Stock futures ticked higher and bond yields retreated, despite data showing inflation at its highest level since 1982, as investors bet that the price pressures affecting the economy might be peaking.
Futures for the S&P 500 rose 0.5% Wednesday. The broad-market index gained Tuesday, snapping a five-day losing streak. Contracts for the tech-focused Nasdaq-100 added 0.7% and futures for the Dow Jones Industrial Average gained 0.4%.
In premarket trading, shares of Biogen dropped 9% after Medicare officials said they would cover its Alzheimer’s drug Aduhelm on the condition that patients were in clinical trials and had early-stage symptoms.
The yield on the benchmark 10-year Treasury note crept down to 1.727% Wednesday from 1.745% Tuesday, when the rally in government bond yields halted. Yields and prices move inversely.
The consumer-price index—which measures what consumers pay for goods and services—rose 7% in December from the same month a year earlier, up from 6.8% in November. That marks the fastest pace in 40 years and the third straight month in which inflation exceeded 6%.
The Federal Reserve appears poised to lift interest rates as soon as March due to concerns over a tight labor market and elevated inflation. Fed Chairman Jerome Powell called high inflation a “severe threat” to a full economic recovery Tuesday and said the central bank was preparing to raise interest rates because the economy no longer needed emergency support.
Stocks have seen choppy trading this week as investors assess the potential impact of sooner-than-anticipated rate rises and await clarity on when inflation may peak. When interest rates are low, investors tend to load up on risk assets such as stocks to generate returns. When inflation accelerates and policy makers raise rates, the value of companies’ future earnings drops and investors have more alternatives for places to make money. This particularly hurts technology stocks that promise expanding future profits.
Luca Paolini, chief strategist at Pictet Asset Management, said he expected inflation to reach a peak this quarter, but is waiting to see if higher inflation weighs on profits in the coming earnings season.
Overseas, the pan-continental Stoxx Europe 600 gained 0.7%, led by gains in the basic resources and oil and gas sectors. Shares of Royal Philips fell 15% in Amsterdam trading after the health-technology company expanded the reach of its already huge recall of breathing-aid machines and said supply-chain strains would hit fourth-quarter sales.
Hong Kong-listed Chinese tech stocks like JD.com and Meituan jumped Wednesday. Analysts and investors said there was no clear catalyst. Hong Kong’s Hang Seng Index surged 2.8% and China’s Shanghai Composite rose 0.8%.
Japan’s Nikkei 225 and South Kroea’s Kospi rallied 1.9% and 1.5%, respectively.
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