By Mark DeCambre and Joy Wiltermuth
U.S. stock benchmarks closed higher Monday, following losses for all three major indexes last week, as investors weighed brightening economic prospects against worries that interest rates will climb faster than anticipated.
How did stock benchmarks perform?
The Dow Jones Industrial Average /zigman2/quotes/210598065/realtime DJIA +0.64% rose 103.23 points, or 0.3%, to close at 32,731.20, snapping a 2-session losing streak.
The S&P 500 /zigman2/quotes/210599714/realtime SPX -0.21% added 27.49 points, or 0.7%, to close at 3,940.59, also ending a 2-sessions slide.
The Nasdaq Composite Index /zigman2/quotes/210598365/realtime COMP -1.67% advanced 162.31 points to finish at 13,377.54, a gain of 1.2%, it’s largest daily jump in about 1.5 weeks, according to Dow Jones Market Data.
The small-capitalization Russell 2000 index /zigman2/quotes/210598147/delayed RUT -1.06% ended 0.9% lower at 2,266.84.
On Friday , the Dow put in a weekly decline of 0.5%, the S&P 500 and the Nasdaq both slid 0.8%.
What drove the market?
Technology-related stocks helped lift equities higher on Monday, after a modest pullback of the 10-year Treasury yield /zigman2/quotes/211347051/realtime BX:TMUBMUSD10Y +1.52% gave the start of March’s last full week of trading a boost.
Highflying tech shares were big winners amid the COVID-19 pandemic, but they also have been under pressure in recent months as government bond yields have risen.
The 10-year Treasury yield stood around 1.682% Monday, down from 1.729% Friday. Rising bond yields have been partially welcomed by Wall Street investors, as a sign of the U.S. economy’s return to health, but caution remains about if another sharp spike in rates could cause disorder in financial markets.
“Rising yields have yet to become overly punitive for the economy and risk assets, but 2.5% on the 10yr may be a key threshold,” a team led by Jason Pride, chief investment officer at Glenmede’s private wealth division, wrote in a note Monday.
Investors have been skittish about the outlook for buying stocks on the heels of additional fiscal stimulus, state reopenings and vaccine rollouts that could lead to a major upswing for the economy and higher interest rates, as falling bond prices push yields higher and make speculative and high-growth assets look less compelling.
“With the federal debt now at $29 trillion and a total debt-to-GDP ratio at an astounding 145%, nominal inflation and interest rates have increased sharply in recent months,” said Phil Orlando, Federated Hermes’ chief equity market strategist, in emailed comments.
Orlando also said sharply higher 10-year Treasury yields “will certainly impair our ability to service that growing debt level.”
Concerns about climbing U.S. debt levels come as President Joe Biden’s economic team was preparing to recommend spending as much as $3 trillion on a set of efforts to boost the economy, reduce carbon emissions and narrow economic inequality, the New York Times reported Monday .
Last week’s slide lower for major stock benchmarks came after the Federal Reserve appeared to strike a dovish tone at its policy meeting on Wednesday, but bond yields rose on expectations for economic recovery and inflation this year.
“The Fed itself may remain one of the most important risks in the near term, simply due to market (over) reaction to its comments and (in) actions,” wrote Saira Malik, chief investment officer at Nuveen, in emailed comments.