The Dow Jones Industrial Average and the S&P 500 on Monday closed at records and Treasury yields remained just below one-year highs as investors assessed inflation risks following the passage of the $1.9 trillion relief package for the U.S. economy.
The Dow finished up 174 points, or 0.53%, to 32,953. The blue-chip index finished higher for the seventh straight session and touched an intraday record.
The S&P 500 rose for a fifth day, up 0.65%, and the Nasdaq gained 1.05%.
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The 10-year Treasury dipped to 1.609% Monday but remained elevated. Investors’ confidence in an economic recovery was boosted by the U.S. aid package and President Joe Biden‘s pledge that all Americans would be eligible to receive a COVID-19 vaccine by May 1.
Many traders and economists say inflation will move higher with the additional stimulus. But Treasury Secretary Janet Yellen said U.S. inflation risks remain subdued despite the relief package.
“The most significant risk we face is a workforce that is scarred by a long period of unemployment,” Yellen said Sunday on ABC’s “This Week.”
“People being out of work, not able to find jobs, can have a permanent effect on their well-being. I think that’s the most significant risk. Is there a risk of inflation? I think there’s a small risk. And I think it’s manageable.”
Fears of rising inflation likely will be on the minds of investors when the Federal Reserve meets this week. Federal Reserve Chairman Jerome Powell has said inflation likely will rise as the economy recovers but he says it will be temporary.
The Fed’s two-day meeting begins Tuesday. On Wednesday, the central bank will announce its decision on interest rates and Powell will hold a news conference.
“Heading into the second half of March, U.S. stocks are coming off their second-best week of the year, with the SPX and DJIA notching record highs — although not without some drama, as rising interest rates continued to demonstrate their potential to trip up the market, particularly in tech, on any given day,” said Chris Larkin, a managing director at E-Trade.
“And with a Fed announcement on deck this week, there may be trepidation mounting among traders as the market looks for any signs from Chairman Powell deviating from his set plan. But keep in mind, coming off of a record week, a slight pullback wouldn’t be out of the norm.”
Oil prices declined Monday following data from China that showed retail sales and industrial output in the world’s second-largest economy surging more than 30% over the first two months of the year. That suggests a powerful start to 2021 following its exit from the coronavirus pandemic late in 2020.