(Bloomberg) — Stocks rebounded as traders piled into companies that stand to benefit the most from an economic rebound, while backing away from technology shares.
Commodity, financial and industrial stocks in the S&P 500 climbed amid bets that major central banks can move toward tighter policies to fight inflation without derailing the economy. The Nasdaq 100 retreated. European equities rose as the region’s policy makers unveiled a gradual pullback of pandemic stimulus. The pound jumped as the Bank of England unexpectedly raised rates for the first time in three years.
Central banks are weighing measures to fight price pressures while balancing risks to growth amid coronavirus challenges. European Central Bank President Christine Lagarde unveiled forecasts showing a strong economic rebound along with an outlook for faster inflation. The Federal Reserve said Wednesday it will accelerate the pace at which it tapers bond purchases, and projected rate hikes through 2024. The market’s early response signals some relief arising from policy clarity.
Read: KKR Boosts Outlook for S&P 500, Profits Despite Inflation Threat
Comments:
- “While we expect increased stock market volatility as the Federal Reserve embarks on normalizing policy, equity markets should end the year higher as the economy still remains strong, which should lead to continued earnings growth,” said Richard Saperstein, chief investment officer at Treasury Partners.
- “I do think that central banks are being reactive, which is good. If inflation does start to moderate as these major central banks are still expecting, we may actually expect some turn in the policy direction in the later part of next year,” said Janet Mui, investment director at Brewin Dolphin.
- “With the Fed decision out of the way, there aren’t any more macro events on the calendar that can deny markets a Santa rally. It wasn’t that the Fed wasn’t hawkish, it’s just that the Fed wasn’t hawkish enough to cause investors to sell now,” said Tom Essaye, a former Merrill Lynch trader who founded “The Sevens Report” newsletter.
Corporate highlights:
- Delta Air Lines Inc. projected it will report a profit this quarter, citing strong demand for travel and a decline in jet-fuel prices.
- Adobe Inc. forecast revenue for the first fiscal quarter and full year 2022 that fell short of analysts estimates.
- Reddit Inc., the social-media platform that helped fuel this year’s meme stock frenzy, said it has confidentially filed for an initial public offering.
U.S. housing starts strengthened in November to the fastest pace in eight months, suggesting builders are making a bit more headway on backlogs against a backdrop of lingering supply and labor constraints. Applications for state unemployment benefits rose last week — but remained near the lowest levels of the pandemic as the labor market recovery continues.
Here are some key events this week:
- BOJ monetary policy decision, Friday.
- S&P Dow Jones Indices quarterly rebalance effective after markets close, Friday.
For more market analysis, read our MLIV blog.
Some of the main moves in markets:
Stocks
- The S&P 500 rose 0.2% as of 10:43 a.m. New York time
- The Nasdaq 100 fell 0.9%
- The Dow Jones Industrial Average rose 0.6%
- The Stoxx Europe 600 rose 1.5%
- The MSCI World index rose 0.6%
Currencies
- The Bloomberg Dollar Spot Index fell 0.3%
- The euro rose 0.1% to $1.1302
- The British pound rose 0.4% to $1.3317
- The Japanese yen rose 0.3% to 113.75 per dollar
Bonds
- The yield on 10-year Treasuries declined two basis points to 1.43%
- Germany’s 10-year yield advanced two basis points to -0.34%
- Britain’s 10-year yield advanced five basis points to 0.79%
Commodities
- West Texas Intermediate crude rose 1.3% to $71.80 a barrel
- Gold futures rose 1.9% to $1,797.40 an ounce
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