Stocks mounted a broad rally Monday, with the Dow surging more than 400 points, as the market recovered from recent heavy losses triggered by concern over rising interest rates.
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The Dow Jones Industrial Average gained 410.37 points, or 1.7%, to 24,601.27. The S&P 500 rose 36.45 points, or 1.39%, to 2,656. The Nasdaq Composite was up 107.47 points, or 1.56%, at 6,981.96, eliminating this year’s losses.
U.S. stocks are coming off a turbulent week in which the Dow recorded its largest-percentage decline since January 2016. Investors are closely watching the Federal Reserve, which could opt to raise interest rates at a faster-than-expected pace as inflation accelerates. The yield on the benchmark 10-year Treasury note hit a four-year high of almost 2.9% on Monday.
Shares of equipment makers and steel producers rallied after the Trump administration rolled out a $1.5 trillion plan to boost spending on infrastructure. Caterpillar (NYSE:CAT) rose 2.1%, while U.S. Steel (NYSE:X) jumped 5.8%. Other top gainers included Deere (NYSE:DE), AK Steel Holding (NYSE:AKS) and U.S. Concrete (NASDAQ:USCR), companies that stand to benefit from increased infrastructure spending.
Oil companies such as Exxon Mobil (NYSE:XOM) also posted gains as crude prices climbed. West Texas Intermediate oil futures rose 9 cents, or 0.15%, to $59.29 a barrel.
|AKS||AK STEEL HOLDING CORPORATION||1.59||-0.21||-11.67%|
|X||UNITED STATES STEEL CORPORATION||5.71||-0.07||-1.12%|
|USCR||U.S. CONCRETE INC.||15.07||+0.44||+3.00%|
The fundamental backdrop for stocks remains strong, said David Joy, Ameriprise chief market strategist, who cited the benefits of the tax overhaul and strong corporate earnings. An increase in bond yields, however, was the main culprit behind the stock market’s recent losses, and it continues to present a challenge for investors.
“While this long overdue correction makes stocks a little less pricey, the longer-term threat of rising bond yields is still very much with us,” Joy wrote in a note to clients. “The risk of rising inflation in a full employment environment is meaningful. …”
Investors will get a fresh snapshot of the U.S. economy with a host of reports this week including readings on consumer and producer prices.
“How this plays out over the coming days depends on whether the rebound we saw on Friday can translate into some form of base for a continuation of the uptrend that has been in place for the last nine years, “ said Michael Hewson, chief market analyst at CMC Markets. “This may well depend on whether we see further increases in bond yields, or a rise in interest rate expectations from other central banks around the world.”
The CBOE Volatility Index, Wall Street’s so-called “fear gauge,” dropped for a second consecutive session Monday. The market’s wild swings last week battered traders who had bet against volatility.
Gold was up around 0.7% at $1,324.10 an ounce in recent trading.