(Bloomberg) — U.S. equity futures edged down Tuesday as traders weighed the Federal Reserve’s hawkish policy pivot and the corporate earnings outlook to gauge if global shares will continue a recovery from this year’s rout.
European contracts were brighter, rising about 1%. The S&P 500 and tech-heavy Nasdaq 100 on Monday completed their best two-day jumps since April and November 2020, respectively.
Japanese shares were mixed and Australia climbed. They were among the few Asian markets open due to Lunar New Year holiday closures. Australia’s central bank scrapped a bond buying program, a step it said doesn’t imply a near-term interest-rate hike. That sapped the nation’s currency and bond yields.
U.S. Treasury yields and the dollar inched lower. Oil extended a climb that’s helped to take the Bloomberg Commodity Spot Index to another record high. Gold pushed up to around $1,800 an ounce.
The U.S. equity rebound pared January’s drop in global stocks to 5%, still the worst monthly performance since the pandemic’s onset in 2020. Waves of volatility have swept across markets after the Fed signaled swifter monetary-policy tightening to curb inflation than many had expected.
Investors need to “get used to this up and down volatility” as there’ll likely be more of it, Nancy Davis, chief investment officer at Quadratic Capital Management, said on Bloomberg Television.
Fed officials said they want to avoid unnecessarily disrupting the U.S. economy as they prepare to start raising interest rates, showing little stomach for an aggressive 50 basis-point move in March.
Fed Speak
Kansas City Fed President Esther George said it’s in “no one’s interest to try to upset the economy with unexpected adjustments.” San Francisco Fed chief Mary Daly said policy moves “have to be gradual and not disruptive.”
For optimists, the corporate-earnings outlook continues to underpin the case for stocks. About 80% of U.S. companies that have reported so far this season have beaten or met projections.
“Investors should not lose sight of the fact that the economy remains strong, which should limit downside from current levels,” Solita Marcelli, Americas chief investment officer at UBS Global Wealth Management, wrote in a note.
Elsewhere, traders continue to monitor diplomatic efforts between the U.S. and Russia to defuse tension over Ukraine.
For more market analysis, read our MLIV blog.
What to watch this week:
- Earnings are due from Alphabet, Amazon, Exxon Mobil, Ford Motor, Meta Platforms, Qualcomm, Sony, Spotify, UBS Group
- Manufacturing PMIs, including euro zone, Tuesday
- OPEC+ meeting on output, Wednesday
- Euro zone CPI, Wednesday
- Bank of England, European Central Bank rate decisions, Thursday
- Fed Board of Governors confirmation hearing, Thursday
- U.S. factory orders, initial jobless claims, durable goods, Thursday
- U.S. payrolls report for January, Friday
- Winter Olympics kick off in China, Russia’s President Vladimir Putin due to attend opening ceremony, Friday
Some of the main moves in markets:
Stocks
- S&P 500 futures fell 0.3% as of 2:17 p.m. in Tokyo. The S&P 500 rose 1.9%
- Nasdaq 100 futures declined 0.2%. The Nasdaq 100 rose 3.3%
- Japan’s Topix index was flat
- Australia’s S&P/ASX 200 index advanced 0.5%
- Euro Stoxx 50 futures increased 1.1%
Currencies
- The Bloomberg Dollar Spot Index shed 0.1%
- The euro was at $1.1243, up 0.1%
- The Japanese yen was at 114.94 per dollar, up 0.2%
- The offshore yuan was at 6.3682 per dollar
Bonds
- The yield on 10-year Treasuries was at 1.77%
- Australia’s 10-year yield was at 1.90%
Commodities
- West Texas Intermediate crude rose 0.4% to $88.50 a barrel
- Gold was at $1,800.62 an ounce, rising 0.2%
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