(Bloomberg) — U.S. stock futures rebounded after economic reports eased concern about mounting inflation pressures and faster rate hikes.
Contracts on the S&P 500 turned higher, while Nasdaq 100 futures outperformed and the dollar was little changed. The employment cost index — which Federal Reserve Chair Jerome Powell cited as key for the pivot to a more aggressive stance on inflation — came in below expectations. While the the Fed’s preferred price gauge advanced at the fastest annual pace in nearly 40 years, it was in line with forecasts. Apple Inc. rose on strong earnings, while Chevron Corp. fell on disappointing profits.
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 rose 0.2% as of 9:21 a.m. New York time
- Futures on the Nasdaq 100 rose 0.4%
- Futures on the Dow Jones Industrial Average were little changed
- 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 unchanged at $1.1145
- The British pound rose 0.3% to $1.3417
- The Japanese yen was little changed at 115.46 per dollar
Bonds
- The yield on 10-year Treasuries advanced three basis points to 1.83%
- Germany’s 10-year yield advanced four basis points to -0.02%
- Britain’s 10-year yield advanced five basis points to 1.28%
Commodities
- West Texas Intermediate crude rose 1.9% to $88.26 a barrel
- Gold futures fell 0.7% to $1,783.20 an ounce
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