Stocks were rising Tuesday as bond yields slipped back, with investors awaiting Federal Reserve Chair Jerome Powell’s testimony before the Senate later in the day.
Futures for the Dow Jones Industrial Average indicated an open more than 100 points or 0.3% higher after dropping 162 points Monday to close at 36,068. The S&P 500 was on track for a similar start. Futures for the Nasdaq signaled an open 0.7% higher, after the tech-heavy index snapped a four-day losing street Monday, rallying from as much as 2.7% lower on the day to close in the green.
Overseas, the pan-European Stoxx 600 rose 1.2%, while in Asia trading was more subdued amid regional Covid-19 concerns. Tokyo’s Nikkei 225 declined 0.9% as Japan moved to extend stricter border measures until late next month.
Investors continue to adjust to an environment of tighter monetary policy. The Federal Reserve—as signaled last week—is headed for earlier and faster interest-rate increases and eventual quantitative tightening. Expectations are for the central bank to now hike rates multiple times in 2022. This has helped bond yields spike, pressuring shares in tech companies and dogging the Nasdaq for much of the past week.
“Federal Reserve rate hike nerves continue to grow tauter,” said Jeffrey Halley, an analyst at broker Oanda, noting that some market participants were talking about the possibility of four rate increases this year.
“I do believe we may be approaching ‘peak Fed-fear’ for now,” Halley added. “That could see a sharp jump for equities, a retreat by U.S. yields and the U.S. Dollar. The first move the market throws the kitchen sink at is usually the wrong one.”
Monetary policy will remain in the spotlight Tuesday as Fed Chair Powell heads to the Senate Banking Committee for his second-term nomination hearing. His prepared remarks indicate inflation and rate increases will be in focus; lawmakers will also have the opportunity to ask questions of the central banker.
After shaking off its losing streak Monday, the Nasdaq was set to outperform as bond yields slipped back. The yield on the benchmark 10-year U.S. Treasury note was down to 1.74% after trading above 1.8% in the last session for the first time since January 2020; it began 2022 with a yield of 1.53%.
Market volatility has also calmed. Wall Street’s so-called “fear gauge”—the Cboe Volatility Index, or VIX —was down around 1.5% to 19 after spiking to a year-to-date intraday high above 23 Monday.
“We view the recent equity volatility as an adjustment to the Fed’s incrementally more hawkish stance, rather than a sign that the Fed is about to bring the recovery and the equity rally abruptly to an end,” said Mark Haefele, the chief investment officer at UBS Global Wealth Management. UBS sees three rate increases from the Fed this year, beginning as soon as March.
In the commodity space, crude prices were consolidating recent gains after easing back in the previous session. Futures contracts for international oil benchmark Brent were up 1.5% to above $82 a barrel, with U.S. futures for West Texas Intermediate crude up similarly to $79.50.
“Omicron has yet to wreak the havoc of the Delta variant and may never do so, keeping the global recovery on track, and OPEC+ compliance means that spare production capacity is limited,” said Halley. “Both factors will continue supporting oil’s bullish outlook.”
The risk-averse moves Monday saw Bitcoin, the leading cryptocurrency, trade below $40,000 for the first time since September 2020. It was clawing back losses Tuesday and hovered above $42,000.
“It’s been a bad start to the year for the cryptocurrency, having shed around -10% over the first 10 days of the year,” said Jim Reid, a strategist at Deutsche Bank.
Here are five stocks on the move Tuesday:
Nokia (ticker: NOK) surged nearly 3% in Helsinki, with its U.S.-listed stock up around 2.5% in the premarket trade, after the Finnish telecom group said it expects to exceed its full-year 2021 guidance and be more profitable in 2022.
HelloFresh (HFG.Germany) rose 4% in Frankfurt after the meal-kit delivery group announced a €250 million ($283 million) share buyback program.
Airbus (AIR.France) rose 0.6% in Paris after the aircraft manufacturer reported an 8% rise in deliveries in 2021, beating rival Boeing (BA) for the crown of biggest plane maker for the third year in a row.
Pfizer (PFE) rose 0.7% in the U.S. premarket, but its Covid-19 vaccine co-developer BioNTech (BNTX) slipped 0.8%. Pfizer has said it should be able to launch a redesigned vaccine to target the Omicron variant of coronavirus by March.
Write to Jack Denton at email@example.com