U.S. stocks jump, send Nasdaq higher for the year
U.S. stocks surged, with financial markets showing signs of recovery after the worst week in two years for American equities.
The 10-year yield fell back from the four-year high hit earlier Monday as the dollar slipped. The Nasdaq Composite Index turned positive for 2018, with the Dow Jones Industrial Average and the S&P 500 now down less than 1 per cent since the end of December. Stocks and bonds have been in a tug-of-war since a blowout jobs report early this month sent Treasury yields spiking, raising the specter of higher interest rates to come.
The CBOE Volatility Index fell as the S&P posted its biggest two-day advance in 18 months, but traders were still on edge following the tumultuous move in equities last week that wiped US$2 trillion from U.S. stocks. Investors are awaiting U.S. consumer-price data due Wednesday with some trepidation, given that pressure on equities has been emanating from the Treasury market and the outlook for inflation.
“You just had a major reversal and investors are just taking a deep breath,” said Mike Bailey, the director of research at FBB Capital Partners in Bethesda, Maryland. “People said, ‘OK, the 10 per cent correction is over, let’s take a look at the bright side.”‘
The S&P 500 retook its 100-day moving average, a technical indicator that it crashed through last week. Morgan Stanley chief U.S. equity strategist Michael Wilson reversed his week-old cautious call, joining peers at Goldman Sachs Group Inc. and JPMorgan Chase & Co. who have told clients to buy the dip.
European and Asian equities also rose Monday, while the dollar’s slide supported commodities, with metals rallying and crude oil slightly higher after a six-day selloff.
The won outperformed major currencies after Vice President Mike Pence told the Washington Post the U.S. is ready to engage in talks about North Korea’s nuclear program, signaling a shift in policy. South Africa’s rand strengthened on speculation President Jacob Zuma is poised to leave office.
Here are some important things to watch out for this week:
Chinese New Year celebrations for the Year of the Dog begin in China and follow across much of Asia, including Hong Kong, Taiwan, Singapore, Malaysia and Indonesia. Chinese mainland markets are closed Feb. 15-21. Zuma’s fate is set to be sealed on Monday when the top leadership of the ruling African National Congress meets to conclude the transition to a new administration.
The U.S. consumer-price index, due Wednesday, probably increased at a moderate pace in January, economists project. Retail sales in the U.S., also out Wednesday, probably increased for a fifth straight month. Japan is expected to extend the longest stretch of economic growth since the mid-1990s when it reports fourth-quarter gross domestic product on Wednesday. Earnings season continues in full swing with reports from Bunge, TripAdvisor, SunPower, Con Edison, Bombardier, Michelin, PepsiCo, MetLife, Cisco, Japan Post Bank, Credit Suisse, Nestle, Airbus, Allianz, Telstra, Coca-Cola, Deere, Eni, Credit Agricole and Campbell Soup.
These are the main moves in markets:
The S&P 500 Index rose 1.4 per cent at the close of trading in New York The Stoxx Europe 600 Index climbed 1.2 per cent. The MSCI All-Country World Index added 1.2 per cent, the most since April. The U.K.’s FTSE 100 Index rose 1.2 per cent.
The Bloomberg Dollar Spot Index dipped 0.3 per cent. The euro rose 0.3 per cent to US$1.229. The British pound was little changed at US$1.3834. South Africa’s rand climbed 0.5 per cent to 11.93 per U.S. dollar.
The yield on 10-year Treasuries was little changed at 2.85 per cent. Germany’s 10-year yield rose one basis point to 0.75 per cent. Britain’s 10-year yield rose three basis points to 1.6 per cent.
West Texas Intermediate crude added 0.2 per cent to US$59.33 a barrel, the first advance in more than a week. Gold rose 0.5 per cent to US$1,322.74 an ounce for the largest advance in two weeks. Copper futures climbed 1.7 per cent for the first advance in five days.