(Bloomberg) — U.S. futures fluctuated as buy-the-dip sentiment warred with investor caution after a hawkish Federal Reserve meeting.
Contracts on the S&P 500 and the Nasdaq 100 were little changed, after swinging between losses and gains. Tesla Inc. dropped in premarket trading after warning of supply-chain issues, while McDonald’s Corp. and Intel Corp. also fell after results. Apple Inc. advanced ahead of its earnings report after market close.
In Europe, losses in tech and travel stocks were tempered by a rally in banks after Deutsche Bank AG raised its outlook. A gauge of Asia-Pacific shares fell to a 14-month low.
Investors are weighing policy-tightening expectations against the economic recovery, 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. While a stock rally on Wall Street fizzled after the meeting, Thursday’s moves in futures signal dip-buying is alive.
Bonds around the world fell. 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.
“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.
Elsewhere, Advanced Micro Devices Inc. fell in premarket trading after Chinese regulators granted approval for the company to buy Xilinx Inc. in a $35 billion deal. Xilinx rallied.
Bitcoin rose toward $37,000.
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.
Stocks
- Futures on the S&P 500 were little changed as of 7:41 a.m. New York time
- Futures on the Nasdaq 100 rose 0.1%
- Futures on the Dow Jones Industrial Average fell 0.3%
- The Stoxx Europe 600 fell 0.1%
- The MSCI World index fell 0.6%
Currencies
- The Bloomberg Dollar Spot Index rose 0.5%
- The euro fell 0.7% to $1.1164
- The British pound fell 0.5% to $1.3395
- The Japanese yen fell 0.5% to 115.25 per dollar
Bonds
- The yield on 10-year Treasuries declined three basis points to 1.83%
- Germany’s 10-year yield advanced three basis points to -0.04%
- Britain’s 10-year yield advanced five basis points to 1.24%
Commodities
- West Texas Intermediate crude rose 0.8% to $88.03 a barrel
- Gold futures fell 1.1% to $1,812.40 an ounce
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