(Bloomberg) — Stocks rallied after bullish outlooks from technology giants, with traders scooping up some of the most-beaten down companies during a selloff sparked by concern the Federal Reserve could speed up the unwinding of pandemic-era stimulus to fight inflation.
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The tech-heavy Nasdaq 100 jumped over 2%, with Microsoft Corp. heading toward its biggest advance since August 2020 after reassuring investors that its cloud-computing business has potential to drive growth. Texas Instruments Inc. climbed on an upbeat sales forecast. Tesla Inc. will report earnings after the market close, and guidance on deliveries for the year ahead will be top of mind. Chief Elon Musk, who skipped the call in October, has said he’ll be back to give an update on the electric-vehicle maker’s product roadmap. Treasuries and the dollar were little changed.
Fed policy makers are poised to signal plans for their first rate hike since 2018 and discuss shrinking their bloated balance sheet to curb price pressures. They penciled in three 2022 rate hikes in their December “dot plot,” and a number of officials have endorsed a March move. Speculation is proliferating over how the process known as quantitative tightening will impact Treasuries, but yields have already moved higher in anticipation, said HSBC Holdings Plc’s bond bull Steven Major.
The Federal Open Market Committee will release a statement at 2 p.m. in Washington and Chair Jerome Powell will hold a press conference 30 minutes later. There are no published forecasts at this meeting.
Comments:
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“Powell will be asked about the market during his presser, and there could be a bounce on his response. But that doesn’t change the goal — the Fed is tightening financial conditions. The Fed’s goal isn’t a market crash. A bear market would have a large impact on economic activity, working against the Fed’s goals,” wrote Dennis DeBusschere, founder of 22V Research.
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“The FOMC’s decision to delay the necessary and inevitable will only leave investors in market limbo for the next 6 weeks until the March meeting. There is no rush for investors to further commit themselves to an expensive market ahead of a tightening cycle,” wrote Michael O’Rourke, chief market strategist at JonesTrading.
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“While it’s possible that the FOMC elects to end asset purchases at this meeting, we think that is unlikely given that the taper has already been accelerated once. We expect the statement and Chair Powell’s press conference to lay the groundwork for a March hike” wrote Paul Hickey, co-founder of Bespoke Investment Group.
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“Markets have priced in a much more hawkish Fed so there’s the opportunity for a ‘not as bad as feared’ relief rally like we saw out of Powell’s testimony, even if the Fed telegraphs a March rate hike. But inflation remains high, and Fed rhetoric has been hawkish, so while not as likely as a dovish surprise, we can’t rule out a hawkish outcome, either,” wrote Tom Essaye, a former Merrill Lynch trader who founded “The Sevens Report” newsletter.
After a selloff that put global stocks on course for their worst month since the start of the pandemic, strategists from Goldman Sachs Group Inc. and Citigroup Inc. say it’s now time to buy. Billionaire Paul Marshall is the latest trading titan to bet on value stocks, which are making a historic comeback after years of neglect. Meantime, Barclays Plc strategists note that mutual funds and retail investors remain “very overweight” equities, so more de-risking is possible if fundamentals worsen.
Read: Grantham Has an Even Scarier Prediction Than His Crash Call
Other corporate highlights:
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Boeing Co. generated cash for the first time since early 2019 as rising 737 Max deliveries helped bolster company finances against mounting 787 Dreamliner losses.
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AT&T Inc. posted earnings that topped estimates, giving investors less reason to fret over lavish free-phone promotions.
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Nasdaq Inc., operator of the technology-heavy stock exchange, posted record revenue that beat analysts’ expectations.
On the geopolitical front, Russian Foreign Minister Sergei Lavrov said the Kremlin will respond to any “aggressive” action by the U.S. as an ally of President Vladimir Putin proposed shipping weapons to separatists. President Joe Biden said he would consider personally sanctioning Putin if he orders an invasion of Ukraine, escalating the U.S. effort to deter the Russian leader from war.
What to watch this week:
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South African Reserve Bank rate decision Thursday.
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U.S. initial jobless claims, durable goods, GDP Thursday.
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Euro zone economic confidence, consumer confidence Friday.
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U.S. consumer income, University of Michigan consumer sentiment Friday.
For more market analysis, read our MLIV blog.
Some of the main moves in markets:
Stocks
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The S&P 500 rose 1.8% as of 9:54 a.m. New York time
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The Nasdaq 100 rose 2.3%
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The Dow Jones Industrial Average rose 1.4%
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The Stoxx Europe 600 rose 2.1%
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The MSCI World index rose 1.5%
Currencies
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The Bloomberg Dollar Spot Index was little changed
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The euro fell 0.1% to $1.1287
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The British pound was little changed at $1.3503
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The Japanese yen fell 0.4% to 114.35 per dollar
Bonds
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The yield on 10-year Treasuries advanced two basis points to 1.79%
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Germany’s 10-year yield advanced two basis points to -0.06%
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Britain’s 10-year yield advanced four basis points to 1.21%
Commodities
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West Texas Intermediate crude rose 1.8% to $87.10 a barrel
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Gold futures fell 1% to $1,837.20 an ounce
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