U.S. Stocks Climb, Bonds Fall on Stimulus Bets: Markets Wrap

(Bloomberg) -- U.S. stocks halted a four-day losing streak as Congress moved toward a federal spending package that would boost the economy. Treasuries retreated.

The S&P 500 rebounded from its longest slide since September. Senate Majority Leader Mitch McConnell said he will keep lawmakers in Washington until a deal gets done. The 10-year Treasury yield moved above 0.90% as the Federal Reserve began its two-day meeting. The dollar weakened for a second day. Oil advanced with gold.

Wall Street is growing increasingly confident that Democratic and Republican lawmakers will clinch a bill based on a $748 billion bipartisan proposal that would inject cash directly into the economy as prior benefits begin to expire at the end of the year. The vaccine rollout continues in the U.S. without any major disruptions so far.

“The markets really locked into the optimism trade and it’s been heavily discounting bad news and focusing on good news,” said Olivia Engel, chief investment officer of active quantitative equity at State Street Global Advisors. “I’m not surprised the market chose to focus more on the good news even as lockdown announcements are coming.”

Bristol-Myers Squibb Co. climbed after Goldman Sachs Group Inc. added the drugmaker to its conviction buy list. In Europe, Volkswagen AG rallied 5% after the German carmaker’s board eased internal corporate tensions by backing CEO Herbert Diess. Trading was mixed in other markets. Asian stocks fell the most in two weeks.

While investors are pricing in optimism about the start of vaccine shots, there’s also ongoing concern over whether a stimulus bill from a bipartisan group of lawmakers will gain traction. The virus continued to rage in the U.S., threatening harsher restrictions across the nation. New York City Mayor Bill de Blasio warned that people should be prepared for a full shutdown. European governments are also tightening measures.

“Stimulus remains a key focus for the market, as it is the necessary bridge to expansive vaccinations,” said Lindsey Bell, chief investment strategist for Ally Invest. “Market participants would like to see a deal sooner rather than later given the expectation for economic data to slow near-term. In the absence of a deal, turbulence could pick up.”

In Europe, the pound rose and credit markets strengthened as Brexit negotiators pushed to reach a final trade deal. Following a weekend of intense diplomatic activity, Michel Barnier, who leads the EU team, said he can see a pathway to a deal -- if the two sides can resolve what he called their significant differences.

Barnier’s Narrow Path: How a Brexit Deal Could Be Done This Week

Here are some key events coming up:

• The Federal Reserve meets Tuesday and Wednesday, with markets widely expecting fresh guidance on its continued asset purchases.
• Policy decisions from the Bank of England and central banks in Mexico, Switzerland and Indonesia are due Thursday. Japan and Russia announce decisions Friday.

These are the main moves in markets:

Stocks

• The S&P 500 Index climbed 1.3% as of 4 p.m. in New York.
• The Stoxx Europe 600 Index increased 0.3%.
• The MSCI Asia Pacific Index decreased 0.3%.
• The MSCI Emerging Market Index was little changed.

Currencies

• The Bloomberg Dollar Spot Index dipped 0.5%.
• The euro rose 0.1% to $1.2159.
• The British pound climbed 0.9% to $1.3443.
• The Japanese yen strengthened 0.4% to 103.64 per dollar.

Bonds

• The yield on 10-year Treasuries climbed two basis point to 0.91%.
• The yield on two-year Treasuries gained less than one basis point to 0.12%.
• Germany’s 10-year yield fell three basis points to -0.61%.

Commodities

• West Texas Intermediate crude increased 1.3% to $47.28 a barrel
• Gold futures strengthened 1.4% to $1,858.30 an ounce.

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