After choppy trading in the previous week, Wall Street staged a big rally on Monday. In the early afternoon, the S&P 500 was at 4,204.10, up 1.17% for the day, while the Dow Jones was at 34,447.67, up 0.70%. The Nasdaq Composite was at 13,680.20, up 1.56% for the day as tech stocks gained momentum.
That's a big difference from last Monday, when major equity averages began the week in the opposite direction, under pressure from a streak of hot inflation numbers in the U.S., Japan and the U.K., which spoiled trader and investor appetite for risk assets.
What's behind this Monday's rally? A couple of things. One of them is a sharp rebound in cryptocurrencies from another selloff during the weekend. It helped technology names associated with cryptocurrencies, like Nvidia Corp. (NVDA, Financial) and Square In.c (SQ, Financial), light up the Nasdaq.
Then there was news of the seven-day average of new daily Covid-19 cases falling close to 25% compared with one week ago, which helped names that benefit from the reopening of the economy, like tourism and travel companies.
And there was the release of the Chicago Fed National Activity Index, which dropped to 0.24 in April from an eight-month high of 1.71 in March. In addition, the index's three-month moving average decreased to 0.07 in April from 0.35 in March. That suggests a slowdown in economic growth, with production-related indicators contributing 0.18, down from 0.92 in March.
Meanwhile, the contribution of the employment, unemployment and hours category decreased to 0.05 from 0.38. In addition, the personal consumption and housing category contributed –0.06, down from 0.50 in March.
The weak CFNAI eased inflationary fears, helping push the 10-year Treasury bond yield lower to the 1.60% mark. That, in turn, provided support for risk-on trades as bargain hunters joined the party.
Still, prudent investors shouldn't be carried away from one day's economic data. The economic calendar for the rest of the week includes data on housing, gross domestic product and inflation, which can take Wall Street on a wild rally, as was the case over the last couple of weeks.
Disclosure: I own shares of Nvidia and Square.
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