U.S. stock futures climbed Monday, suggesting that the major benchmarks will recover some ground following their worst week since October. Silver prices soared.
Futures tied to the S&P 500 rose 0.9%. Contracts linked to the tech-heavy Nasdaq-100 advanced 1%, and those tied to the Dow Jones Industrial Average gained 0.7%.
The Cboe Volatility Index, a gauge of stress in the U.S. stock market, declined almost 5% on Monday after gaining 45% in January. Some investors expect volatility to edge down this week as many hedge funds have already reduced short positions on stocks that have attracted a tremendous amount of attention on the internet.
In premarket trading, some of the most heavily traded stocks among individual investors extended recent gains. AMC Entertainment Holdings AMC 53.65% rallied 22% on Monday ahead of the market open, while headphone manufacturer Koss gained 7% and GameStop rose 4.6%.
“There has always been, in financial markets, a desire on the part of investors to get rich quick and so you may still wind up with isolated incidents in which you wind up with volatile performance of certain assets,” said Mark Dowding, chief investment officer at BlueBay Asset Management.
The broader stock market is likely to continue its rally this year, he added. “We think markets are going to do really well in the near term because you’ve got the hope that the economies are going to get better and we have a lot of policy support,” Mr. Dowding said.
A recent decline in U.S. Covid-19 infection rates will likely support market sentiment and allow stocks to retrace some of Friday’s losses, said Patrick Spencer, managing director at U.S. investment firm Baird. Newly reported coronavirus cases were down Sunday from a day earlier, as were hospitalizations and deaths.
“People were positioned very conservatively going into the weekend, and the news on the coronavirus and the continuation of central bank stimulation will add to momentum,” Mr. Spencer said. “You’ve still got a lot of cash on the sidelines wanting to come back into the market.”
Silver prices rallied, fueled by a wave of fresh enthusiasm from online traders. The move indicates that the recent bout of volatility is likely to extend into a second week in at least some pockets of the global financial market.
The most actively traded silver futures climbed over 10% to $29.70 a troy ounce, its highest level since February 2013. The precious metal has gained in recent sessions after users on Reddit’s WallStreetBets forum posted about executing a “short squeeze” similar to ones credited with fueling recent gains in other stocks such as GameStop and AMC. That suggests individual investors are taking on hedge funds that are betting on silver prices falling.
“I totally underestimated this,” said Carsten Fritsch, a commodities analyst at Commerzbank. “I couldn’t imagine this could ever happen to a serious and large market like silver.”
In bond markets, the yield on the 10-year Treasury note ticked down to 1.076%, from 1.090% Friday. Yields fall when prices rise.
Investors are continuing to monitor the corporate earnings season, with 111 companies from the S&P 500 index reporting this week. Results from big technology companies including Amazon.com and Alphabet are due Tuesday.
The Institute for Supply Management’s manufacturing index for January, due at 10 a.m. ET, is expected to show U.S. factory activity continued to expand, though perhaps at a slower pace than earlier months.
Overseas, the pan-continental Stoxx Europe 600 advanced 1.3%.
In Asia, benchmark indexes closed higher. South Korea’s Kospi climbed 2.7% and Hong Kong’s Hang Seng advanced 2.2%. China’s Shanghai Composite gained 0.6%.
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