US stocks fluctuate as traders weigh in on high-stakes Fed and Apple earnings

Wall Street stocks fluctuated at the end of a wild week across global markets as investors weighed in on the prospect of rapid interest rate rises from the US Federal Reserve and an optimistic earnings report from Apple.

The U.S. benchmark S&P 500 index fell as much as 0.8 percent in early trading on Friday before trading up 0.6 percent late in New York morning. The Nasdaq Composite also fell before it later added 1.3 percent. on the day.

The measures followed a strong quarterly update from Apple, the world’s largest company measured by market value.

Stock markets, particularly those on Wall Street, have proven volatile this week as investors struggled with a hawkish message from Federal Reserve Chairman Jay Powell following the US Federal Reserve’s monetary policy meeting on Wednesday.

Geopolitical tensions as Russian troops gathered at the border with Ukraine have also helped drive the S&P gauge about 9 percent lower this month. The Nasdaq was nearly 18 percent below its record high in November at the close of Thursday.

“Two factors explain this difficult period for the stock markets,” said Christophe Donay, chief strategist at Pictet Wealth Management. “Tensions over Russia and Ukraine have contributed perhaps a third of the correction, and the rest is the Fed.”

Apple on Thursday reported record quarterly revenue and better-than-expected profits. The iPhone maker also revealed an easier hit than analysts had predicted from coronavirus-related semiconductor supply chain failures. The company’s shares rose by 5 per cent on Friday.

Monetary policy concerns, however, remained dominant. Powell on Wednesday refused to rule out raising interest rates from record lows to tackle rising inflation. Futures markets have priced around five rate hikes this year starting in March.

Higher interest rates increase corporate borrowing costs and lower the present value of expected profits in investors’ models.

The Fed’s hawkish turn has therefore challenged some investors to restructure portfolios designed with a view to 2022 being another year of strong economic and earnings gains from coronavirus shocks by 2020. As recently as mid-September, market prices indicated , that the Fed would raise rates at most once this year.

“This is a huge regime change,” said Gergely Majoros, investment committee member at fund manager Carmignac. “It’s hard to keep judgments.”

Yields on US government bonds, which have been under selling pressure as expectations of higher interest rates and sustained inflation reduced the attraction of fixed-rate securities, ticked down in Friday’s trading as the price of the debt instruments rose.

Core data on private spending on Friday showed that the Fed’s preferred inflation target rose at an annual rate of 4.9 percent in December, slightly faster than economists’ forecasts.

The yield on the two-year government bond, which closely follows monetary policy expectations, fell by 0.02 percentage points to 1.17 per cent. The 10-year interest rate fell 0.02 percentage points to 1.79 percent, however, still rising sharply from the end of 2021.

The dollar index, which measures the U.S. currency against six others, lost 0.1 percent after climbing to its highest point in nearly 18 months Thursday.

European markets fell broadly on Friday, with the regional Stoxx 600 index falling 1.1 per cent.

In Asia, Hong Kong’s Hang Seng index fell 1.1 percent, while Tokyo’s export-heavy Nikkei 225 added 2.1 percent, boosted by a stronger dollar.

Additional reporting by Tommy Stubbington

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Wall Street stocks fluctuated at the end of a wild week across global markets as investors weighed in on the prospect of rapid interest rate rises from the US Federal Reserve and an optimistic earnings report from Apple. The U.S. benchmark S&P 500 index fell as much as 0.8 percent in early trading on Friday…

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