Tech stocks look set to rebound from their brief slip into correction territory Wednesday as investors focus on fourth quarter earnings from Netflix after the close of trading.
Updated at 8:35 am EST
U.S. equity futures traded higher Thursday, while Treasury bond yields eased and the dollar held steady against its global peers, as investors continue to track interest rate markets ahead of next week’s Fed policy meeting.
Tech stocks were also on the move, with traders eyeing beaten-down shares in the Nasdaq Composite, which fell into correction territory — defined as a 10% slide from a recent high — during the Wednesday session.
With between three and four rate hikes anticipated from the Fed this year, traders and investors are also looking at the difference in response from policymakers around the world, with China cutting rates in order to stoke post-pandemic growth and the European Central Bank hinting Wednesday that it may not need to move as ‘boldly’ as the Fed to tame record inflation in the region.
The People’s Bank of China cut one-year and five-year prime mortgage loan rates by 10 and 5 basis points Thursday — 3.7% and 4.6% respectively — following on from Monday’s surprise move to lower short and medium term interest rates for the broader financial system, as PBOC Vice Governor Liu Guoqiang urged the central bank to “hurry up … move ahead of the market curve, and respond to the general concerns of the market in a timely manner.”
Tech Leads Rebound, China Cuts Rates, Netflix, United Airlines and AMD – 5 Things You Must Know
The rate move gave Chinese tech stocks a boost, with the CSI200 rising 0.9%, while the region-wide MSCI ex-Japan benchmark was last seen 1.18% higher heading into the close of trading.
“The rate increases are a necessary adjustment as we return to normal. They have certainly generated turbulence in markets in recent days, and we might well get more turbulence before this scenario is over,” said Brad McMillan, CIO for Commonwealth Financial Network in Waltham, Mass. “Market turbulence, however, is normal as well. It’s not necessarily a sign of a larger problem. Keep calm and carry on; the current rate cycle is a needed—and overdue—return to normal.”
On Wall Street, however, geopolitical tensions may influence risk appetite over the coming weeks after President Joe Biden warned late Wednesday that Russia may “move in” on the Ukraine, adding that “it is going to be a disaster for Russia” of any invasion rises past what he called a “minor incursion”.
Higher-than-expected jobless claims for the period ending on January 15, which rose by 55,000 to 286,000, as well as a solid reading for the Philadelphia Fed manufacturing index arrived before the start of trading, with investors also awaiting a key quarterly earnings from Netflix (NFLX) – Get Netflix, Inc. Report that unofficially kicks-off the start of the tech reporting season after the closing bell.
Futures tied to the Dow are indicating a 150 point opening bell gain while those linked to the S&P 500 are priced for a 24 point advance.
Nasdaq Composite futures are indicating a 140 point opening bell gain as benchmark 10-year Treasury note yields ease to 1.82% after hitting a post-pandemic high of 1.895% in Wednesday trading.
Ford (F) – Get Ford Motor Company Report shares were a notable early mover, falling 2.45% in pre-market trading, after after analysts at Jefferies lowered their rating on the carmaker ahead of the group’s fourth quarter earnings early next month.
United Airlines (UAL) – Get United Airlines Holdings, Inc. Report shares slipped 0.5% lower after the carrier posted a narrower-than-expected fourth quarter loss but cautioned that Omicron disruption would delay its near-term recovery.
On the flip side, American Airlines (AAL) – Get American Airlines Group, Inc. Report jumped 1.2% after a narrower-than-expected fourth-quarter loss and revenue numbers that beat Wall Street forecasts as the carrier continued to struggle ferrying passengers across the skies amid ongoing pandemic-induced turbulence at a profit.
Advanced Micro Devices (AMD) – Get Advanced Micro Devices, Inc. Report shares were also active, falling 1.6% after analysts at Piper Sandler cut their rating and price target on the chipmaker, citing a tepid market for PC semiconductors.
In overseas markets, Europe’s Stoxx 600 was marked 0.06% higher in mid-day trading in Frankfurt, while the higher in Frankfurt while Japan’s Nikkei 225 rebounded from yesterday’s Sony-lead slump with a 1.11% gain to close at 27,772.93 points.
