By Alexander Osipovich and Joe Wallace
U.S. stocks surged Monday, putting the S&P 500 on track for its best day in nearly nine months, as a weekslong advance in government-bond yields stalled, easing investors' jitters over rising interest rates.
The broad stock market index soared 2.6% in afternoon trading, poised for its biggest one-session rise since June 5. The Dow Jones Industrial Average climbed 690 points, or 2.2%, while the technology-heavy Nasdaq Composite jumped 3%.
The gains marked a strong rebound after all three indexes declined last week, weighed down by losses among tech stocks. Monday's advance came as the yield on 10-year Treasury notes, the benchmark borrowing cost in U.S. debt markets, slipped to 1.453% from 1.459% Friday. Yields fall when bond prices rise.
Stocks, and particularly shares of tech companies, have been buffeted by sharp moves in government-bond markets in recent trading sessions. Rising long-term interest rates brought by an improving economy tend to make tech and other growth stocks less attractive to investors.
The Nasdaq Composite had fallen 6.4% from its record close on Feb. 12 through Friday's close. The slump in tech stocks has pulled Apple shares down 4% this year, while Amazon.com is off 3.5%. Tesla, meanwhile, is up just 1.3%.
Shares of Apple and Tesla rose more than 5% Monday, while Amazon added nearly 2%.
A long period of low interest rates underpinned the stock market's boom over the past year by making it less attractive for investors to put money in bonds. Last week's run-up in yields threatened to undermine that pillar of the monthslong stock rally.
It also raised the specter that the U.S. Federal Reserve might put an end to easy-money policies to combat inflation -- even though the Fed itself has played down such concerns.
"Today is kind of a reckoning with the reality that the Fed's not moving anytime soon," said Mike Dowdall, a portfolio manager at BMO Global Asset Management.
"It's really hard to paint a negative picture of this market," he added, pointing to the ramp-up in coronavirus vaccinations and the prospect of further fiscal stimulus from Washington. "Everyone's chasing their shadows and saying it's rates here, it's inflation there. But those just aren't real."
The Senate is preparing to move ahead this week with President Biden's sweeping coronavirus relief package. The House passed the $1.9 trillion package over the weekend, and Senate approval appears more likely after senators dropped a proposed minimum-wage increase that some centrist Democrats had opposed.
Democrats are racing to finish the package before March 14, when certain types of federal unemployment assistance are set to expire.
Some investors remain concerned that resurgent bond yields and mounting inflation pressures could still derail the stock market, especially with the prospect of massive spending from Mr. Biden's relief package.
"The concern on the reflation front boils down to the extent of stimulus, " said Brian O'Reilly, head of market strategy for Mediolanum International Funds. "The market is beginning to rightly question how much is too much."
Monday's gains were broadly shared across the market, with all 11 sectors of the S&P 500 rising by at least 1%. Tech stocks were among the leaders, rising more than 3%.
In corporate news, Exxon Mobil shares advanced 4.3% after the oil major, which has been under pressure from activist investors, added two new board members.
Boeing shares rallied 5.9% after United Airlines said it was buying 25 new 737 MAX jets, a boost for the aircraft maker that is still trying to recover from the jet's nearly two-year grounding.
Class B shares of Warren Buffett's Berkshire Hathaway climbed 3.8% after the conglomerate on Saturday posted an increased fourth-quarter profit and reported that it had bought back nearly $25 billion in shares last year, a larger-than-usual buyback for Berkshire.
Shares of Johnson & Johnson added 0.7% after the U.S. over the weekend authorized its single-shot coronavirus vaccine.
Data released Monday showed that activity at U.S. factories grew last month at its fastest pace since the onset of the pandemic. The Institute for Supply Management's February manufacturing index climbed to 60.8 in February from 58.7 in January and beating economists' expectations of 58.9. Any level above 50 indicates an expansion of activity.
The corporate earnings season is winding down, with Zoom Video Communications and Novavax scheduled to report quarterly results after markets close.
Several top Fed officials are scheduled to make public appearances later this week, and investors will be monitoring them closely to see they voice any concerns about bond yields.
"This week is key," said Andrea Carzana, a fund manager for London-based Columbia Threadneedle Investments. If the Fed doesn't seek to tamp down expectations of higher inflation, yields could continue to rise, rattling the stock market, according to Mr. Carzana.
"I'm expecting turbulence or volatility to remain with us until we have a better understanding of where central banks stand," he said.
In commodities, futures on benchmark Brent crude oil fell 1.1% to settle at $63.69 a barrel, ahead of a planned Thursday meeting of the Organization of the Petroleum Exporting Countries and its partners. Analysts say it is likely that the cartel will announce some type of production increase, or at least a further retreat from previously agreed production cuts. Oil prices have been steadily recovering in recent months as vaccinations have raised hopes of a post-pandemic revival of travel.
Improving investor sentiment buoyed overseas stock markets. The Stoxx Europe 600 gained 1.8%, boosted by shares of travel-and-leisure companies, whose fortunes hinge on the reopening of economic activity.
In Asia, Japan's Nikkei 225 rose 2.4%, while China's Shanghai Composite Index added 1.2%.
Write to Alexander Osipovich at email@example.com and Joe Wallace at Joe.Wallace@wsj.com
(END) Dow Jones Newswires