Tech Leads Stock Rally Amid Fed Downside Bets: Markets Roundup
(Bloomberg Opinion) — Stocks rose as fresh signs inflation is easing fueled speculation about smaller Federal Reserve rate hikes.
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Technology fueled the rally in stocks, adding to gains that are putting the S&P 500 on track for its second-best January since the turn of the century, trailing only the 7.9% jump in 2019. As As earnings season progressed, American Express Co. jumped on a bullish forecast, while Intel Corp. fell after predicting one of the worst quarters in its history.
The Fed’s preferred inflation measures eased in December to the slowest annual pace in more than a year and spending fell. Separate data from the University of Michigan showed that US inflation expectations continued to recede in late January, helping boost consumer confidence.
The central bank is watching the long-term outlook with particular attention, as expectations may become self-fulfilling and lead to higher prices.
Former Treasury Secretary Lawrence Summers has urged the Fed to refrain from signaling its next move after an expected hike next week due to the highly uncertain outlook for the economy.
Hopes are high the Fed will deliver a 25 basis point hike on February 1, moving away from the biggest moves of last year, but expectations for rate cuts by the end of 2023 are “a step too far,” according to Erick. Muller, product manager. and investment strategy in Muzinich & Co.
“We’ll probably see the Fed say ‘we’re entering the final phase, but listen up guys, we’ll continue to raise rates,'” Muller said. “A lot of rate volatility will depend on the trajectory of inflation from here.”
Chevron Corp. posted disappointing results just days after surprising investors with a mammoth $75 billion share buyback program.
Colgate-Palmolive Co. sold fewer household and personal care products than expected late last year.
Goodyear Tire & Rubber Co. will cut about 500 jobs in response to weak demand and rising inflation.
Hasbro Inc., one of the world’s largest toymakers, said it would cut 15% of its workforce, following a disappointing holiday shopping season.
US stocks have soared on many dire signs this year, from recession fears to weak earnings. However, a look at the trading activity behind the benchmark index suggests that the bull run lacks conviction.
Flows into the SPDR S&P 500 ETF Trust (ticker SPY) show that while the fund is on track to see net inflows in January after two straight months of investor withdrawals, the total amount of money coming in weekly has been steadily declining this month. Flows into two other major funds that track the S&P 500, the Vanguard S&P 500 ETF (VOO) and the IShares Core S&P 500 ETF (IVV), tell a similar story.
The S&P 500 is up about 6% this month, and if history is any guide, the indicator will likely be in the green on December 31 as well, as the direction in the first month (gain or loss) has coincided. with the annual result two-thirds of the time since 1973.
Positive-positive periods generated an average full-year gain of 20%, while negative-negative years saw a typical decline of 17%.
Some of the main movements in the markets:
The S&P 500 rose 0.2% at 11:39 a.m. New York time
The Nasdaq 100 rose 0.6%
The Dow Jones Industrial Average rose 0.1%
The Stoxx Europe 600 rose 0.3%
The MSCI World Index rose 0.2%
The Bloomberg Dollar Spot Index was little changed
The euro fell 0.3% to $1.0860
The British pound fell 0.2% to $1.2386
The Japanese yen rose 0.3% to 129.84 per dollar
Bitcoin was little changed at $23,090.2
Ether fell 1.1% to $1,585.96
The 10-year Treasury yield rose three basis points to 3.52%.
Germany’s 10-year yield rose three basis points to 2.24%.
Britain’s 10-year yield was little changed at 3.32%
This story was produced with the assistance of Bloomberg Automation.
–With the assistance of Cecile Gutscher, Sujata Rao and Stephen Kirkland.
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