Stocks Rebound On Slower Rate Hike Hopes

Barry Adams
21 Oct, 2022
New York City

Stocks turned higher after early morning doldrums as investors weighed the latest batch of mixed earnings and rising bond yields. 

The Federal Reserve is widely expected to lift rates by 75 basis points at the next meeting ending on November 2. 

In recent days Fed officials have also carried out a campaign with a hawkish tone suggesting that the rates may rise above 4.75% and stay there for a while until the inflation drops to the Fed's target rate of 2%. 

The wide gap between the Fed target inflation rate of 2% and the current rate above 8% has also stoked the fears that the Fed may not be able to avoid a recession. 

The S&P 500 index rose 1.2% to 3,710.30 and the Nasdaq Composite jumped 0.9% to 10,706.58. 

Crude oil increased 68 cents to $85.13 a barrel and natural gas fell 36 cents to $4.99 a thermal unit. 

The yield on 2-year Treasury notes decreased to 4.54%, 10-year Treasury notes eased to 4.23% and 30-year bonds fell to 4.31%. 

On the earnings front, American Express plunged 7% despite reporting higher-than-expected quarterly earnings and lifting annual outlook. 

Snap Inc plunged 25% after the social media company reported $1.12 billion in revenues, lower than expected, but adjusted quarterly earnings of 8 cents a share. 

Verizon dropped 6% after the wireless communication company reported smaller-than-expected post-paid net subscribers. 

CSX Corp rose 0.3% after the railroad operator posted better-than-expected earnings on higher shipping volumes and improvement in freight rates. 

 

European Markets Down On Inflation Worries 

European markets traded lower on the ongoing worries of looming recession and rising bond yields. 

The UK retail sales fell 1.4% in September following the revised 1.7% decline in August, the Office for National Statistics said Friday. 

A separate report showed a slight improvement in consumer confidence in October despite soaring inflation and political chaos. 

The confidence index improved to -47 in October from -49 in September, showed  the survey from the market research group GfK released Friday.  

The DAX index rebounded from the loss of 2% to 0.4% to 12,710.71, the CAC-40 index fell 1% to 6,026.81 and the FTSE 100 index advanced 0.3% to 6,964.97. 

For the week, the indexes in the region are set to close up between 1% and 2.5%.  

The euro held stable near 98.05 U.S. cents and the British pound declined to $1.1203. 

Brent crude oil gained $1.18 to $93.55 a barrel and TTF natural gas futures declined 10.3% to 114.0 euros a MWh. 

The yield on 10-year German bunds rose to a new 11-year high of 2.44%, French bonds to 2.99%, the UK Gilts to 4.09% and Italian bonds to 4.78%. 

Asian markets generally closed lower on the worries that the rising bond yields and falling local currencies are likely to slow down the economies in the region. 

The Bank of Japan conducted its second emergency operations in as many days after the yield on Japanese bonds rose above the target rate 0.25%. 

Moreover, consumer price inflation in Japan rose to a 8-year high in September of 3.0%, the Ministry of Internal Affairs and Communications said Friday.

The Nikkei index eased 0.4% to 26,890.58, the Hang Seng Index dropped 0.4% to 16,211.12 and the Sensex index increased 0.2% to 59,307.15. 

For the week, the Nikkei declined 0.9%, the Hang Seng fell 2.3% and the Sensex index advanced 2.4%. 

Stocks in Mumbai retained upward bias for the sixth day in a row after positive earnings supported cautiously optimistic market sentiment.