Leading U.S. indices traded in choppy trade range. The FED, last week, indicated that they would be tolerant of high inflation—which it believes would be transitional, remain accommodative on monetary policy, and keep interest rates low. However, it didn't comment on rising bond yields. This saw the stock market rise, buoying the NASDAQ, S&P 500, and the DOW.
Investors closely monitor bond yields that rose on Monday, forcing the stock market lower at the back of slumping oil prices. The result says funds flow from "value" stocks—energy and banks, to tech stocks which were the primary beneficiaries of the coronavirus pandemic. This rotation back to tech could continue, propping the currently beaten-up sectors.
Impact on Indices:
Neutral. Analysts are concerned about an overvalued stock market that's fragile, crashing on even the slightest movement. The borrowing cost may cause a market cap calibration across the board, causing a dump down on stocks and therefore indices. If the FED doesn't impose yield curve controls, stocks could retrace from current levels, a net negative cascading to impact leading indices.
More market news over on our Blog
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