Futures signal U.S. may trail global equity rally
BNN Bloomberg
A global equity rally threatened to fizzle when the U.S. markets open on Monday as fluctuations in index futures signaled a volatile day. Investors turned their attention to upcoming earnings amid growing confidence corporate performance can weather Federal Reserve tightening.
A global equity rally threatened to fizzle when the U.S. markets open on Monday as fluctuations in index futures signaled a volatile day. Investors turned their attention to upcoming earnings amid growing confidence corporate performance can weather Federal Reserve tightening.
Contracts on the S&P 500 Index fell 0.2 per cent, while those on the Nasdaq 100 Index rose 0.3 per cent. The Stoxx 600 gauge advanced for a fourth time in five days and an index of global equities pared its biggest monthly drop since March 2020. Treasury yields advanced while the curve flattened as bond markets braced for successive rate hikes by Fed starting March. Citrix Systems Inc. fell in premarket trading after its proposed sale failed to offer a premium on the stock price.
As investors reconcile to a hawkish U.S. central bank, the expensive parts of the U.S. stock market are undergoing a valuation re-rating along with the bond markets. However, traders do see opportunities in less expensive segments of the global markets, such as European and emerging-market stocks, as well as higher-yielding currencies where rate hikes have already happened. The only thing money managers are certain about for the year is greater volatility.
The equity selloff “marks a long overdue correction rather than the start of a bear market,” BCA Research Inc. analysts including Peter Berezin and Melanie Kermadjian wrote in a note. “Stocks often suffer a period of indigestion when bond yields rise suddenly, but usually bounce back as long as yields do not move into economically restrictive territory.”
The stellar run of profitability in U.S. companies continues this quarter. Of the 169 S&P 500 companies that have posted results so far, 81 per cent have met or exceeded expectations. Profits have come about 5 per cent more than the levels predicted.
Companies from Alphabet Inc. to Exxon Mobil Corp. report financial results this week in the U.S., while the European earnings calendar is also full, with the likes of UBS Group AG and Roche Holding AG publishing their figures.
