US futures rise, as strong earnings and a China rate cut help investors shrug off inflation fears for now
- US futures rose on Thursday, as healthy corporate earnings helped offset some concern about the inflation outlook.
- Asian markets were up after China cut key lending rates, while European stocks were mixed.
US stock futures rose on Thursday, as investors took heart from a flurry of upbeat fourth-quarter earnings that helped offset some of the concern around a less friendly environment for equities if inflation keeps rising.
The Nasdaq entered a correction and closed down 10% from its record high on Wednesday. For the past month, the Dow Jones Industrial Average is down 2.03%, the S&P 500 is down 3.49%.
Inflation is running at its hottest in 40 years right now and the Federal Reserve is widely expected to start rapidly tightening monetary policy to ward off any damaging spikes in price pressures. Tech stocks in particular have been hard hit.
Futures on the Dow, S&P, and Nasdaq were last up 0.37%, 0.46%, and 0.73%, respectively, suggesting a stronger open for the benchmark indices.
Corporate earnings in the US are helping counter nervousness about the outlook for inflation and rates. Consumer goods giant Procter & Gamble, investment bank Morgan Stanley and lender Bank of America all delivered upbeat results for the fourth quarter on Wednesday.
"Tech stocks taking a hit from higher discount rates makes intuitive sense, and the last time the Nasdaq had a -10% correction was February 2021, when real 10 year rates had also sold off around 50 basis points," Deutsche Bank strategist Jim Reid said. "Next week we see a slew of tech earnings which have the ability to magnify or reverse the move," he said.
Streaming platform Netflix was due to report earnings later on Wednesday. Several of the biggest tech companies report next week, many of which have been big beneficiaries of the "work from home economy" that has prevailed since 2020, with Apple, Microsoft and Tesla all due to release results.
US Treasury Secretary Janet Yellen told the US Conference of Mayors on Wednesday that she did not believe the Omicron variant would derail the US economic recovery, according to Bloomberg.
Stocks in Asia got a boost after the Chinese central bank cut key lending rates to lower borrowing costs and help shore up the economy, which is grappling with outbreaks of Covid-19 and the fallout from the debt crisis in its massive property sector.
The CSI 300 was up 0.90% while the Hang Seng was up 3.42%. The Shanghai Composite started high but closed down 0.09%.
UK markets got a jolt on Wednesday from data that showed inflation soaring by 5.4% in December, a 30-year high, as the country faces spiraling energy costs and wage pressures from labor shortages. The FTSE 100 was down 0.07%.
Other European stocks were more mixed. The French CAC 40 was down 0.1%. The Stoxx 600 was up 0.13% and Germany's DAX was up 0.18%
"Concerns over rising inflation remain as real as ever, along with worries about how much damage consistently higher prices could do to consumer confidence, as well as wider demand," CMC Markets strategist Michael Hewson said in a daily note.
Bond US yields were also in focus, with the 10-year US Treasury yield holding at around 1.84%, down 3 basis points on the day, having hit a two-year high just above 1.9% the day before. The benchmark yield started the month at 1.5% and has risen along with mounting expectations for the Fed to raise rates to stamp out inflation.
Oil briefly touched a new seven-year high on Thursday, before retreating, with Brent crude last down 0.2% on the day at $88.26 a barrel while WTI crude was flat around $85.81 a barrel.