US Futures Advance on Earnings Beats; Bonds Slump: Markets Wrap

(Bloomberg) — US equity futures climbed on the back of strong corporate results after Target Corp. beat expectations and Chevron Corp. expanded its stock buyback plans. Bonds sank in the wake of reports that showed accelerating inflation in France and Spain.

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Contracts on the S&P 500 and Nasdaq 100 turned higher, reversing earlier losses, after a solid advance on Wall Street Monday. The Stoxx 600 traded little changed after paring a loss, with February set for a 2.1% gain. In US premarket trading, Target added 1.4% on a strong fourth quarter while Tesla Inc. shares gained 1.6%, extending a rally that’s helped the electric-car marker double in value since January. Chevron rose 1.2% after boosting share buybacks.

Bonds slumped on Tuesday, pushing key yields in Germany to a 15-year high, as evidence mounted that a year’s worth of central-bank rate hikes have yet to rein in inflation. Treasury yields advanced, with the 10-year benchmark climbing two basis points but still below a key 4% threshold.

Both US and European stocks ended last week with their biggest five-day drop this year on concern that central banks will ramp up their battle on inflation seemingly invulnerable to aggressive policy. Positioning data shows investors becoming more pessimistic as they amass short bets in both US and European equity futures, according to Citigroup Inc. strategists.

Traders are now pricing US rates to peak at 5.4% this year, compared with about 5% just a month ago. Federal Reserve Governor Philip Jefferson firmly stood by the central bank’s 2% inflation goal on Monday. A series of hawkish Fed speak this month has trimmed January’s gains across markets.

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Market expectations see the European Central Bank raising rates through February 2024 with a 4% ECB terminal rate fully priced.

“Equity markets are not appreciating the macro challenges ahead,” said Wei Li, global chief investment strategist at BlackRock Inc. “That is not to say we cannot have shorter term bouts of rally, like what we saw in January, driven by technical factors, driven by FOMO.”

Elsewhere, oil was set for a fourth straight monthly decline as concerns about tighter monetary policy and swelling stockpiles in the US eclipsed optimism about rising demand in China. Gold headed for its worst month since the middle of 2021.

Key events this week:

• US wholesale inventories, Conf. Board consumer confidence, Tuesday

• China manufacturing PMI, non-manufacturing PMI, Caixin manufacturing PMI, Wednesday

• Eurozone S&P Global Eurozone Manufacturing PMI, Wednesday

• US construction spending, ISM Manufacturing, light vehicle sales, Wednesday

• Eurozone CPI, unemployment, Thursday

• US initial jobless claims, Thursday

• Eurozone S&P Global Eurozone Services PMI, PPI, Friday

Some of the main moves in markets:

Stocks

• S&P 500 futures rose 0.4% as of 7:30 a.m. New York time

• Nasdaq 100 futures rose 0.5%

• Futures on the Dow Jones Industrial Average rose 0.3%

• The Stoxx Europe 600 rose 0.1%

• The MSCI World index was little changed

Currencies

• The Bloomberg Dollar Spot Index was little changed

• The euro was little changed at $1.0610

• The British pound rose 0.2% to $1.2094

• The Japanese yen fell 0.4% to 136.76 per dollar

Cryptocurrencies

• Bitcoin rose 0.5% to $23,492.4

• Ether rose 0.7% to $1,638.24

Bonds

• The yield on 10-year Treasuries advanced two basis points to 3.93%

• Germany’s 10-year yield advanced six basis points to 2.64%

• Britain’s 10-year yield advanced two basis points to 3.83%

Commodities

• West Texas Intermediate crude rose 1.5% to $76.84 a barrel

• Gold futures fell 0.5% to $1,816 an ounce

This story was produced with the assistance of Bloomberg Automation.

–With assistance from Richard Henderson, Tassia Sipahutar and Sagarika Jaisinghani.

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