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Dow surges nearly 590 points, books best day since March as stocks bounce after worst week since October

By Joy Wiltermuth and Mark DeCambre

S&P 500 books best day since mid-May

Stock-market benchmarks recorded significant gains Monday, with the Dow Jones Industrial Average seeing its best day since early March, as investors focused on a strengthening economy after the Federal Reserve last week signaled it may raise rates sooner than previously expected.

What did major benchmarks do?

On Friday, the Dow tumbled more than 500 points, leaving the blue-chip index with its biggest weekly fall, a drop of 3.5%, since October. The S&P 500 suffered a weekly tumble of 1.9%, while the Nasdaq Composite gave up just 0.3%.

What drove the market?

Stocks charged higher Monday as investors focused on strengths in the U.S. economy heading into the summer months, as domestic COVID restrictions fade.

"There was a bit of a selloff last week, with concerns about potentially higher interest rates and a more aggressive Fed," said John Carey, director of equity income at Amundi U.S. "Today, it seems that maybe was overdone."

Carey said "people remain optimistic about the economy" in the U.S. as more households emerge from lockdowns, despite lingering concerns about the global pace of vaccinations and as 30 U.S. states looked poised to fall short (http://30 states likely to miss President Biden's July 4 vaccination goal, and Brazil death toll tops 500,000)of the Biden administration's July 4 vaccination goals.

The White House on Monday also provided more detail of its plans to share 55 million COVID vaccine doses (link) from the U.S. supply globally, including shots destined for countries in Latin America, the Caribbean, Asia and Africa.

"Certainly, the coast is not clear," Carey told MarketWatch. "We will see how things go over the next few months."

The move higher for U.S. and European stocks comes after the Fed's latest policy update unsettled investors, contributing to a flattening of the Treasury yield curve as short- and medium-dated yields rose sharply and long-term yields fell, while the dollar soared and equities ultimately slid, though growth-oriented shares outperformed.

Those moves largely dissipated Monday, with the dollar heading lower and long-dated Treasury yields, which move opposite to prices, headed higher.

The Tell:Markets are sending 'peculiar' signals as Fed changes tune--here's what they mean (link)

Investors also heard more from several Fed officials this week, ahead of Chairman Jerome Powell's planned testimony Tuesday before the House select subcommittee on the coronavirus.

Both St. Louis Fed President James Bullard and Dallas Fed President Rob Kaplan said Monday they expect the pace of inflation next year to remain above (link) the central bank's target.

Bullard also said he was glad the central bank has begun to debate when to slow down its $120 billion per month in asset purchases, even if he won't be a voting member of the rate-setting Federal Open Market Committee until 2022.

New York Fed President John Williams said Monday he's not ready yet (link)for a scale back of central bank support, even if the spike in inflation looks mostly due to temporary factors (link).

Read:Investors growing more fearful of a Fed mistake (link)

"If you consider inflation transitory -- which the Fed does and which makes sense -- then the very high number of unemployed is now the bigger problem," Brad McMillan, chief investment officer at Commonwealth Financial Network, wrote in a midyear outlook.

Even so, he thinks with the Fed's labor market focus means the government will continue to supply monetary and fiscal stimulus, which will keep the economic recovery growing at a fast pace this year.

"As such, corporate earnings are likely to keep growing -- and to push markets higher," McMillan wrote.

See:Buybacks may prop stock market rattled after Fed meeting (link)

Which companies were in focus?

How did other assets fare?

William Watts contributed reporting

-Joy Wiltermuth; 415-439-6400;


(END) Dow Jones Newswires

06-21-21 1629ET

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