(Bloomberg) — U.S. futures trimmed declines after inflation data was broadly in line with expectations, quelling worries about tighter policy. Apple Inc. rose on strong earnings.
Contracts on the S&P 500 tempered earlier declines and those on the Nasdaq 100 turned positive as the Federal Reserve’s preferred price gauge for its inflation target rose in line with forecasts. The employment cost index, which Chair Jerome Powell cited in December as a key reason for adopting a more aggressive stance on inflation, came in below expectations for the fourth quarter.
Apple’s advance boded well for tech stocks, while Chevron Corp. fell on disappointing profits. In Europe, autos and miners led losses, with weak data on the German economy and euro-area confidence also weighing on sentiment.
A dollar gauge reversed gains after the U.S. data. Treasuries slipped as oil rallied, poised for a sixth week of gains. Gold fell.
Markets have been whiplashed by volatility this week as the Fed signaled aggressive tightening, adding to investor concerns about geopolitical tensions and an uneven earnings season. As investors brace for rising rates, rotating out of frothier equities, value stocks are outperforming.
Money markets are now pricing in nearly five Fed hikes this year after a hawkish stance from Chair Jerome Powell. That’s up from three expected as recently as December.
“Tighter liquidity and weaker growth mean higher volatility,” Barclays Plc strategists led by Emmanuel Cau wrote in a note. The “current growth scare looks like a classic mid-cycle phase to us, while a lot of hawkishness is priced in.”
The U.S. stock market is priced “quite aggressively” versus other developed nations as well as emerging markets, and valuations in the latter can be a tailwind rather than a headwind as in the U.S., Feifei Li, partner and CIO of equity strategies at Research Affiliates, said on Bloomberg Television.
Perpetual Loser Europe Looks a Safer Bet in Global Equity Rout
What to watch this week:
- 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 8:45 a.m. New York time
- Futures on the Nasdaq 100 rose 0.2%
- Futures on the Dow Jones Industrial Average fell 0.2%
- The Stoxx Europe 600 fell 1.3%
- The MSCI World index fell 0.1%
Currencies
- The Bloomberg Dollar Spot Index was little changed
- The euro was little changed at $1.1155
- The British pound rose 0.2% to $1.3416
- The Japanese yen was little changed at 115.31 per dollar
Bonds
- The yield on 10-year Treasuries advanced two basis points to 1.82%
- Germany’s 10-year yield advanced three basis points to -0.03%
- Britain’s 10-year yield advanced four basis points to 1.26%
Commodities
- West Texas Intermediate crude rose 2% to $88.37 a barrel
- Gold futures fell 0.5% to $1,786.40 an ounce
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