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The blue-chip Dow erased its gains for the year in Friday’s selloff and the S&P 500 logged its third straight week of losses on worries that strength in the U.S. economy and elevated inflation will give the Fed more room for rate hikes.
Futures pointed to a slight recovery in sentiment on Monday as some of the rate-sensitive growth stocks rose in premarket trading.
Tesla (NASDAQ:TSLA) added 2.6% after the electric automaker said its plant in Brandenburg near Berlin is producing 4,000 cars a week, three weeks ahead of schedule according to a recent production plan reviewed by Reuters.
“Despite the falls that you saw last week, there have been real gains since the start of the year and there will be some concerns that companies’ valuations are still too high,” said Susannah Streeter, senior investment and markets analyst at Hargreaves Lansdown.
“You’re likely to get quite a significant chunk of volatility ahead just as investors continue to be concerned about where rates will go and how long they will stay higher.”
However, U.S. Treasury yields continued to rise, with the yield on two-year notes that is sensitive to short-term interest-rate expectations, rising as high as 4.857% to its strongest level since Nov 4. [US/]
Some traders are even betting on a 50-basis-point (bps) hike in March, although the odds are low at around 25%, after data last week showed the Personal Consumption Expenditures price index, the metric by which the Fed measures its 2% inflation target, rose 5.4% last month.
Fed fund futures show traders have priced in at least three 25 bps hikes this year and see rates peaking at 5.41% by September. [FEDWATCH]
At 7:20 a.m. ET, Dow e-minis were up 153 points, or 0.47%, S&P 500 e-minis were up 21 points, or 0.53%, and Nasdaq 100 e-minis were up 76.75 points, or 0.64%.
After last week’s hawkish comments from the Fed policymakers, investors will turn to Fed Governor Philip Jefferson’s speech later in the day. Durable goods data for January will be released at 8:30 a.m. ET.
Warren Buffett’s Berkshire Hathaway (NYSE:BRKa) Inc reported its highest-ever annual operating profit, even as foreign currency losses and rising rates led to lower earnings in the fourth quarter.
Seagen Inc surged 14.6% after the Wall Street Journal reported that Pfizer (NYSE:PFE) was in early talks to acquire the biotech firm. Pfizer’s shares slipped 1.1%.
U.S. railroad operator Union Pacific (NYSE:UNP) jumped 9.3% as Chief Executive Lance Fritz said he would step down, a move that follows calls from hedge fund Soroban Capital Partners for his ouster.
