Stocks pop as bond yields take a breather

Stocks jumped at Monday’s opening bell as US Treasury yields are pulling back and taking a breather from their recent ascent.

The Dow opened 1.1%, or some 350 points, higher, while the broader S&P 500 climbed 1.4%. The Nasdaq Composite opened up 1.6%.

The recent jump in US government bond yields weighed on the stock market last week. Investors concerned that inflation could spike as the economy reopens fully, forcing the Federal Reserve to raise interest rates sooner than expected, pushed bond yields higher.

And higher interest rates would make it more expensive for companies to borrow, and are thus bad for stocks. This dynamic played out all of last week even though Fed Chairman Jerome Powell reiterated that the central bank wasn’t concerned about a prolonged jump in inflation.

“While still very low from a historical perspective, yields have marched steadily higher over the last two months due to the prospects of an economic boom,” wrote investment strategists at Edward Jones.

The 10-year US Treasury bond yielded 1.43% around the time of the New York open, down 0.02%. Bond yields and prices move opposite to one another.