Traders Likely To Remain Focused On Bond Market Activity

The major U.S. index futures are currently pointing to a mixed opening on Monday following the substantial volatility seen in the markets last week.

The mixed performance by the futures comes as traders continue to pay close attention to activity in the bond markets.

The yield on the benchmark ten-year note has shown a notable move to the upside, once again climbing above the 1.6 percent level.

The increase in yields comes after the Senate voted along party lines on Saturday to approve a new $1.9 trillion coronavirus relief bill.

The bill, which includes $1,400 direct payments and an extension of unemployment benefits, is expected to be approved by the House later this week.

Bond yields have moved sharply higher in recent weeks, raising concerns about the outlook for interest rates and inspiring some traders to cycle out of high-flying tech stocks.

Stocks went on a roller-coaster ride during the trading session on Friday before ending the day sharply higher. With the strong upward move on the day, the major averages partly offset the steep drop seen in previous sessions.

The tech-heavy Nasdaq tumbled to its lowest intraday level in nearly three months before rebounding to end the day up 196.68 points or 1.6 percent at 12,920.15. The Dow also jumped 572.16 points or 1.9 percent to 31,496.30 and the S&P 500 surged up 73.47 points or 2 percent to 3,841.94.

For the first week of March, the major averages turned in a starkly mixed performance. While the Nasdaq tumbled by 2.1 percent, the Dow shot up by 1.8 percent and the S&P 500 climbed by 0.8 percent.

The wild ride on Wall Street came as traders continued to keep a close eye on activity in the bond markets following the recent increase in yields.

Yields spiked early in the session following the release of upbeat jobs data, contributing to a continued sell-off by stocks in morning trading.

However, bond yields gave back ground over the course of the session, with the yield on the benchmark ten-year note ending the day nearly flat after reaching a more than one-year high above 1.6 percent.

The pullback by yields inspired traders to pick up stocks at relatively reduced levels following the weakness seen in recent sessions.

The volatility in the markets followed the release of the Labor Department’s closely watched monthly jobs report, which showed much stronger than expected job growth in the month of February.

The Labor Department said non-farm payroll employment jumped by 379,000 jobs in February after climbing by an upwardly revised 166,000 jobs in January.

Economists had expected employment to increase by 182,000 jobs compared to the uptick of 49,000 jobs originally reported for the previous month.

The stronger than expected job growth was primarily due to a rebound in employment in the leisure and hospitality industry, which added 355,000 jobs.

The report also said the unemployment rate unexpectedly edged down to 6.2 percent in February from 6.3 percent in January. Economists had expected the unemployment rate to remain unchanged.

The modest decrease pulled the unemployment rate down to its lowest level since hitting 4.4 percent last March, when coronavirus-related lockdowns began to take effect.

Energy stocks showed a substantial move to the upside, as the price of crude oil continued to spike after OPEC and its allies agreed to extend production cuts.

Reflecting the strength in the energy sector, the Philadelphia Oil Service Index skyrocketed by 6.6 percent and the NYSE Arca Oil Index shot up by 4 percent.

Significant strength also emerged among housing stocks, as reflected by the 4 percent jump by the Philadelphia Housing Sector Index.

Steel, telecom and semiconductor stocks also saw considerable strength on the day, moving notably higher along with most of the other major sectors.

Commodity, Currency Markets

Crude oil futures are edging down $0.02 to $66.07 a barrel after spiking $2.26 to $66.09 a barrel last Friday. Meanwhile, after dipping $2.20 to $1,698.50 an ounce in the previous session, gold futures are sliding $10.30 to $1,688.20 an ounce.

On the currency front, the U.S. dollar is trading at 108.69 yen versus the 108.31 yen it fetched at the close of New York trading on Friday. Against the euro, the dollar is trading at $1.1870 compared to last Friday’s $1.1915.

Asia

Asian stocks ended mostly lower in choppy trading on Monday as rising bond yields globally on the back of encouraging economic data and U.S. stimulus cheer sparked fears that central banks would tighten policy.

Chinese shares led regional losses after the country’s foreign minister made ominous comments about the self-ruled island of Taiwan.

The benchmark Shanghai Composite Index plunged 80.57 points, or 2.3 percent, to 3,421.41, while Hong Kong’s Hang Seng Index tumbled 557.46 points, or 1.9 percent, to 28,540.83. Investors ignored official data showing that China’s export growth jumped to the highest in over two decades.

Japanese shares fell for a third consecutive session on concerns that the passage of a fresh U.S. coronavirus relief package could cause inflation to soar. The Nikkei 225 Index slid 121.07 points, or 0.4 percent, to 28,743.25, while the broader Topix closed 0.1 percent lower at 1,893.58.

Heavyweights Fast Retailing and SoftBank fell 1.7 percent and 2.4 percent, respectively, while chip testing equipment maker Advantest lost 3.4 percent.

Takeda Pharmaceutical surged 3.9 percent after the drug maker said it had sought approval for the use of Moderna’s Covid-19 vaccine.

In economic news, the value of overall bank lending in Japan was up 6.2 percent year-on-year in February, while the country’s current account surplus fell an annual 2.3 percent in January, separate reports showed.

Australian markets ended off their day’s highs, with materials and consumer staple stocks leading the gainers. The benchmark S&P/ASX 200 Index ended up 28.80 points, or 0.4 percent, at 6,739.60, while the broader All Ordinaries Index rose 28.60 points, or 0.4 percent, to 6,971.60.

Mining heavyweights BHP and Rio Tinto gained 2.4 percent and 2.9 percent, respectively, while gold miner Evolution Mining added 1.8 percent and Newcrest advanced 2.7 percent

Origin Energy climbed 1.8 percent and Oil Search rallied 3.4 percent as oil prices surged after an attack on the world’s largest refinery in Saudi Arabia.

Treasury Wine Estates spiked 6.4 percent on the buzz that European drinks giant Pernod Ricard was interested in the company. Banks ended on a mixed note. Tech stocks fell broadly, with Afterpay losing 3.6 percent.

Seoul stocks fell sharply as improved data from the U.S. and China coupled with rising bond yields stoked fresh concerns over post-pandemic inflation. Increased volatility ahead of the expiration of options and futures on March 11 also weighed on markets.

The benchmark Kospi dropped 30.15 points, or 1 percent, to finish at 2,996.11, with chemical and tech stocks pacing the decliners. LG Chem shed 1.6 percent and SK Hynix gave up 3.2 percent.

Europe

European stocks are broadly higher on Monday amid expectations that positive economic data from the United States and China coupled with the U.S. Senate’s passage of a $1.9 trillion stimulus bill bode well for a stronger economic recovery.

While the German DAX Index has jumped by 1.5 percent, the French CAC 40 Index is up by 0.9 percent and the U.K.’s FTSE 100 Index is up by 0.1 percent.

The British pound ticked higher against a range of other currencies on optimism over the U.K.’s vaccine rollout and the easing of a stringent lockdown, with children returning to school in England for the first time since January.

A measure of U.K. business confidence hit a 12-month high, adding to optimism over economic recovery.

Elsewhere, Sentix’s index for the euro zone rose to 5.0 in March from -0.2 in February, reaching the highest level since February 2020, driven by an improved view of the current situation.

Investors have shrugged off data from Destatis showing that German industrial production unexpectedly decreased in January.

Industrial production fell 2.5 percent month-on-month in January compared to expectations for an increase of 0.2 percent. Production had advanced 1.9 percent in December.

Travel-related stocks are gaining ground, with tour operator company Cruise operator Carnival and airline Lufthansa posting notable gains.

Education group Pearson has also rallied. The company said it expects revenue growth in 2021, with adjusted operating profit expected to be in line with current market forecasts.

Aircraft parts supplier Senior Plc has also shown a notable move to the upside despite warning that this year would be as challenging as 2020.

Domino’s Pizza Group has also risen after it agreed to sell its entire shareholding in PPS Foods AB (Domino’s Sweden) to Eyja fjárfestingafélag III EHF.

Valneva SE shares have also jumped. The specialty vaccine company and Pfizer Inc. have initiated a Phase 2 VLA15-221 study for a Lyme disease vaccine candidate.

U.S. Economic Reports

The Commerce Department is scheduled to release its report on wholesale inventories in the month of January at 10 am ET. Wholesale inventories are expected to jump by 1.3 percent.

Stocks In Focus

Shares of Athene (ATH) are soaring in pre-market trading after the retirement services company agreed to be acquired by Apollo (APO) in an all-stock transaction valued at approximately $11 billion.

Biotechnology company Adaptive Biotechnologies (ADPT) is also likely to see initial strength after the FDA granted an emergency use authorization for the company’s T-Detect COVID to confirm recent or prior COVID-19 infection.

Shares of McAfee (MCFE) are also moving sharply higher in pre-market trading after the cybersecurity company announced the sale of its enterprise business to a consortium led by Symphony Technology for $4.0 billion in cash.