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Futures Fade Overnight Surge As Jump In Yields Sparks Market Jitters

US equity futures and global markets rose this morning, continuing yesterday’s torrid late day surge, as investors looked past supply chain disruptions and focused on the optimistic targets for vaccinations and economic re-openings, after Joe Biden doubled the goal for his vaccination drive even though Covid-19 cases keep rising, and the Federal Reserve freed banks from pandemic restrictions on dividends. Oil rebounded and pushed Treasury yields higher, prompting investors to buy undervalued energy and bank stocks ahead of what is expected to be the fastest economic growth since 1984. Investors awaited key income, spending and inflation data later in the day.

Risk appetite made a comeback across the world on economic-recovery bets, capping a volatile week beset with vaccine-supply disputes, a traffic block on the Suez canal and further deterioration in China’s relations with the West. The renewed optimism helped investors look past another poor 7Y debt auction in the U.S.

“Like a flickering light bulb, the tone of the market has somehow altered from angst to optimism, spurred by President Biden’s doubling of the U.S. vaccine-rollout target and the Fed’s end to pandemic-era dividend cuts,” Nema Ramkhelawan-Bhana, a strategist at Rand Merchant Bank in Johannesburg, wrote in a note. “It’s remarkable how little it takes to shift the mood.”

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