Stocks Gain As Tech Stocks Outperform, Bitcoin Recovers Some Losses
Stocks rose on Monday to recoup some of last week’s losses as investor worries about inflation dissipated at least temporarily.
The S&P 500 rose about 0.5% after finishing lower last week. The Dow and the Nasdaq also opened higher. Tech stocks outperformed as Treasury yields retreated.
Bitcoin (BTC-USD) prices stabilized to rise more than 3%, after the largest cryptocurrency by market cap suffered a long series of selling over the weekend. At the worst time of last week’s sale, Bitcoin prices were more than 50% below their peak of over $ 64,800 in mid-April. Ethereum (ETH-USD), the second largest cryptocurrency, also recovered some recent losses on Monday morning, with prices rising over 7% to over $ 2,300.
All three major indices are heading this week after a multi-week period of volatile trading. Investors are increasingly nervous about the prospects for sustained high inflation during the post-pandemic economic recovery. These concerns hit growth stocks such as tech companies, Amazon’s and Tesla-intensive consumer discretionary sector particularly hard, down 5.2% in the S&P 500 over the past month and the industry. of information technology by 4.4%.
“I think it’s been a good side chop,” Michael Jones, CEO of Caravel Concepts, told Yahoo Finance. “It took some of the speculative excess out. The biggest setbacks have been in some of the more expensive names. It all sounds very healthy to me.”
“I also think the big concerns the market had about inflation – well, you only care about inflation if the Fed cares about inflation,” he added. “And the people of the FOMC [Federal Open Market Committee] that were ringing a warning bell, maybe we should start ‘talking about scaling down’, since that meeting a lot of data has gotten weaker than expected … and I think that gives ammunition to the more accommodating to push this conversation about shrinking further in time. ”
Other experts have also endorsed the Fed’s prevailing view that the inflation seen so far in government measures such as the Consumer Price Index and the Producer Price Index, and anecdotally in appeals and comments on corporate earnings, will prove transient.
Later this week, the U.S. Bureau of Economic Analysis will release its April Personal Consumption Expenditure Index (PCE) on Friday. The stock is expected to post a 3.5% gain in April from a year ago, the biggest increase since 2008, according to Bloomberg consensus data. By removing food and energy price volatility, the so-called core PCE is expected to have risen 2.9% in April from a year ago, which would be the biggest jump in more than two decades. The core PCE serves as the Fed’s preferred inflation gauge.
But even with these expected increases, many economists have urged investors to keep the hikes in perspective.
“Although inflation expectations have risen, our replication of the Fed’s benchmark measure is still below levels seen during the 2001-2007 expansion,” wrote Goldman Sachs chief economist Jan Hatzius, in a note Monday.
“At the end of the day, the bigger question is whether the economy will overheat, that is, whether production and employment will rise significantly above potential,” he added. “We don’t expect this because the starting point is a huge loosening – especially if we look not only at GDP-based measures of the output gap but also on jobs – and because growth is. likely to slow down from its current rapid pace. the fiscal impulse turns negative next year. ”
9:30 a.m. ET: Stocks open higher
Here’s where the markets were trading after the opening bell:
S&P 500 (^ GSPC): +21.49 (+ 0.52%) to 4,177.35
Dow (^ DJI): +125.92 (+ 0.37%) to 34333.76
Nasdaq (^ IXIC): +86.41 (+ 0.63%) to 13,555.65
8:42 a.m. ET: Investors Still Positioning For Rising Inflation: Deutsche Bank
Investor attention so far this year has focused on the outlook for rising inflation, with soaring prices expected to accompany rising demand as people return to in-person activities.
Consumers have taken notice and investors have positioned their portfolios in anticipation of these trends, according to Deutsche Bank.
“Positive surprises in inflation data are at their highest for at least 20 years (as far as the data goes),” Deutsche Bank strategists led by Binky Chadha wrote in a note Monday.
Strategists added that flows to inflation-protected bond funds have been the strongest since 2010 over the past year, after seeing large cash outflows in March 2020 as the pandemic hit the United States. United.
7:23 a.m. ET Monday: Ahead on equity futures, Dow adds over 100 points, or 0.4%
Here’s where the markets were trading in the pre-market action:
S&P 500 Futures (ES = F): 4,171.75, +20 (+ 0.48%)
Dow Futures (YM = F): 34,281.00, + 128.00 (+ 0.37%)
Future Nasdaq (NQ = F): 13,493.50, +88.5 (+ 0.66%)
Gross (CL = F): $ 64.66 per barrel, + $ 1.08 (+ 1.70%)
Gold (GC = F): $ 1,882.50 per ounce,-$ 5.80 (-0.31%)
10-year cash flow (^ TNX): 1.618%, -1.4 basis points
Emily McCormick is a reporter for Yahoo Finance. Follow her on Twitter: @emily_mcck
Learn more about Emily: