U.S. stocks were poised to regain some of the lost ground as investors braced for a meeting of Federal Reserve policymakers and earnings from big tech companies.
Futures for the S&P 500 rose 0.3% on Monday, after the benchmark suffered its third consecutive weekly decline and the largest since March 2020. Contracts for the technology-focused Nasdaq-100 added 0.4% and Dow Jones Industrial Average futures rose 0.3%. Stock futures can be volatile and don’t always indicate where indices will land at the opening bell.
In the bond market, the yield on 10-year Treasury bills slipped, falling to 1.728% from 1.747% on Friday. Yields have risen this year as bond prices have fallen, a sell-off that has rippled through financial markets by punishing speculative betting on stocks and cryptocurrencies.
The biggest factor pushing yields higher and stock prices lower is the expectation that the Fed will raise interest rates several times in 2022 to contain inflation, which is at its fastest pace in 40 years. The central bank is due to meet on Tuesday for a two-day meeting. In his wrap-up on Wednesday, Chairman Jerome Powell is expected to signal that rates will likely rise as early as March.
The central bank is concerned that the rapid rise in consumer prices could feed itself by fueling expectations of higher inflation, said Lyn Graham-Taylor, senior rates strategist at Rabobank. “It’s about tightening up aggressively to overcome that.”
Mr Graham-Taylor said he thinks inflation will come down this year and the Fed won’t raise rates as many times as the market expects, pushing government bond yields down to 10 year.
Earnings season continues, with expected results from Halliburton,
International Business Machines and Steel Dynamics on Monday, followed by General Electric, Microsoft, Apple and Tesla later in the week. About a fifth of S&P 500 companies filed results and 82% beat analysts’ expectations for earnings per share, according to FactSet.
International stock markets fell, after Wall Street lower. The Stoxx Europe 600 lost 1.2%, dragged down by shares in travel, leisure, construction and technology companies.
however, jumped 5.7% after reports that activist hedge fund Trian Fund Management had taken a stake in the packaged food and consumer goods company following its failed bid for part of GlaxoSmithKline.
Vodafone Group rose 4.7% after Reuters reported the telecoms were in talks with Iliad to combine their units in Italy.
Renault shares rose 2.5% after Reuters reported that the French automaker, Nissan Motor and Mitsubishi Motors planned to triple investment to jointly develop electric vehicles.
Asian markets were mixed as the prospect of higher US interest rates caused investors to reassess valuations of fast-growing technology companies. Hong Kong’s Hang Seng fell 1.2%, the Shanghai Composite was flat and Japan’s Nikkei 225 rose 0.2%.
Chinese internet stocks have been under pressure. Hong Kong-listed shares of Alibaba Group and JD.com fell 6.3% and 5.6%, respectively.
Still, Frank Benzimra, head of Asian equity strategy at Societe Generale, said investors were returning to China’s internet sector, attracted by relatively low valuations and a changing regulatory environment. “There seems to be some stabilization in the regulatory framework. Recent news hasn’t been all bad for China’s internet sector,” he said.
Bitcoin has stabilized, trading at around $35,200, according to CoinDesk. The cryptocurrency was swept up in the recent stock market selloff and traded below $35,000 over the weekend.
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