U.S. Stocks Climb as Bond Markets Calm

By Joe Wallace

U.S. stocks surged Monday as a weekslong advance in government bond yields stalled, easing investors' jitters over rising interest rates.

The Dow Jones Industrial Average soared 524 points, or 1.7%, after the opening bell. The S&P 500 gained 1.6%, while the technology-heavy Nasdaq Composite jumped 1.6%.

All three indexes declined last week, weighed down by losses among tech stocks.

Monday's broad advance came as the yield on 10-year Treasury notes, the benchmark borrowing cost in global debt markets, slipped to 1.431% from 1.459% Friday. Yields fall when bond prices rise.

Stocks, and particularly shares of tech companies, have been buffeted by volatile moves in government-bond markets in recent trading sessions. A climb in yields last week called into question the prospect of a long period of low interest rates, which had underpinned the past year's booming rally in stocks.

Monday's decline in yields helped revive investors' demand for stocks. But money managers remained wary of further spikes that could spark fresh volatility in share prices.

"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 corporate news, Exxon Mobil shares gained 4.6% after the oil major, which has been under pressure from activist investors, added two new board members.

Perrigo shares rose 6.4% after the pharmaceuticals company said it expects earnings and sales to increase in the 2021 fiscal year and agreed to sell its Generic Rx Pharmaceuticals business to Altaris Capital Partners for roughly $1.55 billion.

United Airlines shares rose 3.9%. The Justice Department said late Friday that the airline had agreed to pay more than $49 million to settle criminal charges and civil claims relating to fraud on postal service contracts.

Shares of Johnson & Johnson rose 1.6%. The company's Covid-19 vaccine received a green light from the Centers for Disease Control and Prevention Sunday. The U.S. Food and Drug Administration authorized use of the single-dose shot on Saturday.

Fed officials have so far suggested the climb in yields reflects expectations for an economic recovery fueled by the vaccine program and the likelihood of additional fiscal stimulus. President Biden over the weekend urged the Senate to take quick action after the House passed his $1.9 trillion Covid-19 relief package.

Democrats are racing to finish the package before March 14, when certain types of federal unemployment assistance are set to expire.

With the economy already showing signs that it has weathered the third wave of coronavirus and is primed to rebound in 2021, investors are questioning whether another big dose will produce a spike in inflation and further rise in yields.

"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."

Investors are parsing a speech by Fed governor Lael Brainard for clues about whether the central bank will push back against higher yields. Later on Monday, the New York Fed's John Williams, Cleveland Fed's Loretta Mester and Minneapolis Fed's Neel Kashkari are scheduled to make public appearances.

New data showed robust growth in activity at U.S. factories last month. The Institute for Supply Management's February manufacturing index came in at 60.8 in February, up 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.

Oil markets resumed their rally ahead of a meeting of the Organization of the Petroleum Exporting Countries and its partners on Thursday. Brent-crude futures, the benchmark in international energy markets, rose 0.7% to $64.85 a barrel.

Analysts expect the cartel, which has held back millions of barrels of crude oil a day since last spring to bolster prices, to agree to boost production in April.

Improving investor sentiment buoyed overseas markets. The Stoxx Europe 600 was recently up 1.4%, led higher 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% and China's Shanghai Composite Index added 1.2%.

Write to Joe Wallace at [e-mail]

(END) Dow Jones Newswires

03-01-21 1025ET