U.S. stocks edged higher, as stocks showed modest momentum after both the Dow Jones Industrial Average and the S&P 500 closed last week at a record.
The Dow Jones Industrial Average rose 0.4% in early trading, suggesting that blue-chip stocks in companies sensitive to the economic recovery would extend their gains. The S&P 500 was up 0.1%. The Nasdaq Composite Index ticked less than 0.1% higher, pointing to muted gains for the technology sector.
The stock market last week resumed its rally on a firmer footing after weeks of being buffeted by sharp moves in the U.S. government bond market. The yield on 10-year Treasurys has climbed for six straight weeks, its longest winning streak since December 2016. Some money managers have grown concerned that inflation will climb sharply, which could prompt the central bank to consider increasing interest rates within the next two years.
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Federal Reserve officials have repeatedly tried to calm such fears, and have reiterated that they will keep monetary policy loose for the foreseeable future to help the labor market’s recovery. Investors are looking to the Federal Reserve’s next monetary policy statement on Wednesday for further guidance about the health of the economy, and policy makers’ views on rising bond yields and inflation prospects.
“The fear factor has now gone away, so markets are now finding an equilibrium. Bond yields will go higher, but central banks are not backing down,” said Carsten Brzeski, ING Groep ’s global head of macro research. “The Fed meeting will clearly be crucial and essential in terms of further educating markets as to what the Fed is up to.”
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