Traders work on the floor of the New York Stock Exchange.
Dow futures rose Sunday night when a new stimulus package from Washington was finalized this week.
Forward contracts linked to the Dow Jones industrial average added 155 points, or 0.5%. Those for the S&P 500 rose 0.4%, while those for the Nasdaq 100 were flat, suggesting that a recent underperformance by technology stocks could continue Monday.
The move to the future came after the Senate passed a $ 1.9 billion economic relief and stimulus bill on Saturday, paving the way for the expansion of unemployment benefits, another round of stimulus controls and assistance to state and local governments. The Democratic House is expected to approve the bill later this week. President Joe Biden is expected to sign it into law before unemployment benefits programs expire on March 14.
The new round of government spending could cause ripples in the U.S. treasury market, where standard yields have risen sharply for ten years in recent weeks. The yield rose to 1.62% on Friday after the calendar year started below the 1% mark. It traded at around 1.59% on Sunday night.
The rapid shifting of the bonds also unnerved equity investors, which contributed to stocks with high valuations being weak.
“The ten-year returns have finally caught up with other asset markets. This puts pressure on valuations, especially for the most expensive stocks that have reached values with nosebleeds,” Mike Wilson, Morgan Stanley’s top US equities strategist, said in a note.
The stock market begins an afternoon period on Friday that took a bit of the sting out of a tough week for high-flying names. The tech-savvy Nasdaq posted a week-to-date loss of 2.1%, while the S&P 500 rose 0.8%. The Dow, which is more dependent on cyclical equities, rose 1.8%.
The Friday reversal does not indicate that the recent weakness for the market is over, but the divergence between technological and cyclical plays shows that the bullish story remains intact, Morgan Stanley’s Wilson said.
“The bull market is still under cover, with value and cycles giving the lead. Growth stocks can rejoin the party once the valuation correction and repositioning is complete,” Wilson said.
In the economic field, investors will get a look at the wholesale stock data from Monday, January. Several economic measures in the past week have shown a recovery that is taking up steam, including a better-than-expected February job report.