Equities jumped higher overnight after Federal Reserve Chairman Jerome Powell told 60 Minutes that it could do more to boost the markets. When asked by reporter Scott Pelley, “Has the Fed done all it can do?” Powell answered: “There’s a lot more we can do. We’re not out of ammunition by a long shot. There’s really no limit to what we can do with these lending programs that we have.” Also boosting shares were reports of early success in vaccine trials for coronavirus.
Small-cap and value shares benefited most from the positive news. The Russell 2000 Index gained 6.10 percent. Vanguard Value (VTV) climbed 3.89 percent and Vanguard Growth (VUG) added 2.28 percent. The Dow Jones Industrial Average increased 3.85 percent, the S&P 500 Index 3.15 percent and the Nasdaq 2.44 percent.
SPDR Energy (XLE) advanced 8.17 percent on the day, boosted by an 11 percent increase in West Texas Intermediate crude oil. SPDR Industrials (XLI) rose 6.59 percent and SPDR Financials (XLF) 5.13 percent.
The National Association of Homebuilders reported an uptick in homebuilder optimism in May. Their index slid to 30 in April amid the closed economy, but it rebounded to 37 this month. Tuesday brings housing starts and building permits for April and Thursday brings existing home sales.
Economists expect initial claims for unemployment fell to 2.35 million last week. Flash manufacturing and service PMIs for many economies will be out on Thursday. Investors will be looking for a rebound from April lows.
Finally, the minutes from last month’s Federal Reserve meeting will be released on Wednesday.
The U.S. Dollar Index declined 0.80 percent on Monday as “risk-on” trades dominated. The dollar fell nearly 1 percent versus the euro, but it has a small gain versus the yen. iShares MSCI EAFE (EFA) increased 4.04 percent and iShares MSCI Emerging Markets (EEM) climbed 3.91 percent.
The 10-year Treasury yield climbed to 0.74 percent on Monday, the highest close since mid-April. iShares 20+ Year Treasury (TLT) declined 2.20 percent. High yield and corporate bonds rallied as investors priced in the reopening of the U.S. economy. iShares iBoxx High Yield Corporate Bond (HYG) climbed 1.77 percent, Invesco Senior Loan (BKLN) 0.87 percent and Fidelity Corporate Bond (FCOR) 0.30 percent.
Retail earnings reports will dominate the week. Investors will hear from Home Depot (HD), Lowe’s (LOW), Wal-Mart (WMT), Kohl’s (KSS), Urban Outfitters (URBN), Target (TGT) and TJX Companies (TJX) among.
Chinese companies also report this week. On tap are Weibo (WB), Alibaba (BABA) and Autohome (ATHM).
Other companies reporting are Medtronic (MDT), Nvidia (NVDA), Expedia (EXPE), Palo Alto Networks (PANW), Deere (DE), Campbell’s Soup (CPB) and Intuit (INTU).