US stocks posted their biggest rally on Tuesday, after investors bought shares in companies that would benefit the most from the economic recovery. Leading the growth were financial and industrial stocks, which pushed the S&P 500 up by 1.7%.

At the same time, 10-year bond yields surged after dropping earlier on speculation that the Federal Reserve will continue to adhere to a super-soft monetary policy.

Clearly, traders are not afraid that the ongoing increase in COVID-19 infections will limit economic recovery. At the same time, they view the recent sell-off as an opportunity to build up long positions amid the prospect of solid earnings, government stimulus and soft monetary policy.

In fact, Schroders strategist Bill Callahan said it is ideal to buy stocks in the current environment because doing so will give great profit.

With regards to the economy, latest data showed that US housing construction increased more than expected in June, indicating a stabilization in the sector despite continued supply chain disruptions and labor shortages.

Other important events for this week are:

- policy decisions of the European Central Bank (Thursday);

- policy decisions of the Bank of Indonesia (Thursday);

- data on US home sales (Thursday);

- Summer Olympic Games in Tokyo (Friday).