U.S. stocks on Monday were seen trading higher to start the week and month as evidence mounted that American corporations were rebounding from the deadly COVID pandemic, portending a strong bounce for the overall economy in the second half of 2021.
However, fears of a sustained rise in inflation and concerns that much of the economy’s rebound has been priced into equity valuations has created some unease among investors and has the potential to knock stocks around.
How are stock benchmarks performing?
Futures for the Dow Jones Industrial Average
were rising 187 points to reach 33,954, a gain of 0.6%.
S&P 500 index futures
were up 21.10 points to 4,195.50, a gain of 0.5%.
advanced 57.25 points, or 0.4%, to 13,907.25.
On Friday, the Dow
posted a weekly decline of 0.5%, but notched a 2.4% gain in April, while the S&P 500
was virtually unchanged, but gained 5.6% last month. The Nasdaq Composite Index
registered a weekly loss of 0.4% but jumped 7% in April.
What’s driving the market?
Investors have been keenly focused on the recovery of U.S. corporations in the aftermath of the COVID pandemic, with some of the biggest companies affirming that a genuine rebound is under way.
That rebound was at least partially on display in light of the performance of investment conglomerate Berkshire Hathaway
which reported a 20% jump in its operating profit, rising to $7.02 billion from $5.87 billion in the year prior.
Berkshire over the weekend also reported first-quarter net income of $11.7 billion, compared with a loss of $49.7 billion, in the year-earlier period.
Performances like that of Berkshire’s has helped to bolster confidence in equities at the start of the month that has traditionally been associated with a comparatively weak six-month seaonsal stretch of trading starting in May.
“We look for a positive start of trading in May as investors are likely to adopt to sideways movements, while staying clear of ‘Selling And Going Away In May’,” wrote Peter Cardillo, chief market economist at Spartan Capital Securities.
Investors also saw positive developments from Europe, bolstering confidence in the eurozone recovery. The European Commission on Monday proposed allowing entry by non-essential travelers who have been fully vaccinated to the region.
Looking ahead, investors are watching for further commentary from Federal Reserve Chairman Jerome Powell, who is scheduled to speak at 2:20 p.m. Eastern Time at the Just Economy conference, which is being held virtually.
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Anxieties surrounding the Fed’s response to a stronger economy also has investors on edge after Dallas Fed President Robert Kaplan said Friday that he believes it is time to discuss tapering the central bank’s asset purchases.
Bernard Baumohl, chief global economist at The Economic Outlook Group, recently wrote that the Fed will have to walk a fine line as it eventually dials up interest rates and tapers an asset-purchasing program that has helped to support markets during the height of the pandemic-inspired stock selling in March.
“So what should the Fed do at this stage? Frankly, nothing major at this time. But as the economy regains its footing, Powell will face one truly vexing issue later this year: How do you reduce asset purchases without causing major turbulence in the bond market?” wrote Baumohl.
On the economic data front, market participants await manufacturing reports in April, headlined by the manufacturing index from the Institute for Supply Management due at 10 a.m., released after Markit’s manufacturing index at 9:45 a.m.
Last week, a weaker tone of manufacturing and services activity in China and recession in Europe were blamed for a slide in stocks on Friday.
Which companies are in focus?
Shares of Berkshire’s Class B shares
were up over 1% before the opening bell after Chief Executive Warren Buffett said Greg Abel, the conglomerate’s vice chairman in charge of non-insurance operations, would be his successor as CEO if Buffett left the job.
Tesla Inc. shares
were trading lower in premarket action after a German trade magazine reported that Tesla’s gigafactory in Berlin is likely to be delayed by six months.
Shares of Verizon Communications Inc.
inched higher after it announced it would sell Verizon Media, including Yahoo and AOL brands, for $5 billion to private equity firm Apollo Global.
Domino’s Pizza Inc.
said in a Monday filing that it has entered into a $1 billion accelerated share repurchase agreement with Barclays.
Shares of GameStop Corp.
rose 2% in premarket trading Monday, after the videogame and consumer electronics retailer announced it has effectively eliminated its long-term debt.
Estée Lauder Companies
shares slid 0.6% in premarket trading, after the cosmetics and beauty company posted stronger-than-expected profit for its fiscal third quarter but sales that missed estimates.
How are other assets faring?
European equities were trading in line with the buoyant mood in U.S. markets. The Stoxx Europe 600 index
was up 0.5%, while the U.K.’s FTSE 100
In Asia, Hong Kong’s Hang Seng index
fell 1.3%. Bourses in Shanghai and Tokyo were closed.
The 10-year Treasury note yield
was virtually flat at 1.627%.
The greenback was on the backfoot, trading down 0.2% based on the ICE U.S. Dollar Index.
Prices for gold futures
were up 0.9% to 1,784,30 an ounce on Comex. U.S. crude futures
were flat at $63.59 a barrel.