Stocks, Bonds Rise As Traders Cheer Treasury Pick: Markets Wrap

Stocks and Treasuries rose as traders welcomed Donald Trump’s pick of Scott Bessent for US Treasury Secretary, betting the hedge fund manager will bring a Wall Street mindset to the role and soften the returning president’s support for sweeping tax cuts and trade tariffs.

Futures on the S&P 500 and Nasdaq 100 advanced 0.5% while the yield on 10-year Treasuries dropped seven basis points to 4.33%. Contracts on the Russell 2000 Index of small-cap stocks gained more than 1%. The dollar declined while Bitcoin rebounded from a weekend drop.

The market moves mark a reversal of some elements that define the so-called Trump Trade, including a surging dollar and rallying Bitcoin. The cooling enthusiasm about these assets comes as traders trim expectations for the president-elect to lower taxes and boosts tariffs, policies that may keep interest rates elevated and support the greenback.

Bessent’s nomination has eased concerns over the incoming president’s inflationary agenda, which had sparked a selloff in government bonds that drove the benchmark Treasury yield to a four-month high of 4.5%. The Key Square Group hedge fund manager has indicated he’ll back Trump’s tariff and tax cut plans but investors expect him to prioritize economic and market stability.

“Markets can now map a road ahead for policies,” said Colin Graham, head of multi-asset strategies at Robeco, whose positions are overweight on both US stocks and Treasuries. Bessent is “seen as more moderate on tariffs so could be perceived as bond positive.”

The “secret sauce” for the S&P 500 is a decrease in bond yields, Bank of America Corp. strategists said on Friday. US stock funds are set to attract record inflows this year, annualized at $448 billion, on the prospect of Federal Reserve rate cuts while the economy continues to grow at a healthy clip. The main US equity gauge has already rallied 25% in 2024.

RBC Capital Markets strategist Lori Calvasina tipped the S&P 500 to reach the 6,600 level by the end of 2025, an advance of about 11%, propelled by solid economic and earnings growth.

By contrast, a surge in bond yields would sink stock-market buoyancy and high valuations, according to Plurimi Wealth Management Group Chief Investment Officer Patrick Armstrong.

“There will come a point where multiples just aren’t sustainable if you’ve got 5% Treasuries,” Armstrong said in an interview with Bloomberg TV. “Unexpected inflation is what kills Treasuries and big cap tech at the same time.”

Bloomberg’s dollar index fell by the most in over two weeks. Traders betting on Trump’s fiscal policies — including sweeping trade tariffs and persistent economic growth — had pushed the dollar up for eight straight weeks through Friday.

In premarket trading, quantum-computing stocks rose on the prospect of a program being rolled out by Amazon Web Services. Bath & Body Works Inc. gained 13% after the retailer boosted its earnings per share forecast for the full year. Macy’s Inc. dropped after saying it would delay the release of its third-quarter earnings after an investigation revealed an employee hid tens of millions of dollars of expenses.

Corporate dealmaking caught traders’ attention on Monday morning. UniCredit SpA launched a €10 billion ($10.6 billion) all-share offer for domestic rival Banco BPM, opening a second major takeover front as it also pursues Commerzbank AG.

Banco BPM shares surged 8.5%. Commerzbank slumped 7.2%, while UniCredit shares were 2.5% lower.

Looking ahead, traders will closely parse the Federal Reserve’s November meeting minutes, consumer confidence and personal consumption expenditure data to help assess the outlook for rate cuts next year.

Key events this week:

• BOE Deputy Governor Clare Lombardelli and rate-setter Swati Dhingra speak, Monday
• ECB chief economist Philip Lane and Governing Council Member Gabriel Makhlouf speak, Monday
• Riksbank Deputy Governor Anna Seim speaks, Tuesday
• US FOMC minutes, new home sales, US Conference Board consumer confidence, Tuesday
• Bank of Canada Deputy Governor Rhys Mendes speaks, Tuesday
• China industrial profits, Wednesday
• New Zealand rate decision, Wednesday
• US PCE, initial jobless claims, GDP, durable goods, Wednesday
• Bank of Australia Governor Michelle Bullock speaks, Thursday
• South Korea rate decision, Thursday
• Eurozone economic confidence, consumer confidence, Thursday
• Japan unemployment, Tokyo CPI, industrial production, retail sales, Friday
• Eurozone CPI, Friday
• Bank of England issues financial stability review and policy committee minutes, Friday
• Canada GDP, Friday

Some of the main moves in markets:

Stocks

• S&P 500 futures rose 0.5% as of 8:32 a.m. New York time
• Nasdaq 100 futures rose 0.5%
• Futures on the Dow Jones Industrial Average rose 0.7%
• The Stoxx Europe 600 was little changed
• The MSCI World Index rose 0.3%

Currencies

• The Bloomberg Dollar Spot Index fell 0.7%
• The euro rose 1% to $1.0524
• The British pound rose 0.6% to $1.2607
• The Japanese yen rose 0.6% to 153.86 per dollar

Cryptocurrencies

• Bitcoin rose 0.6% to $97,637.39
• Ether rose 3.7% to $3,469.91

Bonds

• The yield on 10-year Treasuries declined seven basis points to 4.33%
• Germany’s 10-year yield declined two basis points to 2.23%
• Britain’s 10-year yield declined four basis points to 4.35%

Commodities

• West Texas Intermediate crude fell 0.3% to $71.05 a barrel
• Spot gold fell 1.2% to $2,684.67 an ounce

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