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US futures rise, as strong earnings and a China rate cut help investors shrug off inflation fears for now


Stock market trader new york
Investors have to brace for more market volatility thanks to the new Omicron variant.
  • On Thursday, US futures rose as a result of positive corporate earnings that offset concerns about the inflation outlook.
  • After China reduced key lending rates, Asian markets rose while European stocks were mixed.
  • Later in the day, Netflix was expected to report quarterly earnings.

Stock futures in the United States rose on Thursday as investors took comfort from positive fourth-quarter earnings. This helped to offset some of the concerns about a less favorable environment for equities should inflation continue rising.

The Nasdaq closed down 10% on Wednesday after a correction. The Dow Jones Industrial Average has fallen 2.03% and the S&P 500 has fallen 3.49% over the past month.

The current level of inflation is at its highest point in 40 years. It is widely believed that the Federal Reserve will soon tighten its monetary policy quickly to prevent any price spikes. Tech stocks have been particularly hard hit.

Futures on S&P, Dow and Nasdaq were up 0.37% and 0.46% respectively at the end of the last session, respectively. This suggests a stronger open for benchmark indices.

The US is seeing positive corporate earnings, which are countering nervousness over the future of inflation and rates. On Wednesday, Procter & Gamble (consumer goods giant), Morgan Stanley (investment bank) and Bank of America (lender) all reported positive results for the fourth quarter.

Jim Reid, Deutsche Bank strategist, stated that tech stocks are taking a hit due to higher discount rates. The last time the Nasdaq saw a correction of -10% was February 2021 when real 10-year rates had fallen by around 50 basis points. He said that next week will see tech earnings that could magnify or reverse this move.

On Wednesday, streaming platform Netflix will report its earnings. Many of the largest tech companies will report next week. Many of them have been huge beneficiaries of the "work at home economy" that has dominated since 2020. Results are due from Apple, Microsoft, and Tesla.

According to Bloomberg, Janet Yellen, US Treasury Secretary, stated Wednesday at the US Conference of Mayors that she didn't believe the Omicron variant of the US economy would stop the US economic recovery.

After the Chinese central bank reduced key lending rates to lower borrowing cost and stabilize the economy, stocks in Asia gained a boost. The country is currently struggling with Covid-19 outbreaks and the consequences of the massive debt crisis in its property sector.

The Hang Seng rose 3.42%, while the CSI 300 went up 0.90%. The Shanghai Composite opened high, but closed lower by 0.09%.

The data showing that inflation rose by 5.4% in December was a 30-year record for the UK. This is a result of spiraling energy costs and wage shortages. The FTSE 100 fell 0.07%.

Other European stocks were mixed. The French CAC 40 was 0.1% lower. Stoxx 600 rose 0.13%, while Germany's DAX rose 0.18%.

Michael Hewson, CMC Markets strategist, stated in a daily note that "Concerns about rising inflation remain as real and along with concerns about how consistent higher prices could damage consumer confidence as well as wider market demand."

The 10-year US Treasury yield was also under scrutiny. It stood at 1.84% on the day, down 3 basis points from the previous day's high of 1.9%, and had risen to a new two-year high of 1.9% the day prior. The benchmark yield began the month at 1.5%, and has increased with rising expectations that the Fed will raise rates to combat inflation.

Brent crude crude briefly hit a seven-year high, but then it retreated 0.2% to $88.26 per barrel. WTI crude was flat at $85.81 per barrel.







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