Techs lead stock gains; bond yields tick higher

U.S. stocks rose in early trading on Monday as investors took stock of the outlook for monetary policy ahead of key inflation data later this week. Treasury yields ticked higher and a rout in European sovereign bonds deepened.

U.S. stocks rose in early trading on Monday as investors took stock of the outlook for monetary policy ahead of key inflation data later this week. Treasury yields ticked higher and a rout in European sovereign bonds deepened.

Tech and consumer discretionary sectors led the S&P 500 higher, while the Nasdaq 100 outperformed major benchmarks as equities firmed after Friday’s bounce. Peloton Interactive Inc. soared after reports that it’s exploring takeover options. The Treasury curve steepened, with 10-year yield up about 1.5 basis points, and the dollar was little changed. Greek bonds led a selloff in European peripheral debt.

Investors are grappling with the prospect of the steepest monetary tightening cycle since the 1990s, with markets pricing in more than five quarter-point Federal Reserve interest-rate hikes in 2022 following a strong U.S. jobs report. The U.S. inflation report this week could lead to more market volatility. A reading north of 7 per cent, the highest since the early 1980s, is expected.

“The repricing of Fed rate hikes has lost momentum as investors await more clarity on the impact of the pandemic and soaring energy prices on the U.S. and Fed outlook,” Credit Agricole strategists including Valentin Marinov wrote in a note. “Looking ahead, focus will be on the U.S. CPI and the January Fed minutes. it would take fairly positive inflation surprises and hawkish FOMC signals to revive the dollar rally in the near term.”

The Fed is in a difficult spot, “trying to manage the real economy where we see that hot inflation and the financial economy, which quivers every time we talk about rate rises,” Karen Harris, Bain & Co. global head of macro research, said on Bloomberg Television.