Finance

Dow jumps 500 points to a record high as investors cheer Senate stimulus approval

U.S. stocks climbed on Monday as investors cheered Senate approval of a new Covid stimulus package and piled into shares best-positioned to benefit from an economic comeback.

The S&P 500 rose 0.4%, led by strong gains in financials, industrials and materials. The Dow Jones Industrial Average gained 520 points to hit an intraday record high. The tech-heavy Nasdaq Composite traded 1.3% lower in volatile trading as investors continued to dump high-flying shares amid rising rates. Apple and Tesla both dropped more than 3%.

The Senate passed a $1.9 trillion economic relief and stimulus bill on Saturday, paving the way for extensions to unemployment benefits, another round of stimulus checks and aid to state and local governments. The Democrat-controlled House is expected to pass the bill later this week. President Joe Biden is expected to sign it into law before unemployment aid programs expire on March 14.

The stimulus news boosted stocks banking on a strong economic recovery. Meanwhile, the Centers for Disease Control and Prevention said Monday people who’ve been fully vaccinated against Covid-19 can meet safely indoors without masks, further boosting reopening hopes.

Disney shares added more than 5% after California eased Covid rules, paving the way for Disneyland to reopen on a limited basis in April. American Airlines jumped 4%, while United Airlines popped 6%. Target rose 2.7%

Sentiment also got a boost after hedge fund manager David Tepper said the recent sharp rise in rates is likely over and it’s hard to be bearish on stocks right now.

“Basically I think rates have temporarily made the most of the move and should be more stable in the next few months, which makes it safer to be in stocks for now,” Tepper told CNBC’s Joe Kernen, who shared the comments on “Squawk Box.”

The benchmark 10-year yield has risen sharply in recent weeks in anticipation of more stimulus on top of a booming economic recovery. The 10-year Treasury yield rose 4 basis points to 1.6% Monday. The benchmark rate started the calendar year below the 1% mark.

Tepper believes the sell-off in Treasurys that has driven rates higher is likely over as big foreign buyers like Japan are poised to come in. He also said “bellwether” stocks like Amazon are starting to look attractive after the pullback.

Amid rising rates, investors rotated into names tied to an economic reopening in recent weeks, while dumping high-flying tech shares. For March, the Dow Industrials, leveraged more to the reopening, is up 3.8%, while the Nasdaq Composite is off by 2.5%. Meanwhile, the broader S&P 500 is up 1.8%. The S&P 500 remains less than 2% from an all-time high.

“We see higher rates largely as a function of earlier and stronger than expected economic recovery and supportive of our positive equity outlook,” Dubravko Lakos-Bujas, JPMorgan’s chief U.S. equity strategist, said in a note.

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