Stocks fell on Monday as commodity prices rose as rising government interest rates and expectations of higher inflation weighed on stock prices.
The S&P 500 dipped approx. 0.8% shortly after the opening bell and the index was on track to add to last week’s losses. Dow threw more than 150 points or 0.6%. Nasdaq underperformed sharply, falling 1.3% in early trading as tech stocks came under more pressure.
However, some commodity prices performed stronger. US West Texas Intermediate Crude Oil Futures (CL = F) and Brent crude futures (BZ = F) both jumped after Goldman Sachs strategists said in a note Monday that they expected Brent prices to reach $ 70 in the second quarter and $ 75 in the third quarter of this year due to rising demand. WTI crude oil has already risen 23% this year and exceeded prices from the same time last year.
The outlook for rapidly rising inflation during this year’s expected economic recovery has pushed bond prices lower and interest rates have risen sharply. Yield on benchmark 10-year government bond (^ TNX) briefly ticked above 1.39% on Monday to reach a new year high, increasing the specter of higher borrowing costs for businesses. Copper prices jumped over $ 9,000 pr. tons on the London Metal Exchange, which marks the highest level in nine years as a tightening of supply, rising inflation and notions of significant infrastructure programs out of the US and other countries led to expectations of increased demand.
Since strong COVID-19 vaccine efficacy data were first announced in November, traders have positioned the likelihood of strong economic growth later in the year, as vaccine distribution eventually allows more companies to reopen. As such, many traders have turned away from the high-tech stocks that led the indices higher for much of last year. Instead, they have preferred more economically sensitive stocks and asset classes in anticipation of a recovery from the pandemic.
“The influx of equity funds has risen sharply over the last few months along with the optimism surrounding an economic recovery. The rotation of equity funds has most preferred strategies that benefit from faster economic growth,” said Goldman Sachs strategist led by Arjun Menon in a recent note, based on an analysis studying 507 shares. “[Emerging market]-focused, small c-, value- and cyclical equity funds have experienced the largest influx. The secular migration to ESG-focused funds is sustained and we expect this trend to accelerate under the overall democratic government. “
In addition, approx. 57% of mutual funds surpassed their benchmarks in 2021 so far, representing the highest share at this point in a year in nearly a decade, the strategists added.
09:44 ET: ‘This is the right thing to do’: Yellen reiterates call for robust fiscal stimulus, reaffirms support for $ 1,400 direct control
Finance Minister Janet Yellen doubled her call for yet another key fiscal package to combat the COVID-19 crisis in the United States, suggesting that the benefits of measures such as President Joe Biden’s proposed $ 1,400 stimulus control would ultimately do more good than harm the economy. .
“The principle of targeting money to those who have suffered the most is an important and valid principle. And the US rescue plan does it in many different ways, even though it is targeted food aid, unemployment compensation, some rental assistance for low-income people, exposure to the face and in other ways, and it is quite targeted, “said Yellen Andrew Ross Sorkin during Dealcast DC Policy Project webcast. “But the truth is, there are pockets of pain that go beyond what can be achieved in these highly targeted ways.”
“Take the example of people who have had to drop the workforce because they have children who were not in school, so they face a loss of income. Many are not eligible for unemployment insurance. And some of them face food insecurity, “she added.” You have 24 million adults who say they do not have enough to eat … 15 million people who are behind on their rent. And it’s not that easy in a very targeted way to help these people. “
“So my view would be that the control, for example, controls $ 1,400. Of course, we do not want them to go to people with very high incomes and households who have been less affected. misery that we know exists out there that is not affected by the more targeted things that help is provided there as well, “she concluded. “And I think we’re better off, and that’s the right thing to do.”
9:30 ET: Stocks open lower
Here markets traded Monday morning:
S&P 500 (^ GSPC): -25.86 points (-0.66%) to 3,880.85
Dow (^ DJI): -174.33 points (-0.55%) to 31.319.99
Nasdaq (^ IXIC): -152.41 points (-1.1%) to 13,719.36
Raw (CL = F): + $ 1.36 (+ 2.3%) to $ 60.60 pr. Barrel
Gold (GC = F): + $ 18.80 (+ 1.06%) to $ 1796.20 pr. Ounce
10-year treasury (^ TNX): +1.2 bps to give 1.357%
9:14 ET: Bitcoin prices fall 10% and retreat from record highs
Bitcoin (BTC-USD) fell Monday morning as cryptocurrency prices retreated after a rid-up so far this year.
Bitcoin was down about 10% to about $ 51,400 from 6 p.m. 9:15 a.m. in New York after rising to a record high of more than $ 57,600 over the weekend, according to Bloomberg data. cryptocurrency has still maintained sharp year-to-date gains, however, after entering 2021 at just over $ 31,000.
8:36 ET: Chicago Fed National Activity Index points to more growth in January
That Chicago Federal Reserve National Activity Index rose more than expected in January as personal spending improved more than expected, confirming the strong recovery in consumption spending reflected in last week retail sales report from the trade department.
The Chicago Fed’s index rose to 0.66 in January from a downward 0.41 in December. Under the headline index, the contribution from personal consumption and housing together rose to 0.35 in January and turned directionally from -0.06 in December. While employment and output-related indicators were both positive in January, they fell slightly from December.
Consensus economists had expected the index to rise to just 0.45 in January, according to Bloomberg data. The index showed a positive reading for the ninth month in a row in January.
7:19 AM Monday: Stock futures point to a lower open
Here the markets traded in front of the opening bell:
S&P 500 futures (ES = F): 3,874.00, down 29 points or 0.74%
Dow futures (YM = F): 31,254.00, down 179 points or 0.57%
Nasdaq futures (NQ = F): 13,395.25, down 180.75 points or 1.33%
Raw (CL = F): + $ 0.51 (+ 0.86%) to $ 59.75 per. Barrel
Gold (GC = F): + $ 18.30 (+ 1.03%) to $ 1,795.70 per. Ounce
10-year treasury (^ TNX): +2.9 bps to give 1.374%
Emily McCormick is a reporter for Yahoo Finance. Follow her on Twitter: @emily_mcck
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