Traders on the floor of the New York Stock Exchange, August 11, 2021.
Source: NYSE
Stocks were higher Monday following a volatile week on Wall Street as investors eye a key event where the Federal Reserve could hint at prospects for tapering stimulus.
The Dow Jones Industrial Average gained 290 points, or 0.8%. The S&P 500 and Nasdaq Composite added 1% and 1.5%, respectively, to all-time highs.
Traders are eagerly awaiting the Jackson Hole symposium for clues on the Fed’s timeline for dialing back its $120 billion a month bond-buying program. The event takes place virtually on Thursday and Friday.
“Markets, climbing the Wall of Money, continue to search for clues on the Fed’s taper decision as developments unfold, the next opportunity at Jackson Hole,” said BTIG’s Julian Emanuel.
Shares of vaccine makers are trading higher Monday after the Food and Drug Administration granted full approval for the two-dose Pfizer-BioNTech vaccine on Monday morning, the first licensing of a vaccine for Covid-19. Pfizer shares are up 2.9%. Its partner BioNTech‘s stock jumped 10.8% and Moderna is 7% higher. Trillium Therapeutics is soaring on news that it’ll be acquired by Pfizer. Its shares are up 189%.
Travel and leisure stocks reacted positively to the news, with Delta and American Airlines moving 2% higher. Carnival and Norwegian Cruise Lines gained about 3%.
Energy stocks are leading the S&P 500 as oil prices jumped Monday and snapped its longest losing streak since 2019. Diamondback Energy and Occidental Petroleum are 6% higher, and Devon Energy gained 5%.
Major averages are coming off a losing week as investors grew worried that the Fed’s potential move to pull back monetary stimulus could slow down the economic recovery that is already challenged by the spread of the delta Covid-19 variant.
“Markets may take a breather after their recent run, but strong Q2 results have provided a fundamental justification and reinforced our confidence in the sustainability of the recovery,” according to Barclays.
Chairman Jerome Powell’s Friday speech is titled “The Economic Outlook,” and could have a more near-term focus, according to Nomura economist Aichi Amemiya.
“Given the recent deterioration in incoming data and the pandemic situation, we see some risk Powell focuses on increased uncertainty due to the latest COVID-19 surge,” Amemiya said in a note. “At a minimum, we view recent comments from Fed officials as supporting our view of a December tapering announcement despite a preference on the FOMC for November as of the July meeting.”
The blue-chip Dow fell 1.1% last week, while the S&P 500 declined nearly 0.6%, breaking a two-week winning streak. The tech-heavy Nasdaq dipped 0.7% during the week.
“We suspect investor conviction is being challenged by the potential for upcoming monetary policy changes, shifting growth vs. value rotations, and a rising trajectory of new coronavirus cases,” Craig Johnson, technical market strategist at Piper Sandler, said in a note.
For the month of August, major benchmarks are poised to post modest gains. The S&P 500 is up 1.1% month to date, while the blue-chip Dow has gained 0.5% and the Nasdaq has climbed 0.3%.
“August is a historically volatile month for markets and this year is no different, with investors currently climbing multiple walls of worries,” said Rod von Lipsey, managing director at UBS Private Wealth Management. “Upticks in Covid-19 cases and a downward spiral in Afghanistan are creating a crisis of confidence, at a time when many investors are on holiday.”
