Stocks were rising Friday, rebounding from a selloff Thursday amid concerns about inflation and bond yields, as investors looked ahead to earnings from big banks.
Futures for the Dow Jones Industrial Average indicated an open 75 points or 0.2% higher, after the index fell 176 points Thursday to close at 36,113. The S&P 500 was on track for a similar start, but the Nasdaq —which tumbled 2.5% Thursday as technology stocks in particular came under pressure—was poised to open around or below flat.
Markets have been roiled by inflation data this week. Wednesday brought the fastest rise in annual consumer-price index inflation since 1982—7%. Thursday ushered in the highest annual producer-price index increase in the history of the index: 9.7%.
High inflation—which is seen nearing its peak—comes as investors grapple with the tighter monetary policy from the Federal Reserve, as well as what that means for bond yields, which have an influence on stock prices. But investors have seen the upside to the data, which include indications that inflation is slowing, which would be a moderating force on hawkishness from the Fed.
“Investors cannot make up their minds whether they’re worried about inflation and rising interest rates, or that they’re comfortable central banks can work their magic and get inflation under control,” said Russ Mould, an analyst at broker AJ Bell .
The Fed is headed for earlier, faster interest-rate increases as it faces higher inflation; the market is pricing in three rate increases this year with the first in March. Along with raising rates, the Fed is also expected to begin shrinking its balance sheet.
Inflation and policy signals have helped put upward pressure on bond yields. The yield on the benchmark 10-year U.S. Treasury note began 2022 at 1.53% and spiked to a Covid-19 pandemic-era high of 1.8% earlier this week. By Friday, its yield was above 1.74%.
While yields have yet to pop again, investors expect them to in the future, which was a major factor behind Thursday’s selloff, especially in tech stocks. The valuations of many high-growth tech companies rely on the notion of profits years in the future, and higher bond yields tend to discount the present value of future cash.
But stocks looked to be mostly rebounding Friday, as earnings season begins in earnest with a number of big banks releasing results in the day ahead.
JPMorgan Chase (ticker: JPM), Wells Fargo (WFC), and Citigroup (C) are among those reporting earnings. Results from the big banks will be closely watched for outlook on the year ahead—especially with respect to interest rates—as well as for signals on borrowing and momentum in trading and capital markets.
“We expect a positive quarter, with an earnings beat of 7 [percentage points] resulting in earnings growth of 30% over the prior year,” said Mark Haefele, the chief investment officer at UBS Global Wealth Management, speaking about the earnings season ahead.
“Guidance from companies also looks set to point to continued demand strength in 2022 even if Omicron is disrupting some businesses right now,” Haefele added.
In the commodity space, crude prices continued to march higher. Futures for international oil benchmark Brent were up 1% to nearly $85.50 a barrel. U.S. futures for West Texas Intermediate crude rose similarly, approaching $83.
Cryptocurrencies were broadly lower. Bitcoin —the leading crypto—was down more than 3% in the last 24 hours to below $42,500, according to data from CoinDesk. Smaller peer Ether fell 3% in tandem to around $3,250.
Here are three stocks on the move Friday:
SAP (SAP) was up near 1% in the U.S. premarket trade, after the German software group reported that revenue from its cloud-computing business rose 28% in the last quarter.
Las Vegas Sands (LVS) jumped more than 5% in the premarket; shares in the casino giant have been rising this week as some analysts see a brighter future for the stock in 2022 after a massive underperformance last year. Peer Wynn Resorts (WYNN), which faced similar pressures in 2021—including regulatory concerns from China—rose near 5%.
Write to Jack Denton at firstname.lastname@example.org