US equity-index futures struggled for direction as traders remained concerned over hawkish central banks, worsening economic data and earnings hiccups in the world’s largest economy.
(Bloomberg) — US equity-index futures struggled for direction as traders remained concerned over hawkish central banks, worsening economic data and earnings hiccups in the world’s largest economy.
Contracts on the S&P 500 and Nasdaq 100 were little changed even as the underlying gauges were poised for the biggest weekly losses since before Christmas. The Stoxx Europe 600 Index posted a modest rebound from the biggest loss in a month. Treasuries fell as investors weighed comments by US and European central bankers favoring higher interest rates. The dollar edged higher. Oil climbed on hopes for Chinese demand.
In premarket New York trading, Eli Lilly & Co. fell as its bid for accelerated approval of its Alzheimer’s therapy was rejected by regulators. Netflix Inc. jumped after reporting stronger-than-expected subscriber numbers for the fourth quarter.
This week’s economic data pointed to an increased possibility of a US recession and global slowdown, but that didn’t deter Federal Reserve or European Central Bank officials from reiterating their hawkish stance. With 10% of S&P 500 companies having reported the latest quarterly earnings, initial trends suggest a rapid deterioration in profitability, helping to erase about $700 billion of equity value in the past two days alone.
“The Fed is not stepping back from its rate hike talk despite easing inflation and easing activity,” Ipek Ozkardeskaya, a senior analyst at Swissquote Bank, wrote in a note. “Major banks and institutions agree that the US is faced with a mild recession.”
On Thursday, Fed Vice Chair Lael Brainard, considered a dove, said rates would need to stay elevated for a period to further cool inflation. Her comments came a day after St. Louis Fed President James Bullard penciled in a forecast for a target-rates range of 5.25% to 5.5% by the end of this year. The current range is 4.25% to 4.5%.
Adding to the somber mood in the US, the federal debt limit was hit and the Treasury Department began the use of special measures to avoid defaulting on any payments.
The nascent earnings-reporting season has brought concern that higher interest rates are already impacting the economy and corporate performance. Of the 51 S&P 500 companies that have reported results so far, only two-thirds have beaten analysts’ estimates, compared with the 80% positive surprise seen over the past several quarters.
Eli Lilly fell 2.3% in early New York trading after the Food and Drug Administration told the company it won’t give accelerated approval for donanemab because not enough patients on the trial had received the drug for a full 12 months. Netflix jumped 5.9%.
Europe’s benchmark Stoxx 600 index steadied from Thursday’s biggest slump in a month, as energy and mining stocks rose. A measure of global stocks rose for the first time in four days, but remained on course for a weekly decline.
The dollar was marginally higher, heading for its first weekly gain in more than a month.
Oil contracts rose for a second day, with West Texas Intermediate crude heading for a weekly advance. Traders were emboldened by Chinese demand that’s been picking up after the nation abandoned harsh virus restrictions.
Copper held on to its fifth weekly increase, its best run since May 2021, with global supply risks persisting and inventories near historic lows.
Key events on Friday:
- US existing home sales, Friday
- IMF’s Kristalina Georgieva and ECB’s Lagarde speak in Davos, Friday
Here are some of the main market moves:
Stocks
- The Stoxx Europe 600 rose 0.3% as of 10:14 a.m. London time
- S&P 500 futures were little changed
- Nasdaq 100 futures rose 0.3%
- Futures on the Dow Jones Industrial Average were little changed
- The MSCI Asia Pacific Index rose 0.5%
- The MSCI Emerging Markets Index rose 0.7%
Currencies
- The Bloomberg Dollar Spot Index rose 0.2%
- The euro was little changed at $1.0837
- The Japanese yen fell 0.9% to 129.60 per dollar
- The offshore yuan fell 0.2% to 6.7821 per dollar
- The British pound fell 0.3% to $1.2351
Cryptocurrencies
- Bitcoin was little changed at $20,951
- Ether rose 0.4% to $1,551.12
Bonds
- The yield on 10-year Treasuries advanced three basis points to 3.43%
- Germany’s 10-year yield advanced six basis points to 2.13%
- Britain’s 10-year yield advanced six basis points to 3.33%
Commodities
- Brent crude rose 0.5% to $86.56 a barrel
- Spot gold fell 0.2% to $1,929.06 an ounce
This story was produced with the assistance of Bloomberg Automation.
–With assistance from Richard Henderson, Brett Miller and Rob Verdonck.
More stories like this are available on bloomberg.com
©2023 Bloomberg L.P.