A tech rebound drove the stock market higher in a session of many twists and turns ahead of inflation data that will help shape the views on whether a soft landing is still on the table amid the Federal Reserve’s most-aggressive tightening campaign in a generation.
(Bloomberg) — A tech rebound drove the stock market higher in a session of many twists and turns ahead of inflation data that will help shape the views on whether a soft landing is still on the table amid the Federal Reserve’s most-aggressive tightening campaign in a generation.
After erasing a rally of almost 1%, the S&P 500 was back in the green and poised to halt a four-day selloff. The index regained its 4,000 support broken earlier in the week, and was fighting to stay above a key uptrend line from the October low.
Friday’s personal consumption expenditures index is likely to show that headline and core inflation accelerated. In the run-up to the numbers, data showed US growth in the fourth quarter was weaker than previously estimated while the Fed’s preferred inflation figures were revised higher. Separate data highlighted unrelenting labor-market tightness.
To Michael Shaoul at Marketfield Asset Management, investors are caught between welcoming the evidence that the US economy remains on a stable footing and fearing that this resilience will provoke a stern reaction from policymakers.
“Granted things could be worse, the specter of a rapid deterioration of the economic cycle appears to have been banished, with recent economic data and corporate earnings both confirming that although growth has decelerated from the stimulus driven boom, we have not entered a period of obvious weakness,” he added.
Retail traders have retaken a bearish view that dominated their outlook for much of last year after a raucous stock rally hit a wall this month. Following two weeks of tepid optimism, the bull-bear spread from the American Association of Individual Investors survey flipped to -17 in the week ending Feb. 22, the most pessimistic stance since the start of the year.
Billionaire quant investor Cliff Asness warned that US stocks are vulnerable to a macro shock if inflation doesn’t stage a spirited decline as the market expects. The co-founder of AQR Capital Management told Bloomberg Television that despite last year’s declines, equities remain expensive versus history, based on a broad assumption that price growth is set to slow.
The US economy has obstacles to overcome, though there’s still a chance for a soft landing, Jamie Dimon said. “The US economy right now is doing quite well — consumers have a lot of money, they’re spending it, jobs are plentiful,” the JPMorgan Chase & Co.’s chief told CNBC. “Out in front of us there’s some scary stuff.”
In other corporate news, Netflix Inc. tumbled on plans to cut the price of subscriptions in over 100 countries. A bullish revenue forecast from Nvidia Corp. spurred a surge of as much as 15% for the shares. Domino’s Pizza Inc. tumbled the most in more than a decade as delivery woes and softening demand caused fourth-quarter sales to trail Wall Street expectations and led management to cut targets for revenue growth.
Elsewhere, Bitcoin is on pace for its second monthly advance, breaking with stocks and other riskier assets that have slid amid renewed concern about rising interest rates. The crypto market’s rally recovers only a sliver of the ground lost last year, when prices tumbled and the collapse of the FTX exchange caused a pullback by investors.
Key events this week:
- BOJ governor-nominee Kazuo Ueda appears before Japan’s lower house, Friday
- US PCE deflator, personal spending, new home sales, University of Michigan consumer sentiment, Friday
- Russia’s invasion of Ukraine hits the one-year mark, Friday
Some of the main moves in markets:
Stocks
- The S&P 500 rose 0.4% as of 2:58 p.m. New York time
- The Nasdaq 100 rose 0.8%
- The Dow Jones Industrial Average rose 0.2%
- The MSCI World index rose 0.2%
Currencies
- The Bloomberg Dollar Spot Index was little changed
- The euro was little changed at $1.0597
- The British pound fell 0.2% to $1.2020
- The Japanese yen rose 0.2% to 134.62 per dollar
Cryptocurrencies
- Bitcoin rose 0.7% to $23,982.52
- Ether rose 2.1% to $1,653.9
Bonds
- The yield on 10-year Treasuries declined four basis points to 3.87%
- Germany’s 10-year yield declined four basis points to 2.48%
- Britain’s 10-year yield declined one basis point to 3.59%
Commodities
- West Texas Intermediate crude rose 1.9% to $75.38 a barrel
- Gold futures fell 0.6% to $1,830.60 an ounce
This story was produced with the assistance of Bloomberg Automation.
–With assistance from Jessica Menton and Isabelle Lee.
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