Dow up 550 points, Nasdaq reclaims 14,000 mark as stocks charge higher after worst week since October

What’s driving the market?

Stocks charged higher Monday as investors focused on strengths in the U.S. economy heading into the summer months, as domestic COVID restrictions fade.

“There was a bit of a selloff last week, with concerns about potentially higher interest rates and a more aggressive Fed,” said John Carey, director of equity income at Amundi U.S. “Today, it seems that maybe was overdone.”

Carey said “people remain optimistic about the economy” in the U.S. as more people emerge from lockdowns, despite lingering concerns about the global increase of vaccinations and as 30 U.S. states looked poised to fall short of the Biden administration’s July 4 vaccination goals.

But the White House on Monday also provided more detail of its plans to share 55 million COVID vaccine doses from the U.S. supply globally, including with countries in Latin America, the Caribbean, Asia and Africa.

“Certainly, the coast is not clear,” Carey told MarketWatch. “We will see how things go over the next few months.”

The move higher for U.S. and European stocks comes after the Fed’s latest policy update unsettled investors, contributing to a flattening of the Treasury yield curve as short- and medium-dated yields rose sharply and long-term yields fell, while the dollar
DXY,
-0.39%
soared and equities ultimately slid, though growth-oriented shares outperformed.

Those moves largely dissipated Monday, with the dollar heading lower and long-dated Treasury yields, which move opposite to prices, headed higher.

The Tell: Markets are sending ‘peculiar’ signals as Fed changes tune—here’s what they mean

Investors have begun to hear from several Fed officials this week, ahead of Chairman Jerome Powell’s planned testimony Tuesday before the House select subcommittee on the coronavirus.

Both St. Louis Fed President James Bullard and Dallas Fed President Rob Kaplan said Monday they expect the pace of inflation next year to remain above the central bank’s target.

Bullard also said he was glad the central bank has begun to debate when to slow down its $120 billion per month in asset purchases.

“The Fed’s inflation forecast definitely gave traders some food for thought, as the markets got a taste of the rotation away from pandemic-driven monetary policy,” wrote Chris Larkin, managing director trading at E-Trade Financial, in an emailed note.

Friday’s U.S. stock selloff intensified after Bullard 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

Larkin said that “the path to economic recovery isn’t always a straight one, so that’s not to say that the reflation trade is dead. With the market pretty much rangebound for the past few weeks, we’ll see how it continues to digest the Fed’s outlook.”

New York Fed President John Williams is scheduled to deliver keynote remarks at a banking conference at 3 p.m.

See: Buybacks may prop stock market rattled after Fed meeting

Which companies are in focus?

• Shopify Inc.
  SHOP,
  +3.08%
  shares were up 3.5% Monday, rising toward a record high as enthusiasm builds for the e-commerce powerhouse ahead of its annual developer conference.
• 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 0.6%.
• Vivendi SE on Sunday reached an agreement for a 10% investment in Universal Music Group by Bill Ackman’s Pershing Square Tontine Holdings 
  PSTH,
  +0.37%,
   valuing the world’s largest music company at about $40 billion. Vivendi shares were flat in Paris, while PSTH shares rose 0.6%
• 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.” 
• Shares of Lordstown Motors Corp.
  RIDE,
  -4.13%
  fell after The Wall Street Journal reported that several top executives sold off chunks of stock in the electric-truck startup ahead of reporting financial results, according to regulatory filings disclosing the transactions. Shares were down 4.1%.
• The U.S. Supreme Court on Monday sent a case involving a shareholder class-action lawsuit against Goldman Sachs back to a lower court. The high court ruled that a federal appeals court needs to again consider whether the suit can proceed. Investors led by the Arkansas Teacher Retirement System filed the suit, which accused the bank of hiding conflicts of interest related to mortgage-backed securities. Shares were up 2.2% on Monday.
• Beyond Meat Inc. BYND announced expanded distribution in Australia with 800 Woolworths stores now carrying the flagship Beyond Burger. Shares rose 1.1%.

How are other assets faring?

• The yield on the 10-year Treasury note TMUBMUSD10Y rose 4 basis points to 1.48%.
• The ICE U.S. Dollar Index DXY, a measure of the currency against a basket of six major rivals, fell 0.4%, 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 2.6% to trade at $73.12 a barrel. Gold futures GC00 traded 0.8% higher Monday at $1,783 an ounce.
• European equities closed higher, with the pan-Continental Stoxx Europe 600 SXXP adding 0.7%. London’s FTSE 100 UKX picked up 0.6% Monday, after booking a weekly loss of 1.6% on Friday.
• In Asia, the Shanghai Composite SHCOMP closed with a gain of 0.1%, Hong Kong’s Hang Seng Index HSI ended 1.1% lower and Japan’s Nikkei 225 NIK tumbled 3.3%.

William Watts contributed reporting