Wall Street veered toward small gains in premarket trading Tuesday with another batch of earnings on tap to close out a month of losses fueled by anxiety over more interest rate hikes and a possible recession.
Futures for the Dow Jones industrials were up 0.3% before the bell and futures for the S&P 500 rose 0.4%.
Investors are jittery as analysts raise forecasts for how high the Federal Reserve will take interest rates and how long it will keep them there in an attempt to tame inflation that has so far failed to retreat as much as expected.
Economies around the world have remained resilient, with China loosening its business-damaging anti-COVID restrictions and Europe avoiding a worst-case energy crisis.
“As we move into ‘Turnaround Tuesday,’ investors are debating whether January’s inflation reflation was just another temporary bump in the road as the economy adjusts to a post-pandemic world,” Stephen Innes of SPI Asset Management said in a report. “The post-pandemic era continues to deliver unusual macroeconomic patterns.”
Stocks have struggled in February after a strong start to the year. Robust economic data helped calm fears that a recession may be imminent given the dampening impact of more costly borrowing on spending by consumers and businesses.
But they likely mean a longer spell of higher interest rates. The heightened expectations for rates have been most evident in the bond market, where yields have shot higher in recent weeks.
The 10-year Treasury yield ticked back up to 3.94% early Tuesday after dipping to 3.92% on Monday. That yield helps set rates for mortgages and other important loans. The two-year yield, which moves more on expectations for the Fed, inched back up to 4.80% from 4.78%. It’s near its highest level since 2007.
Earlier, analysts thought the Fed might soon ease back. Now the expectation is that it might raise rates above 5.25%. The Fed’s key overnight rate is now in a range of 4.50% to 4.75%, up from virtually zero at the start of last year.
Even with the worries about rates going higher than expected, the S&P 500 is still holding onto a gain of 3.7% for the year so far, and shoppers are still continuing to spend at stores. Both can add upward pressure on inflation.
Target kicked off another big week for retailers, reporting a 43% drop in profits but a slight uptick in sales for the holiday quarter. Shares in the Minneapolis retailer tumbled 5% initially, but recovered to a 2% gain before the bell. The fiscal fourth-quarter results beat analysts’ expectations, but the company issued a cautious outlook for the year — much like Walmart and Home Depot last week — as inflation squeezes household budgets.
Dollar Tree, Kohl’s, Kroger and Lowe’s report later this week.
Most companies have already reported their results for the last three months of 2022. Overall, this earnings reporting season has been lackluster. Companies in the S&P 500 are on track to report their first drop in earnings per share from a year earlier since the summer of 2020, according to FactSet.
In Europe at midday, Germany’s DAX and the CAC 40 in Paris each gained 0.2% while Britain’s FTSE 100 lost 0.4%.
In Asian trading, Tokyo’s Nikkei 225 index added 0.1% to 27,445.56 and the Kospi in Seoul advanced 0.4% to 2,412.85.
Hong Kong’s Hang Seng shed 0.8% to 19,785.94, while the Shanghai Composite index surged 0.7% to 3,279.61. Australia’s S&P/ASX 200 rose 0.5% to 7,258.40.
Shares in Mumbai fell 0.6% while Bangkok’s SET index slipped 0.4%.
In other trading Tuesday, U.S. benchmark crude oil gained $1.07 to $76.75 per barrel in electronic trading on the New York Mercantile Exchange.
Brent crude, the pricing basis for international trading, picked up $1.03 to $83.07 per barrel.
The U.S. dollar rose to 136.71 Japanese yen from 136.20 yen. The euro inched up to $1.0617.
On Monday, the S&P 500 rose 0.3% and the Dow industrials gained 0.2%. The Nasdaq composite climbed 0.6%.
Kurtenbach reported from Bangkok; Ott reported from Silver Spring, Maryland.
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