Tech Stocks Rise With Small Caps; Treasuries Slip: Markets Wrap

(Bloomberg) -- U.S. stocks rose, led by gains in tech shares and small caps, with Wall Street parsing the latest earnings ahead of a flood of reports this week.

The S&P 500 Index rebounded from Friday’s selloff after a three-day weekend that brought little by means of fresh macro news. Ten-year Treasury yields climbed back toward 1.1% and the dollar weakened. Crude oil and emerging markets also advanced. Goldman Sachs Group Inc. turned lower even after reporting that profit more than doubled. Bank of America Corp. shares edged higher after its results. General Motors Co. rose to a record after Microsoft Corp. invested in its self-driving car startup. Netflix Inc. reports results after markets close.

Janet Yellen encountered early Republican resistance to President-elect Joe Biden’s $1.9 trillion Covid-19 relief plan in her confirmation hearing to become Treasury secretary. Donald Trump is in the final hours of his term, with Biden to be sworn in at noon Wednesday in Washington.

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The market moves on Tuesday show that investors are coming back to the reflation trade, betting that the incoming U.S. administration will use its legislative firepower to propel economic growth. Biden’s stimulus package includes measures like a minimum-wage hike and substantial expansion in family and medical leave -- programs that have already triggered Republican opposition.

“Yellen is a positive,” said Mohit Kumar, strategist at Jefferies International. “We should have greater co-operation between the Fed and the Treasury, with both the monetary and fiscal policy working together and supportive. This is a good backdrop for risk sentiment.”

In Asia, Hong Kong stocks closed at the highest level since May 2019. A spending spree by mainland investors is powering gains, lifting the Hang Seng Index up 2.7% on Tuesday.

Signs suggest that mainland buying will continue, with investors shifting out of A shares to buy those listed in Hong Kong. The benchmark Hang Seng Index is still cheaper than the Shanghai Composite gauge in terms of price-to-earnings multiples.

These are some key events coming up in the week ahead:

• Earnings come from companies including Morgan Stanley, Procter & Gamble, Intel, and Netflix.
• Joe Biden takes office as U.S. president on Wednesday.
• Policy decisions are due Wednesday from central banks in Brazil, Malaysia and Canada. The Bank of Japan and the ECB deliver decisions Thursday.

Here are the main moves in markets:

Stocks

• The S&P 500 Index jumped 0.8% as of 4 p.m. in New York.
• The Stoxx Europe 600 Index lost 0.2%.
• The MSCI Asia Pacific Index increased 1.2%.
• The MSCI Emerging Market Index increased 1.6%.

Currencies

• The Bloomberg Dollar Spot Index declined 0.2%.
• The euro climbed 0.4% to $1.2124.
• The British pound increased 0.3% to $1.3631.
• The Japanese yen weakened 0.2% to 103.89 per dollar.

Bonds

• The yield on 10-year Treasuries was little changed at 1.09%.
• The yield on two-year Treasuries slipped to 0.13%.
• Germany’s 10-year yield advanced one basis point to -0.526%.

Commodities

• West Texas Intermediate crude advanced 1.2% to $53.01 a barrel.
• Gold futures added 0.5% to $1,838.80 an ounce.

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