(Bloomberg) — Stocks bounced back as solid growth data lured dip buyers wagering the world’s largest economy will be able to withstand higher interest rates. The dollar climbed.
All major groups in the S&P 500 advanced after a selloff that put the equity market on pace for its worst month since the early days of the pandemic. Apple Inc. rallied ahead of its quarterly earnings, with the shares rebounding from their longest losing streak since 2016. Tesla Inc. tumbled 7.5% as strong results were overshadowed by the electric-car giant’s cautious comments on supply-chain troubles. The greenback rose for a fourth straight day, while the two-year Treasury yield — which is more sensitive to near-term policy moves — pushed higher once again.
More than $5 trillion has been wiped out from stock values this year as traders struggled to price the outlook for monetary policy. Markets had been factoring in four quarter-point hikes in 2022, but that edged toward five after Federal Reserve Chair Jerome Powell suggested the economy and labor market could handle a faster pace if warranted. U.S. gross domestic product accelerated by more than forecast in the fourth quarter, while applications for state unemployment insurance fell for the first time in four weeks.
Comments:
- “The fourth quarter, especially the back half, was marked by omicron somewhat blindsiding investors and consumers, but with GDP coming in strong, it’s encouraging to see the economy took the challenges in stride,” said Mike Loewengart, managing director of investment strategy at E*Trade from Morgan Stanley. “Investors are still trying to digest the Fed’s path forward, so some ups and downs are likely to persist.”
- “Stronger U.S. economy in Q4 + more hawkish Fed than expected = stronger U.S. dollar,” wrote Fawad Razaqzada, an analyst at ThinkMarkets, referring to fourth-quarter economic data.
- “The Q4 GDP report was a nice upside surprise in a string of recently underwhelming economic data points,” said Mike Reynolds, vice president of investment strategy at Glenmede. “Looking ahead, investors should turn their attention to next week’s jobs report, which should provide a more timely assessment of unfolding economic trends.”
Other corporate highlights:
- Hedge fund magnate Bill Ackman has acquired more than 3.1 million shares in Netflix Inc., offering a vote of confidence in the streaming giant after the stock collapsed in recent days.
- Pfizer Inc.’s Covid-19 pill received backing from the European Union’s drugs regulator, offering a tool to manage coronavirus infections at home and ease the burden on hospitals.
- Blackstone Inc. hauled in a record pile of new cash, taking its biggest quarterly leap yet toward a goal of managing $1 trillion.
- McDonald’s Corp.’s earnings for the fourth quarter came in below estimates, weighed down by staffing struggles and supply-chain snags.
On the geopolitical front, Russia criticized Western security proposals aimed at defusing a crisis over Ukraine, while still leaving the door open to further talks. This comes a day after the U.S. and the North Atlantic Treaty Organization delivered written responses to Russia, broadly rejecting Moscow’s demands that the alliance close its door to Ukraine’s potential membership and roll back forces from former Soviet states.
What to watch this week:
- 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 11:13 a.m. New York time
- The Nasdaq 100 rose 1.3%
- The Dow Jones Industrial Average rose 1.6%
- The Stoxx Europe 600 rose 0.8%
- The MSCI World index rose 0.4%
Currencies
- The Bloomberg Dollar Spot Index rose 0.5%
- The euro fell 0.7% to $1.1157
- The British pound fell 0.4% to $1.3403
- The Japanese yen fell 0.7% to 115.41 per dollar
Bonds
- The yield on 10-year Treasuries declined six basis points to 1.81%
- Germany’s 10-year yield advanced two basis points to -0.05%
- Britain’s 10-year yield advanced three basis points to 1.23%
Commodities
- West Texas Intermediate crude rose 0.1% to $87.47 a barrel
- Gold futures fell 1.8% to $1,798.40 an ounce
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