U.S. stock indexes trade near session highs Monday afternoon, with the Dow on track for a third straight advance, as technology stocks soar to begin the final week of trade for May.
The Dow last week fell 0.5%, while the S&P 500 gave up 0.4%, with both indexes suffering their second straight weekly fall. The Nasdaq Composite advanced 0.3%, snapping a run of four consecutive weekly declines.
Investors appeared to be shaking off uncertainty around the next phase of the economic recovery, as businesses grapple with stressed supply chains, soaring consumer demand and climbing prices as the world reboots from the pandemic.
“We are starting off the week with some nice gains,” said Peter Cardillo, chief market economist at Spartan Capital Securities, in an interview with MarketWatch.
“I think the reason for that is that we have 10-year Treasury yields that are backing down from their recent run-up, and today are near 1.6%,” Cardillo said, adding that progress in Washington on the Biden administration’s pared-down infrastructure plan also provides a backdrop of potentially more stimulus to come.
Rising inflation pressures have been blamed for heightened stock-market volatility after data earlier this month showed the consumer-price index rose a hotter-than-expected 4.2% year-over-year in April. That prompted fears the Fed could move earlier than anticipated to begin pulling back on its monetary policy accommodation.
Most Fed officials have maintained that it inflation will be “transitory” and that it remains too early to begin contemplating the withdrawal of monetary support.
But stocks have been largely in a holding pattern for the past two weeks, as investors await clearer signs on the staying power of higher inflation and if the Fed’s current polices will reach the hardest-hit by the pandemic.
“The economy has made an impressive rebound since the reopening phase really took hold. But it now needs to make the harder yards, to help get back to where we were for the most vulnerable U.S. households, as policy is being set there as opposed to the traditional approach of targeting the median household,” said Padhraic Garvey, ING’s global head of debt and rates strategy, in emailed commentary.
Meanwhile, talks continue around President Joe Biden’s infrastructure push. The White House on Friday trimmed the size of its proposal from $2.3 trillion to $1.7 trillion in an effort to win Republican support, but news reports cast doubt on the prospects for a deal before a Memorial Day target. Democrats could attempt to move on their own if the stalemate continues, using budget reconciliation procedures.
Volatility in the cryptocurrency markets also remained a focus. Fed Gov. Lael Brainard said Monday that the Federal Reserve is paying close attention to China’s progress in developing a digital currency, especially its use in international payments.
“What’s happened in the past week in the crypto world is just more proof of a product that’s being run up by speculation,” said Spartan Capital’s Cardillo. “That’s not to say that down the road there’s not going to be a place for bitcoin.”
William Watts contributed reporting