Stocks soar as attention shifts to positive stimulus, pandemic news

• US stocks rose Monday on their best day since June as attention turned to an overwhelmingly positive macroeconomic environment.
• The S&P 500 rallied above the 3,900 level, up 2.4% on the day.

Wall Street saw its best day since June 2020, with the S&P 500 rallying 2.4% from below 3-850 to close above 3,900. The Nasdaq 100 gained 2.9% to close not far from 13,300 and the Dow gained 1.95% to regain the 31,500 level. The small-cap Russell 2000 was the best performer of the group, rising more than 3.0% on the day, while the CBOE Volatility Index (VIX) fell 4.6 points to 23.00. All equity sectors performed well.

Risk appetite

The stars lined up for a fierce rally on the first trading day of the new month. First, the bond market turmoil, the main factor that weighed on risk appetite in the second half of February, appears to be diminishing. Yields on US 10-year bonds fell a modest 3bp on Monday to end the session just below 1.43% and traded within a 7bp range between 1.38% -1.45%. That compares with trading ranges closer to 20 basis points last Thursday and Friday, which saw yields hover as high as 1.60%.

Looking ahead, equity investors will be busy this week with the February ISM Services PMI report and February ADP National Employment to be released on Wednesday, followed by weekly jobless claims and a speech from the president of Fed Jerome Powell on Thursday (comments to be released to WSJ), ahead of February’s official labor market report on Friday. In the meantime, investors will continue to track the path of the pandemic and news about the launch of vaccines, as well as the passage of Biden’s $ 1.9 stimulus package through the Senate. If all goes well with the latter two, it should set the stage for further stock market improvement, while strong data is likely to pose a greater threat than weak data as the former could reignite “overheating” concerns. , while the latter could alleviate them.