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S&P500 Steady Near Record High as Yields Rise Again

S&P500 gravitates near all-time highs while Dow Jones ekes out a record. Meanwhile, US futures fairly muted, point to a mixed open on Tuesday.

SageFX - Mar, 30, 21

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Principal Points

  • S&P500 gravitates near all-time highs while Dow Jones ekes out a record
  • US futures fairly muted, point to a mixed open on Tuesday

The ten-year treasury yield started climbing again on Monday after it subsided from its recent highs last week. The rise in the ten-year bond yield brought it to 1.74%, while the five-year yield hit its highest point in over a year.

Investors’ jitters are on the rise again as the US government and the Federal Reserve remain determined to inject hundreds of billions of dollars on a monthly basis to keep the economy afloat and aid the recovery from the pandemic. Market participants remain concerned that the strengthening of the economy will enhance inflation risks. In addition, rising interest rates are poised to jeopardize valuations of all assets, the most affected of which would be highflying tech stocks, which were highly favored by investors during the most severe times of the pandemic.

Since the pandemic lows, however, the markets have gone a long way. All three major US indexes have reached record highs this year. The optimistic times now are in stark contrast to where the markets were just a year ago. The current market optimism, stemming primarily from the Federal Reserve and the Treasury, has countered the economic weakness of 2020. In March last year, the economies of the world and the global markets were cascading down with breakneck speed. In mid-March 2020, the Fed and the Treasury came out with programs intended to buoy the markets and strengthen the economy.

On March 23, last year, the US equity market was down about one-third, its fastest decline in the modern era. However, the programs worked and produced a strong rebound. The S&P500 ended the year higher by 18%, while tech stocks were up much more than that.

Fast forward, for the past 12 months, the S&P500 has risen over 60%, notching a fresh record last week, on Mar 26. The Nasdaq Composite is up 75% for the same period, while the 30-stock Dow Jones Industrial Average is higher by 58% in the past 12 months and just made a new record yesterday. The blue-chip benchmark index closed in record territory on Monday as the reopening trades continue to pile. Dow Jones’ modest rise of 0.30%, or 98.49 points, was enough to lift it to an all-time high at 33,171.37. The slight gains in the benchmark index came despite weakness in the banking sector following Friday’s margin call when Archegos Capital Management, a large investment firm, liquidated more than $30bn in value.

Initially, on Monday, the Dow slumped by 160 points but later erased the losses and climbed to its fresh record. The S&P500 fell modestly by 0.09%, or 3.45 points, easing from its all-time high to close at 3,971.09. And the tech-focused Nasdaq Composite skittered down 0.60%, or 79.08 points, to end the session at 13,059.65.

US equity futures on Tuesday are trading mixed with the Nasdaq indicating a negative open, while S&P futures and Dow Jones futures point to a green open.