Stocks face the crosscurrents of higher interest rates and fiscal stimulus in the week ahead

Stocks face the crosscurrents of higher interest rates and fiscal stimulus in the week ahead

The Covid-19 aid package is on track for final congressional approval in the week ahead “” and it could be a double-edged sword for markets.The legislation should be greeted by optimism around the powerful lift it could give the stock market and the economy, but it could also be met with concern about what a historically large stimulus package could do to inflation and interest rates.Stocks were mixed in the past week, with the Dow and S&P 500 higher, but the Nasdaq was dragged lower by interest rate-sensitive tech names. The benchmark 10-year Treasury yield has continued to press higher, revisiting its recent high of 1.61% on Friday, before trading at 1.54% in late trading. Yields move opposite price.

One wild card for stocks could be how interest rates behave around upcoming Treasury auctions. There is a $38 billion 10-year auction on Wednesday and a $24 billion 30-year bond auction on Thursday. Traders are watching these closely, after a historically weak 7-year Treasury note auction in February sent rates higher, even for the 10-year."We're a little more cautious on them, just given what we saw in the 7-year and some Japanese selling pressure," said Ben Jeffery, strategist on the U.S. rates strategy