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Top 5 Things to Watch in Markets in the Week Ahead

EconomyFeb 28, 2021 07:48AM ET
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© Reuters

By Noreen Burke

Investing.com -- The shakeup in stocks prompted by the rapid run up in Treasury yields looks set to continue to be a major focus for markets in the coming week, particularly if stronger economic data pushes Treasury yields even higher. Investors will be focusing on Friday’s employment report, which is expected to show that virus restrictions kept a lid on jobs growth in February. Appearances by several Federal Reserve speakers, including Chairman Jerome Powell will also be closely watched. The OPEC+ coalition is expected to moderately increase oil output at its meeting on Thursday, with prices near 13-month highs. In Europe, the UK budget is due on Wednesday, while euro zone economic data will show how the economy is coping with ongoing pandemic restrictions. Here’s what you need to know to start your week.

  1. Tug of war between stocks, rising bond yields

The shift into energy, financial and other stocks set to benefit from the economic reopening has accelerated, while rapidly climbing Treasury yields are pressuring tech stocks that have led market gains for years.

Tech stocks are particularly sensitive to rising yields because their value rests heavily on future earnings, which are discounted more deeply when interest rates go up.

A dovish sounding Fed together with expectations for more stimulus have propelled yields higher and fueled concerns about inflation and the two-track market looks set to continue, at least in the short team.

Meanwhile, earnings season is wrapping up, but retailers will still be reporting, with Target (NYSE:TGT), Kohl's (NYSE:KSS) and Nordstrom (NYSE:JWN) due to publish figures on Tuesday, followed by Costco (NASDAQ:COST) on Thursday.

  1. February jobs report

With President Joe Biden's $1.9 trillion coronavirus relief package advancing to the Senate Friday’s nonfarm payrolls report for February will show how the recovery in the labor market is faring.

Government data late last week showed that initial jobless claims unexpectedly declined to their lowest in three months, indicating that the slowing infection rate is allowing the labor market to gain some traction. Retail sales also rebounded in January.

Economists are expecting the U.S. economy to have created 165,000 new jobs in February, after January's 49,000 increase. But the winter storms that swept across the South may complicate the picture.

  1. Powell speech

With the rapid climb in Treasury yields roiling the stock market investors may be hoping for Fed officials to address the selloff in Treasuries.

Fed Chair Jerome Powell is set to speak about the economy at an online event hosted by the Wall Street Journal on Thursday. So far there has been little sign of anxiety among Fed officials about higher Treasury yields.

Last week Powell said the move higher was the result of a stronger economy but added that the rate of economic recovery has slowed in recent months and reiterated that monetary policy will remain easy for some time to come.

Other Fed official set to make appearances include New York Fed President John Williams, Fed Governor Lael Brainard, Atlanta Fed President Raphael Bostic, San Francisco Fed President Mary Daly, Philadelphia Fed President Patrick Harker and Chicago Fed President Charles Evans.

  1. OPEC+ meeting

With oil prices at 13-month highs, the OPEC+ producers' meeting on Thursday is expected to discuss increasing production from April.

The Organization of the Petroleum Exporting Countries and allies, known as OPEC+, slashed output by 9.7 million barrels per day last year as the pandemic ravaged global demand.

OPEC+ sources reckon a 500,000 bpd output increase looks possible without causing an inventory build-up, as economies recover.

Russia is keen to raise supply. Saudi Arabia's voluntary 1 million bpd cut also expires in March, and that supply may return from April.

  1. UK budget, euro zone data

In the UK, finance minister Rishi Sunak will pledge more budget spending on Wednesday, but it may be the last bit of pandemic-related support he offers. The budget is expected to pile more borrowing on top of nearly 300 billion pounds ($418 billion) of COVID spending and tax cuts.

The budget plan will be closely watched as it will be one of the largest factors determining the pace of the economic recovery.

Meanwhile in the euro zone, data on inflation, PMIs, retail sales and unemployment will show how the economy is faring ahead of the European Central Bank’s March meeting.

--Reuters contributed to this report

Top 5 Things to Watch in Markets in the Week Ahead
 

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Comments (13)
Daniel Lu
Daniel Lu Feb 28, 2021 9:07PM ET
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Asian market is more focused on tax rise for stock trades
Viking Fire
Viking Fire Feb 28, 2021 6:02PM ET
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Vaccines out things lining up. Buy buy buy while you can
Leon Kelly
Leon Kelly Feb 28, 2021 6:00PM ET
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Monday and Tuesday Green highs, wed, Thursday and Friday expect Gravity
Dave Jones
Dave Jones Feb 28, 2021 1:17PM ET
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I don't understand how a dovish fed has spiked rates? The way I see it there's a tsunami of bonds about to hit the market with no one turning up to buy them. It's market forces supply and demand. fed could potentially buy everything then it's the buyer of last resort and it's balance sheet becomes the US national debt. You can't taper a ponzi and this is the biggest one in world history!
Art Fire
Art Fire Feb 28, 2021 1:17PM ET
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This isn't new.  It's called "stimulus" for a reason. Stimulate now, deal with consequences later. Same old story. Lets just hope in 5 or 10 years we don't have another record-setting economic disaster because 3 decades in a row is too much.
سعید پاشایی
سعید پاشایی Feb 28, 2021 12:47PM ET
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good
Ali Raza Ali Raza
Ali Raza Ali Raza Feb 28, 2021 12:25PM ET
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Matthew Szot
Matthew Szot Feb 28, 2021 11:48AM ET
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don't watch gme
Kaveh Sun
Kaveh Sun Feb 28, 2021 11:41AM ET
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Bonds trade below par as interest rates rise, as the issuer's credit rating falls, or when the bond's supply greatly exceeds demand. Biden is selling too much bonds. The media is covering up as usual for dems as usual.
Dave Jones
Dave Jones Feb 28, 2021 11:41AM ET
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totally
Viking Fire
Viking Fire Feb 28, 2021 11:41AM ET
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Interest rates on the rise?
Kaveh Sun
Kaveh Sun Feb 28, 2021 11:37AM ET
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It is all Biden fault. Biden needs money. Janet/Treasury is issuing,selling bonds left n right. They have to sell at discount ie interest raise otherwise no or few buys.
Terry Barker
Terry Barker Feb 28, 2021 11:14AM ET
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Remember the multiplier effect from the 2008 recession? Didn’t work then. Won’t work now.Bond vigilantes watching
Dave Tran
Dave Tran Feb 28, 2021 11:08AM ET
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You can never tax the rich for the simple reason that the rich is by definition the poor that becomes smart . And the poor can never tax their dream because they or their kids want to become smarter one day. Think about this please.
Ajay Philip
Ajay Philip Feb 28, 2021 11:08AM ET
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think about this... there is a hugh misconception about being RICH! “RICHES” are plentiful! I have rich knowdge to Distinguish between being rich versus plain old wealthy! The wealthy do not go broke even if they tried
The Chad Bull
The Chad Bull Feb 28, 2021 10:33AM ET
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You can’t print your way to prosperity. The USA produces nothing while consuming goods from china. China is the new superpower
Jim Jones
Jim Jones Feb 28, 2021 10:15AM ET
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Good thing handouts are a key driver in the worlds largest economy. What could go wrong?
Andrew Meadows
Andrew Meadows Feb 28, 2021 10:15AM ET
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I'd rather us overheat a bit versus putting too little wood in the fire like in 2008-2009. It was embarrassing to watch China with smaller economy do a bigger stimulus.
 
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