(Bloomberg) — U.S. futures rose as dip buyers stepped in following a selloff spurred by a hawkish Federal Reserve.
Contracts on the S&P 500 and the Nasdaq 100 held onto gains after positive economic data. McDonald’s Corp. fell after disappointing results and Intel Corp. dropped on a weak profit forecast. Apple Inc. advanced ahead of its earnings report due after market close.
In Europe, banks rallied after Deutsche Bank AG raised its outlook, outweighing a drop in tech shares. A gauge of Asia-Pacific shares fell to a 14-month low.
Investors are weighing policy-tightening expectations against the economic rebound, after Fed Chair Jerome Powell on Wednesday endorsed interest-rate liftoff in March and opened the door to more frequent, potentially larger hikes than expected.
Data on Thursday signaled a strengthening recovery: the U.S. economy expanded more than forecast in the fourth quarter, while jobless claims fell last week.
Bonds around the world declined. Two-year U.S. Treasuries extended declines, even as longer-dated ones rebounded. Credit markets were also hit, with a gauge of default risk heading for its worst month since the pandemic-fueled rout of 2020.
Powell’s Hawkish Surprises Mean Treasuries Rout Flattens Curve
Oil rose, with Brent crude hitting a fresh seven-year high, while the dollar rose. Bitcoin climbed toward $37,000.
“As supply constraints ease, inflation will fall through 2022, and so monetary tightening pressures will fade,” wrote Seema Shah, chief strategist at Principal Global Investors. “This tightening pace should neither spook markets nor disrupt the economic expansion.”
Global stocks are still heading for their worst month since the pandemic roiled markets in 2020. And traders are boosting bets for higher borrowing costs, pricing in five rate hikes from the Fed and another four from the Bank of England.
Traders Ramp Up Bets to See Five Federal Reserve Hikes This Year
Investors are also keeping an eye on geopolitical tension, after Russia criticized U.S. and NATO security proposals aimed at defusing a crisis over Ukraine, while still leaving the door open to further talks.
Meanwhile, Tesla Inc., which fell in premarket trading earlier after warning of supply-chain issues, reversed losses.
Xilinx Inc. rallied after Chinese regulators granted approval for Advanced Micro Devices Inc. to buy the company.
Elsewhere, South Africa’s central bank lifted its benchmark interest rate for a second straight meeting.
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.
Stocks
- Futures on the S&P 500 rose 0.5% as of 8:42 a.m. New York time
- Futures on the Nasdaq 100 rose 0.7%
- Futures on the Dow Jones Industrial Average rose 0.2%
- The Stoxx Europe 600 rose 0.3%
- The MSCI World index fell 0.6%
Currencies
- The Bloomberg Dollar Spot Index rose 0.6%
- The euro fell 0.9% to $1.1142
- The British pound fell 0.7% to $1.3366
- The Japanese yen fell 0.6% to 115.36 per dollar
Bonds
- The yield on 10-year Treasuries declined four basis points to 1.83%
- Germany’s 10-year yield advanced two basis points to -0.05%
- Britain’s 10-year yield advanced four basis points to 1.23%
Commodities
- West Texas Intermediate crude rose 0.9% to $88.11 a barrel
- Gold futures fell 1.4% to $1,805.90 an ounce
More stories like this are available on bloomberg.com
©2022 Bloomberg L.P.
