(Bloomberg) — Stocks climbed after bullish forecasts from tech giants, with traders scooping up some of the most-battered shares during a selloff sparked by fears the Federal Reserve could accelerate the unwinding of pandemic-era stimulus to combat inflation.
Major averages headed toward their biggest rallies this year, with the Nasdaq 100 outperforming after sinking more than 15% from its November peak. Software behemoth Microsoft Corp. surged after saying its cloud-computing business has potential to drive growth, while Texas Instruments Inc. jumped as an upbeat outlook signaled demand for electronic components remains high. Chipmaker Intel Corp. and electric-vehicle heavyweight Tesla Inc. gained before their results. The dollar and bond yields were little changed. Brent oil hit $90 a barrel for the first time since 2014 on supply jitters.
Read: Big Tech and Interest Rates Are Starting to Move in Unison Again
Fed policy makers are poised to signal plans for their first hike since 2018 and discuss shrinking a bloated balance-sheet to restrain the hottest inflation in nearly 40 years. They penciled in three 2022 rate increases in their December “dot plot,” and several officials have endorsed a March move. For HSBC Holdings Plc’s bond bull Steven Major, the Treasury market is already pricing in the process known as quantitative tightening.
The Federal Open Market Committee will release a statement at 2 p.m. in Washington, with Chair Jerome Powell set to hold a press conference 30 minutes later. There are no published forecasts at this meeting.
Comments:
- “Powell will be asked about the market during his presser, and there could be a bounce on his response. But that doesn’t change the goal — the Fed is tightening financial conditions. The Fed’s goal isn’t a market crash. A bear market would have a large impact on economic activity, working against the Fed’s goals,” wrote Dennis DeBusschere, founder of 22V Research.
- “The FOMC’s decision to delay the necessary and inevitable will only leave investors in market limbo for the next 6 weeks until the March meeting. There is no rush for investors to further commit themselves to an expensive market ahead of a tightening cycle,” wrote Michael O’Rourke, chief market strategist at JonesTrading.
- “While it’s possible that the FOMC elects to end asset purchases at this meeting, we think that is unlikely given that the taper has already been accelerated once. We expect the statement and Chair Powell’s press conference to lay the groundwork for a March hike,” wrote Paul Hickey, co-founder of Bespoke Investment Group.
- “Markets have priced in a much more hawkish Fed, so there’s the opportunity for a ‘not as bad as feared’ relief rally like we saw out of Powell’s testimony, even if the Fed telegraphs a March rate hike. But inflation remains high, and Fed rhetoric has been hawkish, so while not as likely as a dovish surprise, we can’t rule out a hawkish outcome, either,” wrote Tom Essaye, a former Merrill Lynch trader who founded “The Sevens Report” newsletter.
After a selloff that put stocks on course for their worst month since the start of the pandemic, strategists from Goldman Sachs Group Inc. and Citigroup Inc. say it’s now time to buy. Billionaire Paul Marshall is the latest trading titan to bet on value shares, which are making a historic comeback after years of neglect. Meantime, Barclays Plc strategists note that mutual funds and retail investors remain “very overweight” equities, so more de-risking is possible if fundamentals worsen.
Read: Grantham Has an Even Scarier Prediction Than His Crash Call
Other corporate highlights:
- Planemaker Boeing Co. recorded $5.5 billion in total charges and costs to cover higher factory and customer expenses for the 787 Dreamliner.
- AT&T Inc. posted earnings that topped estimates, giving investors less reason to fret over lavish free-phone promotions.
- Nasdaq Inc., operator of the technology-heavy stock exchange, posted record revenue that beat analysts’ expectations.
- Mattel Inc. won back the license to produce toys based on Walt Disney Co.’s princesses and the “Frozen” movies.
Read: Hedge Funds Face New SEC Disclosures as Gensler Cracks Down
The latest economic readings showed that sales of new U.S. homes climbed in December to a nine-month high. Meantime, the merchandise-trade deficit unexpectedly widened to a fresh record as imports continued to rise, outpacing shipments overseas.
On the geopolitical front, the U.S. told its citizens to consider leaving Ukraine now given the continuing tensions with Russia and the “unpredictable” security situation in the Eastern European nation. Russian Foreign Minister Sergei Lavrov said the Kremlin will respond to any “aggressive” action by the U.S. as an ally of President Vladimir Putin proposed shipping weapons to separatists. President Joe Biden said he would consider personally sanctioning Putin if he orders an invasion of Ukraine.
What to watch this week:
- South African Reserve Bank rate decision Thursday.
- U.S. initial jobless claims, durable goods, GDP Thursday.
- Euro zone economic confidence, consumer confidence Friday.
- U.S. consumer income, University of Michigan consumer sentiment Friday.
For more market analysis, read our MLIV blog.
Some of the main moves in markets:
Stocks
- The S&P 500 rose 1.5% as of 1:33 p.m. New York time
- The Nasdaq 100 rose 2.5%
- The Dow Jones Industrial Average rose 0.9%
- The MSCI World index rose 1.3%
Currencies
- The Bloomberg Dollar Spot Index was little changed
- The euro was little changed at $1.1293
- The British pound rose 0.1% to $1.3515
- The Japanese yen fell 0.4% to 114.31 per dollar
Bonds
- The yield on 10-year Treasuries advanced one basis point to 1.78%
- Germany’s 10-year yield was little changed at -0.07%
- Britain’s 10-year yield advanced three basis points to 1.20%
Commodities
- West Texas Intermediate crude rose 2.3% to $87.57 a barrel
- Gold futures fell 1.2% to $1,833.30 an ounce
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