Yield Decline Revives Investor Demand

Stock futures and government bonds climbed Monday as investors awaited a slate of Federal Reserve speakers and data on the manufacturing sector.

Futures tied to the S&P 500 rose 1.2% and contracts for the NASDAQ advanced 1.5% after a bruising week for technology stocks. The broad advance came as the yield on 10-year Treasury notes, the benchmark borrowing cost in global debt markets, slipped to 1.416% from 1.459% Friday. Yields fall when bond prices rise.

Stocks, and particularly shares of tech companies, have been buffeted by volatile moves in government-bond markets in recent trading sessions.

A lurch higher in yields last week called into question the prospect of a long period of low interest rates, which had underpinned the past year's booming rally in stocks.

Monday's decline in yields helped revive investors' demand for stocks.

But money managers remained wary of further spikes that could spark fresh volatility in share prices. Investors will later parse a speech by Fed governor Lael Brainard for clues about whether the central bank will push back against higher yields.

"This week is key," said Andrea Carzana, a fund manager for London-based Columbia Threadneedle Investments. If the Fed doesn't seek to tamp down expectations of higher inflation, yields could continue to rise, rattling the stock market, according to Mr. Carzana.

"I'm expecting turbulence or volatility to remain with us until we have a better understanding of where central banks stand," he said.

Fed officials have so far suggested the climb in yields reflects expectations for an economic recovery fueled by the vaccine program and the likelihood of additional fiscal stimulus.

President Biden over the weekend urged the Senate to take quick action after the House passed his $1.9 trillion Covid-19 relief package. Democrats are racing to finish the package before Mar. 14, when certain types of federal unemployment assistance are set to expire.

It is the pace at which yields have jumped, rather than their outright level, that has unsettled many investors. "I still think equities are more attractive than bonds, especially if you believe there will temporarily be some inflation,"

Mr. Carzana said, adding that stocks offer more protection against rising prices. Ms. Brainard is due to address a conference of the Institute of International Bankers on financial stability at 9:05 a.m. ET.

The New York Fed's John Williams, Cleveland Fed's Loretta Mester and Minneapolis Fed's Neel Kashkari are also scheduled to make public appearances.

The reading from the Institute for Supply Management's February manufacturing index is due out at 10 a.m., and is expected to show another month of robust growth in activity at U.S. factories.

The corporate earnings season is winding down, with Zoom Video Communications (NASDAQ:ZM) and Novavax (NASDAQ:NVAX) scheduled to report quarterly results after markets close.

Oil markets resumed their rally ahead of a meeting of the Organization of the Petroleum Exporting Countries and its partners on Thursday. Brent futures, the benchmark in international energy markets, rose 1.7% to $65.52 a barrel, extending their advance this year to 27%.

Analysts expect the cartel, which has held back millions of barrels of crude oil a day since last spring to bolster prices, to agree to boost production in April. Improving investor sentiment buoyed overseas markets.

The Stoxx Europe 600 jumped 1.7%, led higher by shares of retail and travel-and-leisure companies, whose fortunes hinge on the reopening of economic activity.

In Asia, Japan's Nikkei 225 rose 2.4% by the close and China's Shanghai Composite Index added 1.2%. China's manufacturing activity eased in February, posting the slowest rate of expansion in nine months, according to a private survey of manufacturers.

Still, it was the 10th consecutive month in which the Caixin index held above the 50 mark, which separates expansion from contraction.