U.S. Rally Resumes After Investors Overcome Rate Jitters for Now

Barry Adams
14 Feb, 2024
New York City

Stocks on Wall Street rebounded, and investors focused on high growth tech companies and returned to add more positions. 

Investors reassessed the previous day's losses, and market indexes attempted a rebound in Wednesday's trading. 

The S&P 500 index and the Nasdaq Composite advanced after investors surmised that a market selloff in the previous session, the deepest since March 2023, may not be warranted. 

The hotter-than-expected consumer price inflation in January most likely pushed the rate cut later in the year, undercutting the base argument for the recent rally in the last five weeks. 

However, investors shifted their focus to positive earnings, receding inflation, and stable interest rates. 

Investors are looking forward to the release of the producer price inflation report later in the week. 

On the earnings front, Cisco, Generac, Kraft Heinz, Zillow, Airbnb, Robinhood Markets, Lyft, Instacart, and AutoNation were in focus. 

 

U.S. indexes and yields

The S&P 500 index increased 0.4% to 4,971.38, and the Nasdaq Composite rose 0.4% to 15,723.63. 

The yield on 2-year Treasury notes advanced to 4.63%, 10-year Treasury notes increased to 4.30%, and 30-year Treasury bonds edged up to 4.46%.

WTI crude oil decreased $0.12 to $77.76 a barrel, and natural gas prices declined 6 cents to $1.62 a thermal unit, a low last seen in September 2020.

Gold increased by $2.40 to $1,989.23 an ounce after the U.S. dollar gained in international trading.

The dollar index, which weighs the U.S. dollar against a basket of foreign currencies, edged lower to 104.74.

 

U.S. Stock Movers

Airbnb declined 6.2% to $141.43 despite the online booking platform reporting better-than-expected quarterly results.

Revenue in the quarter surged after the company attracted more first-time customers and expanded beyond its core markets in Europe, South America, and Asia. 

Gross booking value in the quarter increased 15% to $15.5 billion, and nights and experiences booked 12% to 98.8 million in the fourth quarter. 

Revenue in the fourth quarter rose 17% to $2.2 billion, net income swung to a loss of $349 million from a profit of $319 million, and diluted earnings per share were a loss of 55 cents compared to a profit of 48 cents a year ago. 

Active listings at the end of the fourth quarter increased by 1.2 million to 7 million around the world. 

Gross booking value in 2023 soared 16% from a year ago to $73.3 billion, and nights and experiences booked jumped 14% to 448.2 million. 

Lyft Inc. soared 20% to $14.56 after the ridesharing company reported fourth-quarter results.

Revenue in the quarter increased to $1.22 billion from $1.18 billion, and net losses shrank to $26.3 million from $588.1 million. 

Gross bookings on the platform rose to $3.7 billion from $3.2 billion. Active riders increased 10% to 22.4 million from 20.4 million, and rides surged to 190.8 million from 151.1 million a year ago. 

The company estimated gross booking in the first quarter between $3.5 billion and $3.6 billion and adjusted operating earnings between $50 million and $55 million. 

 

European Markets Turned Higher Tracking Wall Street Gains

European markets closed higher in Wednesday's trading, a day after a sharp selloff following the release of the U.S. inflation report. 

World markets traded down after U.S. inflation in January eased less than expected to an annual pace of 3.1% and core inflation stayed at 3.9%, supporting the case for the Federal Reserve to wait a longer before lowering interest rates. 

In Wednesday's trading, benchmark indexes in Paris, London, and Frankfurt advanced, and investors reacted to domestic corporate results. 

In Europe, benchmark indexes traded near record highs after investors dialed back on rate-cut optimism. 

The number of employed persons in the Euro Area increased by 0.3% from the previous quarter in the final quarter of 2023 to 169.3 million. 

Employment increased by 1.3% from a year ago in the fourth quarter of 2023. 

Employment in the eurozone expanded for the eleventh quarter in a row, giving more leeway to the European Central Bank to keep interest rates at restrictive levels while bringing down inflation. 

 

UK Inflation Held Steady In January

Closer to home, the UK consumer price inflation rate held steady at 4.0%, the Office for National Statistics reported on Wednesday. 

Core inflation, which excludes food and energy prices, was also unchanged at 5.1%. 

On a monthly basis, inflation declined by 0.6%, after rising by 0.4% in December.

 

Dutch GDP Expands In the Final Quarter of 2023  

The Netherlands GDP grew by 0.3% from the previous quarter in the final quarter of 2023, Statistics Netherlands reported Wednesday. 

The Dutch economy expanded in the final quarter following the contraction in the previous three quarters in a row, after consumer spending rose 1.8% and government spending advanced 0.4%. 

International trade did not make any contribution to the GDP after exports and imports rose 0.3%. 

The Dutch GDP shrank by 0.5% from a year ago after contracting by 0.8% in the third quarter. 

 

Europe Indexes and Yields

The DAX index increased 0.4% to 16,950.23, the CAC-40 index rose 0.7% to 7,676.22, and the FTSE 100 index inched higher by 0.7% to 7,562.22.

The yield on 10-year German bonds edged up to 2.36%; French bonds inched higher to 2.85%; the UK gilts edged higher to 4.07%; and Italian bonds inched higher to 3.90%.

The euro edged lower to $1.070, the British pound inched higher to $1.255, and the U.S. dollar gained to 88.79 Swiss cents.

Brent crude decreased $0.01 to $82.75 a barrel, and the Dutch TTF natural gas fell by €0.74 to €24.70 per MWh.

 

Europe Stock Movers

Banks across Europe declined after rate-cut hopes waned in the eurozone. 

Societe Generale, BNP Paribas, UniCredit, and Commerzbank edged lower. 

ABN Amro Bank increased 4.2% to €14.02 after the Dutch lender's quarterly earnings were ahead of market expectations. 

ThyssenKrupp declined 8.5% to €5.05 after the German steelmaker lowered its full-year profit and sales outlook, citing weakening demand. 

The company also took on impairment charges in its fiscal first quarter.

Schindler Holding increased 2% to CHF 212.80 after the Swiss elevator company estimated revenue growth of "low single-digit" in 2024. 

Bilfinger SE soared 10.1% to €42.16 after the company won a large maintenance order from INEOS for the Forties Pipeline System. 

Delivery Hero jumped 5.5% to €19.74 after the German food delivery company said its organic cash flow is sufficient to cover its bond and debt maturities. 

Heineken NV dropped 5% to €88.48 after the alcoholic beverage maker issued a cautious outlook for 2024, citing uncertainty in global geopolitical and economic conditions. 

Capgemini advanced 4.5% to €215.50 after the French IT consulting group reported solid results in 2023 despite the weak macroeconomic environment. 

Dunelm Group decreased 0.7% to 1,078.0 pence after the UK-based home goods retailer reported strong results in the interim period for 26 weeks ending on December 30. 

The company signaled that margin growth is likely to slow down in the coming months. 

Coca-Cola HBC gained 5.7% to 2,332.0 pence after the Hellenic bottling company reported a record annual profit in 2023 and the company lifted its dividend. 

 

Asian Markets Under Pressure After U.S. Inflation Report

Across Asia, market indexes declined in Japan, Korea, and Indonesia, and financial markets remained closed in China. 

Overall inflation fell to an annual pace of 3.1% in January, and core inflation, which excludes food and energy prices, stayed at 3.9%, significantly higher than the Federal Reserve's target rate of 2%.

Hotter-than-expected inflation in January supported the case for the Federal Reserve to wait for a while before lowering inflation, denting the critical assumption behind the market rally over the last three months. 

Higher inflation suggests that the U.S. dollar is likely to advance and stock market indexes are likely to face downward pressures in the days ahead.

 

Japan Stocks Faced Selling Pressure 

The Nikkei 225 average fell, tracking losses in overnight trading on Wall Street following the release of hotter-than-expected U.S. inflation in January. 

The Nikkei 225 decreased 0.7% to 37,702.85 and eased from the 34-year high reached in the previous session. 

The yen weakened to 150.25 against the U.S. dollar after U.S. rate-cut hopes were pushed back following the inflation report. 

Exporters were among the leading decliners, and tech companies led the gainers. 

Toyota Motor, Sony Group, Panasonic, Canon, Japan Tobacco, and Nippon Steel declined between 2% and 3%. 

Advantest, Screen Holdings, Tokyo Electron, and Renesas Electronics gained between 0.5% and 1.0%. 

Citizen Watch soared 5.9% to ¥1,049.0 after the company reported better-than-expected quarterly results. Sales in the fiscal third quarter rose 4.2% to 859 billion yen, and net income attributable to shareholders increased 2% to 73 billion yen. 

Seiko Group advanced 0.5% to ¥2,738.0, following Citizen's results. 

Sapporo Holding soared 7.7% to ¥7,406.0, and Idemitsu Kosan added 2.6% to ¥852.60 after the energy exploration company reported better-than-expected earnings. 

  

Hang Seng Index Erased Morning Losses 

The Hang Seng index advanced 0.3% to 15,797.59, and the benchmark index erased a 1.2% decline in the morning session after investors returned from a long weekend to celebrate the Lunar New Year. 

Financial markets in mainland China and Taiwan are closed for the rest of the week. 

Property developers continued on the downward path due to the ongoing worries of weak demand and a lack of specific stimulus from policymakers. 

Longfor, China Resources Land, China Vanke, and Sun Hung Kai Properties declined between 1% and 3%. 

New World Development, Budweiser Brewing, and Xinyi Glass declined around 1% after MSCI included these three companies in the list of 66 Chinese companies scheduled to be removed from its global standard index at the end of this month. 

 

India Indexes Erase Morning Losses

Stocks in Mumbai and Asia faced selling pressure after U.S. inflation was higher than expected in January. 

The Sensex and the Nifty indexes dropped about 0.5% in early trading and dragged down tech service providers and banks after the release of the U.S. inflation report. 

The Sensex index gained 0.4% to 71,822.83, and the Nifty index rose 0.5% to 21,840.05.

Adani Group stocks were in focus after the U.S.-based rating agency Moody's Investor Service revised its outlook on four group companies to "stable" from "negative."

The ratings agency had lowered its outlook on Adani Green, Adani Electricity Mumbai, Adani Transmission, and Adani Energy Solutions after the U.S.-based short seller launched a media attack a year ago.