By Vildana Hajric and Peyton Forte
U.S. technology stocks dropped to session lows as dip buying in the battered sector halted, slowing equities’ best four-day rally since 2020.
The tech-heavy Nasdaq 100 fell 0.4% while the S&P 500 was little changed after Alphabet Inc. and Advanced Micro Devices Inc. pared earlier gains on strong results. Brent crude fell from seven-year high after OPEC+ agreed to another output hike. Treasury yields declined and the dollar was weaker.
It’s been a volatile start to the year with investors’ swinging between concerns over Federal Reserve tightening and confidence in the economic recovery. A robust earnings outlook is helping to ease the uncertainty, at least for the moment. However, many dangers, including stubborn inflation, geopolitical risks and pandemic flare-ups still lingers in the background.
“We are seeing writ large the market tug-of-war between the reality of a changing monetary backdrop and what that means for multiples — and eventually economic growth — and what’s still good earnings growth, even though profit margins are moderating relative to last year,” said Peter Boockvar, chief investment officer at Bleakley Advisory Group.
The latest Fed commentary hinted at a calibrated approach to raising interest rates to fight high inflation, soothing some concerns the economy might take a hit from tighter monetary policy. None of six Fed officials speaking so far this week have backed the idea of a half-point rate increase in March, and the most aggressive, James Bullard, president of the St. Louis Fed, said five hikes — one more than every quarter — is “not too bad a bet.”
“Fed officials backing away from a 50bp hike is important because it suggests the Fed will not aggressively offset a near-term economic rebound,” wrote Dennis DeBusschere, founder of 22V Research. “If true, that would favor a significant reversal in cyclicals, higher real yields, and reopening stock performance.”
ADP data ahead of Friday’s jobs report showed employment at U.S. companies contracted in January by the most since the early days of the pandemic with the spike omicron cases. Poor jobs numbers could urge the Fed to reconsider aggressive rate hikes. However, a dip in employment is not unexpected with government officials warning of the possibility in recent days.
“It was a weak number versus surveys, but not a cause for concern for the Fed in their hiking plans,” said Adam Shakoor, portfolio manager at Columbia Threadneedle Investments. “The Fed has already telegraphed the labor market as tight and near maximum employment at the end of 2021, so we should expect to see some deceleration in these figures play out in 2022.”
What to watch this week:
- Earnings are due from Amazon, Ford Motor, Meta Platforms, Qualcomm, Spotify
- 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:
- The S&P 500 was little changed as of 11:39 a.m. New York time
- The Nasdaq 100 fell 0.4%
- The Dow Jones Industrial Average fell 0.2%
- The Stoxx Europe 600 rose 0.5%
- The MSCI World index rose 0.2%
- The Bloomberg Dollar Spot Index fell 0.1%
- The euro rose 0.2% to $1.1297
- The British pound rose 0.3% to $1.3561
- The Japanese yen rose 0.3% to 114.33 per dollar
- The yield on 10-year Treasuries declined four basis points to 1.75%
- Germany’s 10-year yield was little changed at 0.03%
- Britain’s 10-year yield declined six basis points to 1.24%
- West Texas Intermediate crude fell 0.9% to $87.37 a barrel
- Gold futures rose 0.4% to $1,809.60 an ounce
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