Most stock benchmarks rose Monday morning, picking up steam in early trade, as investors parse the Federal Reserve’s signaling last week that it may raise rates sooner than investors previously expected.
What are major benchmarks doing?
-
The Dow Jones Industrial Average
DJIA,
+1.50%
rose 373 points, or 1.1%, to 33,670. -
The S&P 500
SPX,
+1.17%
was up 33 points, or 0.8%, at 4,199. -
The Nasdaq Composite Index
COMP,
+0.68%
declined 35 points, or 0.2%, to trade at around 14,066. -
The small-capitalization Russell 2000 index
RUT,
+1.82%
was up 0.7% at 2,252.
On Friday, the Dow tumbled more than 500 points, leaving the blue-chip index with its biggest weekly fall, a drop of 3.5%, since October. The S&P 500 suffered a weekly tumble of 1.9%, while the Nasdaq Composite gave up just 0.3%.
What’s driving the market?
Last week’s Federal Reserve meeting unsettled markets, leading to a flattening of the yield curve as short- and medium-dated yields rose sharply and long-term yields fell, while the dollar soared and equities ultimately slid, though growth-oriented shares outperformed.
The Tell: Markets are sending ‘peculiar’ signals as Fed changes tune — here’s what they mean
“Given these extreme moves, one of the most important things this week will likely be Fed speakers responding to the meeting and subsequent market reaction,” said Jim Reid, macro strategist at Deutsche Bank, in a note.
“Make no mistake the market reaction was fairly extreme to what at the end of the day is a Fed that themselves suggest they are still around 2-1/4 years away from raising rates,” he said.
Stocks extended their slide Friday, with weakness attributed in part to remarks by St. Louis Fed President James Bullard, who said he thought the Fed should lift its benchmark interest rate as early as next year. Bullard isn’t a voting member of the rate-setting Federal Open Market Committee this year but will be in 2022.
Read: Investors growing more fearful of a Fed mistake
Investors will hear from several Fed officials this week, with Chairman Jerome Powell set to testify Tuesday before the House select subcommittee on the coronavirus.
On Monday, Bullard, Dallas Fed President Rob Kaplan and Philadelphia Fed President Patrick Harker will be speaking at a forum that begins at 9:30 a.m. Eastern.
New York Fed President John Williams is scheduled to deliver keynote remarks at a banking conference at 3 p.m.
“We will be eager to see whether Williams is as hawkish as Bullard on interest rates, and how soon does he anticipate the committee to start scaling back its bond purchases,” said Charalambos Pissouros, senior market analyst at JFD Group, in a note.
See: Buybacks may prop stock market rattled after Fed meeting
Which companies are in focus?
- American Airlines Group Inc. AAL, which had boosted flying to meet soaring travel demand, is trimming some flights to alleviate potential strains on its operations. The number of flights being culled is relatively small, amounting to about 1% of planned flying in the first half of July, the company said. Shares were down 1.1%.
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Vivendi SE on Sunday reached an agreement for a 10% investment in Universal Music Group by Bill Ackman’s Pershing Square Tontine Holdings
PSTH,
+0.48%,
valuing the world’s largest music company at about $40 billion. Vivendi shares were up flat in Paris, while PSTH shares rose 0.4% - LegalZoom.com Inc. set terms for its initial public offering, as the California-based online legal and compliances services company takes another shot at going public with a valuation of up to $5.2 billion. The company is looking to raise up to $516.3 million by offering 19.12 million shares in the IPO, which is expected to price between $24 and $27 a share, with the stock expected to list on the Nasdaq under the ticker symbol “LZ.”
How are other assets faring?
- The yield on the 10-year Treasury note TMUBMUSD10Y rose 4.1 basis points to 1.49%.
- The ICE U.S. Dollar Index DXY, a measure of the currency against a basket of six major rivals, fell 0.2%, following its sharpest weekly fall since the week of April 3, 2020.
- Oil futures CL00 rose Monday, with West Texas Intermediate crude for July delivery gaining 0.5% at $71.64 a barrel. Gold futures GC00 traded 0.3% higher Monday, at 0.3% lower at $1,774.30 an ounce.
- European equities gained with the pan-Continental Stoxx Europe 600 SXXP added 0.3%. London’s FTSE 100 UKX picked up 0.1% Monday, after booking a weekly loss of 1.6% on Friday.
- In Asia, the Shanghai Composite SHCOMP closed gained 0.1%, Hong Kong’s Hang Seng Index HSI ended 1.1% lower and Japan’s Nikkei 225 NIK tumbled 3.3%.
