The Federal Reserve boosted stock and bond markets again on Monday, announcing a plan to buy individual corporate bonds. The S&P 500 Index increased 0.83 percent.
SPDR Communication Services (XLC) led with an increase of 1.61 percent, followed by the largest issuers of debt securities, financials and real estate. SPDR Financials (XLF) rallied 1.38 percent and SPDR Real Estate (XLRE) climbed 1.27 percent. Biotechnology was a strong subsector, with SPDR S&P Biotech (XBI) advancing 2.82 percent. High beta stocks also outperformed. Invesco S&P 500 High Beta (SPHB) climbed 1.19 percent. Low volatility also held up well considering the environment though. iShares Edge MSCI Minimum Volatility USA (USMV) rose 0.72 percent.
The Federal Reserve will start buying individual corporate bonds along with the corporate bond ETFs it is already buying. This is part of the Fed’s efforts to keep markets functioning and ease funding for corporations. In March, the Fed gave itself the authorization to buy up to $750 billion in corporate bonds through its Secondary Market Corporate Credit Facility.
May retail sales will be out today. Analysts expect “make up” consumption took place. They see sales rising 8.5 percent on the month and 6.5 percent ex-autos. Industrial production is also expected to rebound from April lows and rise 2.8 percent.
Housing sales and building permits for May will be released on Wednesday. Economists forecast large rebounds for both reports.
Federal Reserve Chairman Jerome Powell will testify before the Senate on Tuesday and the House on Wednesday.
Initial claims for unemployment will be closely watched on Thursday. Claims have been falling steadily week after week. Analysts predict claims will fall from 1.54 million to 1.35 million.
Crude oil climbed above $27 per barrel on Monday. SPDR Energy (XLE) gained 0.30 percent.
The U.S. Dollar Index tumbled 0.42 percent on the Fed’s decision to buy individual corporate bonds.
Investment grade corporate bond funds did not move significantly due to the Fed’s announcement, but high yield caught a bounce. Fidelity Corporate Bond (FCOR) added 0.29 percent. iShares iBoxx High Yield Corporate Bond (HYG) climbed 0.97 percent.