S&P 500; US Indexes Fundamental Daily Forecast – Set to Post Sharp Gains on Opening

The major U.S. stock indexes are expected to open higher on Monday based on the pre-market price action. This is a strong follow-through rally in reaction to Friday’s sharp gains.

At 1210 GMT, March E-mini S&P 500 Index futures are trading 2760.50, up 11.75 or +0.43%. March E-mini Dow Jones Industrial Average futures are trading 25484, up 170 or +0.67% and March E-mini NASDAQ-100 Index futures are at 6932.50, up 22.75 or +0.33%.

In the cash market on Friday, the benchmark S&P 500 Index settled at 2747.30, up 43.34 or +1.58%. The blue chip Dow Jones Industrial Average closed at 25309.99, up 347.51 or +1.37% and the tech-based NASDAQ Composite finished at 7337.14, up 127.05 or +1.73%.

On Friday, stocks finished higher, as concerns over rising interest rates subsided. This theme could be continuing early Monday with U.S. government debt yields under pressure on worries surrounding the future of the economy and uncertainty over U.S. monetary policy.

Forecast

Based on the early price action, it looks as if stocks could be underpinned today by weaker U.S. Treasury yields. In the absence of major economic releases today, the general theme is likely to be, lower yields, higher stocks.

Minor economic data includes New Home Sales at 1500 GMT, followed by the Dallas Fed’s Texas manufacturing outlook survey, set to be released at 1530 GMT. The Chicago Fed’s Activity Index is set to be released at 1330 GMT. Late in the day at 2015 GMT, Fed Governor Randal Quarles, a voting member of the FOMC, is scheduled to speak.

A few days ago, Quarles said inflation is running a little below target which shouldn’t stand in the way of interest rate increases. In addition to monetary policy, Quarles said now would be a time to review the banking regulations put in place in response to the 2008 financial crisis.

Today’s price action indicates that investors may have grown accustomed to a rising interest rate environment. Currently, investors are pricing in three quarter-point increases this year and give a 30 percent chance for a fourth.