U.S. Stocks Jump, Send Nasdaq Higher for the Year: Markets Wrap
U.S. stocks surged, with financial markets showing signs of recovery after the worst week in two years for American equities. The 10-year yield fell back from the four-year high hit earlier Monday as the dollar slipped. The Nasdaq Composite Index turned positive for 2018, with the Dow Jones Industrial Average and the S&P 500 now down less than 1 percent since the end of December. Stocks and bonds have been in a tug-of-war since a blowout jobs report early this month sent Treasury yields spiking, raising the specter of higher interest rates to come. The Cboe Volatility Index fell as the S&P posted its biggest two-day advance in 18 months, but traders were still on edge following the tumultuous move in equities last week that wiped $2 trillion from U.S. stocks. Investors are awaiting U.S. consumer-price data due Wednesday with some trepidation, given that pressure on equities has been emanating from the Treasury market and the outlook for inflation. “You just had a major reversal and investors are just taking a deep breath,” said Mike Bailey, the director of research at FBB Capital Partners in Bethesda, Maryland. “People said, ‘OK, the 10 percent correction is over, let’s take a look at the bright side.”’ The S&P 500 retook its 100-day moving average, a technical indicator that it crashed through last week. Morgan Stanley chief U.S. equity strategist Michael Wilson reversed his week-old cautious call, joining peers at Goldman Sachs Group Inc. and JPMorgan Chase & Co. who have told clients to buy the dip.
U.K. Inflation Holds Steady After BOE Warns of More Rate Hikes
U.K. inflation held at 3 percent in January as downward pressure from auto fuel and food prices was offset by the cost of attractions such as zoos and gardens. Consumer prices fell 0.5 percent from December, as they did in January 2017, the Office for National Statistics said on Tuesday. Annual core inflation accelerated to 2.7 percent from 2.5 percent. The Bank of England expects inflation to subside this year as the effect of sterling’s 2016 deprecation fades. That’s good news for consumers who have seen rising prices eat into their spending power over the past year. But what matters for rate setters is domestically generated inflation, and officials now judge there is little spare capacity remaining in the economy. Markets are pricing in about three interest-rate hikes over the next three years, with the first coming as early as May. Even that will leave “excess demand” and inflation above the 2 percent target, policy maker Gertjan Vlieghe said on Monday. Auto-fuel prices rose less last month than they did a year earlier, and food prices fell for the first time since June. Upward pressures came from the recreation and culture sector, where prices posted their smallest January decline in five years. There was also some pressure from clothing prices as seasonal discounts failed to match those of a year ago.
Hong Kong Stocks Rebound After World’s Biggest Equity Slump
Stocks in Hong Kong rose, led by technology and financial companies, as investors took courage from the global equity rebound. The Hang Seng Index climbed 1.3 percent, trimming an earlier gain of 2.4 percent, while a gauge of Chinese shares traded in the city rose for the first time in seven days. Hong Kong and China stocks bore the brunt of the recent selloff, with both indexes still down more than 9 percent this month, the most among global benchmarks. The Shanghai Composite Index added 1 percent Tuesday, paring its February loss to 8.5 percent. “The focus of the market will shift to earnings results after Chinese New Year and that will determine the future trend of the Hong Kong stocks,” said Banny Lam, head of research at CEB International Investment Corp. Hong Kong markets will be closed Friday and Monday for holidays, while mainland bourses shut for a week from Thursday. Sunny Optical Technology Group Co. led gains on the Hong Kong benchmark, jumping 5.7 percent after saying 2017 net income probably more than doubled from a year earlier. Ping An Insurance Group Co. climbed 3.7 percent after sinking 13 percent last week.