With Stimulus Approval, ETFs Continue Friday's Surge

Stocks and index ETFs were mixed to higher, continuing their recovery on Monday, as investors were invigorated by Senate approval of a fresh coronavirus stimulus package, helping to boost companies set to benefit from an economic return.

The S&P 500 rose 0.9% buoyed by financial stocks, while the Dow Jones Industrial Average added 460 points or 1.5%. The Nasdaq Composite meanwhile lost 0.6%, as tech volatility dragged the index lower.

Major stock ETFs are mixed on Monday as well. The SPDR Dow Jones Industrial Average ETF (DIA) and SPDR S&P 500 ETF Trust (SPY) are both higher, while the Invesco QQQ Trust (QQQ) is declining just after 12:15 PM EST.

Hedge fund manager David Tepper helped investor enthusiasm when he said that the recent pop in rates is likely over and it’s difficult to be bearish on stocks right now.

“Basically I think rates have temporarily made the most of the move and should be more stable in the next few months, which makes it safer to be in stocks for now,” Tepper told CNBC’s Joe Kernen, who shared the comments on “Squawk Box.”

Markets have been jittery lately as the benchmark 10-year yield has spiked in recent weeks, as markets have been awaiting additional stimulus to add to a robust economic recovery. The 10-year Treasury yield climbed another 4 basis points to 1.6% Monday, after commencing 2021 below 1%.

Tepper feels the nosedive in Treasuries that has driven rates higher, as rates run opposite to bonds, is likely finished, as big foreign buyers like Japan are set to come at for lower prices.

More Stimulus Is Impending

The big news for markets is that the Senate passed a $1.9 trillion economic relief and stimulus bill this weekend, making room for extensions to unemployment benefits, an additional round of stimulus checks, and help for state and local governments. The House is predicted to pass the bill later this week, after which President Biden would sign it into law before unemployment aid programs terminate on March 14.

Investors also cheered news from the Centers for Disease Control and Prevention, which on Monday said that people who’ve been fully vaccinated against coronavirus can meet safely indoors without masks.

The stimulus news aided stocks and ETFs poised to benefit from an economic recovery, such as the Invesco Dynamic Leisure and Entertainment ETF (PEJ). Reopening stocks like Disney jumped nearly 4% after California eased coronavirus rules, implying that popular theme park Disneyland could reopen on a limited basis in April. American Airlines also popped 4%, while United Airlines surged 6%.

“We see higher rates largely as a function of earlier and stronger than expected economic recovery and supportive of our positive equity outlook,” Dubravko Lakos-Bujas, JPMorgan’s chief U.S. equity strategist, said in a note.

The recent divergence between tech and cyclical plays suggests that the bull market is still going strong, according to Mike Wilson, the chief U.S. equity strategist at Morgan Stanley.

“The bull market continues to be under the hood, with value and cyclicals leading the way. Growth stocks can rejoin the party once the valuation correction and repositioning is finished,” Wilson said.

For more market trends, visit  ETF Trends.