday.
The moves come after last week’s Federal Reserve meeting unsettled investors, contributing to a flattening of the Treasury yield curve as short- and medium-dated yields rose sharply and long-term yields fell, while the dollar soared and equities ultimately slid, though growth-oriented shares outperformed. Those moves have largely dissipated and long-dated yields, which move opposite to prices, were headed higher again.
The Tell: Markets are sending ‘peculiar’ signals as Fed changes tune—here’s what they mean
“Given these extreme moves, one of the most important things this week will likely be Fed speakers responding to the meeting and subsequent market reaction,” said Jim Reid, macro strategist at Deutsche Bank, in a note.
“Make no mistake the market reaction was fairly extreme to what at the end of the day is a Fed that themselves suggest they are still around 2-1/4 years away from raising rates,” he said.
Investors will hear from several Fed officials this week, with Chairman Jerome Powell set to testify Tuesday before the House select subcommittee on the coronavirus.
“The Fed’s inflation forecast definitely gave traders some food for thought, as the markets got a taste of the rotation away from pandemic-driven monetary policy,” wrote Chris Larkin, managing director trading at E-Trade Financial, in an emailed note.
Stocks extended their slide Friday, with weakness attributed in part to remarks by St. Louis Fed President James Bullard, who said he thought the Fed should lift its benchmark interest rate as early as next year. Bullard isn’t a voting member of the rate-setting Federal Open Market Committee this year but will be in 2022.
Read: Investors growing more fearful of a Fed mistake
Larkin said that “the path to economic recovery isn’t always a straight one, so that’s not to say that the reflation trade is dead. With the market pretty much range-bound for the past few weeks, we’ll see how it continues to digest the Fed’s outlook.”
On Monday, Bullard, Dallas Fed President Rob Kaplan and Philadelphia Fed President Patrick Harker were set to speak at a forum that began at 9:30 a.m. Eastern.
New York Fed President John Williams is scheduled to deliver keynote remarks at a banking conference at 3 p.m.
“We will be eager to see whether Williams is as hawkish as Bullard on interest rates, and how soon does he anticipate the committee to start scaling back its bond purchases,” said Charalambos Pissouros, senior market analyst at JFD Group, in a note.
See: Buybacks may prop stock market rattled after Fed meeting
Which companies are in focus?
- American Airlines Group Inc. AAL, which had boosted flying to meet soaring travel demand, is trimming some flights to alleviate potential strains on its operations. The number of flights being culled is relatively small, amounting to about 1% of planned flying in the first half of July, the company said. Shares were down 1.1%.
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Vivendi SE on Sunday reached an agreement for a 10% investment in Universal Music Group by Bill Ackman’s Pershing Square Tontine Holdings
PSTH,
+0.09% ,
valuing the world’s largest music company at about $40 billion. Vivendi shares were up flat in Paris, while PSTH shares rose 0.4% - LegalZoom.com Inc. set terms for its initial public offering, as the California-based online legal and compliances services company takes another shot at going public with a valuation of up to $5.2 billion. The company is looking to raise up to $516.3 million by offering 19.12 million shares in the IPO, which is expected to price between $24 and $27 a share, with the stock expected to list on the Nasdaq under the ticker symbol “LZ.”
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Shares of Lordstown Motors Corp.
RIDE,
-4.60%
fell after The Wall Street Journal reported that several top executives sold off chunks of stock in the electric-truck startup ahead of reporting financial results, according to regulatory filings disclosing the transactions. Shares were down 4.1%. -
The U.S. Supreme Court on Monday sent a case involving a shareholder class-action lawsuit against Goldman Sachs back to a lower court. The high court ruled that a federal appeals court needs to again consider whether the suit can proceed. Investors led by the Arkansas Teacher Retirement System filed the suit, which accused the bank of hiding conflicts of interest related to mortgage-backed securities. Shares were up 2.3% on Monday.
- Beyond Meat Inc. BYND announced expanded distribution in Australia with 800 Woolworths stores now carrying the flagship Beyond Burger. Shares were off 0.7%.
How are other assets faring?
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The yield on the 10-year Treasury note TMUBMUSD10Y rose 4.1 basis points to 1.49%.
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The ICE U.S. Dollar Index DXY, a measure of the currency against a basket of six major rivals, fell 0.2%, following its sharpest weekly fall since the week of April 3, 2020.
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Oil futures CL00 rose Monday, with West Texas Intermediate crude for July delivery gaining 0.5% at $71.64 a barrel. Gold futures GC00 traded 0.3% higher Monday, at 0.3% lower at $1,774.30 an ounce.
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European equities gained with the pan-Continental Stoxx Europe 600 SXXP added 0.3%. London’s FTSE 100 UKX picked up 0.1% Monday, after booking a weekly loss of 1.6% on Friday.
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In Asia, the Shanghai Composite SHCOMP closed with a gain of 0.1%, Hong Kong’s Hang Seng Index HSI ended 1.1% lower and Japan’s Nikkei 225 NIK tumbled 3.3%.