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Business

U.S. stock futures rise ahead of last trading week of 2022

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U.S. stock futures rose Monday night, ahead of the final trading week of 2022.

Dow Jones Industrial Average futures
YM00,
+0.44%
gained more than 150 points, or 0.5%, as of 11 p.m. Eastern. S&P 500 futures
ES00,
+0.59%
and Nasdaq-100 futures
NQ00,
+0.71%
were also logging solid gains, indicating positive market moves when regular trading resumes Tuesday from the three-day Christmas holiday.

Oil prices rose
CL.1,
+0.85%,
as the U.S. Dollar Index
DXY,
-0.30%
slipped.

Last week, the Dow gained nearly 1%, while the S&P 500 and Nasdaq fell for a third straight week.

See more: What to expect for the stock market in 2023 after the biggest decline since the financial crisis

On Friday, the Dow Jones Industrial Average 
DJIA,
+0.53%
rose 176.44 points, or 0.5%, to close at 33,203.93. The S&P 500 
SPX,
+0.59%
 gained 22.43 points, or 0.6%, finishing at 3,844.82, for a weekly decline of 0.2%. The Nasdaq Composite 
COMP,
+0.21%
 closed at 10,497.86, up 6.85 points, or 0.4%. For the week, the Nasdaq fell 1.9%.

Friday marked the start of the so-called Santa Claus rally period — the final five trading days of the calendar year and the first two trading days of the new year. That stretch has, on average, produced gains for stocks, but failure to do so is often read as a negative indicator.

Read more: How a Santa Claus rally, or lack thereof, sets the stage for the stock market in first quarter

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Business

Why stock-market bears are eying June lows after S&P 500 falls back below 3,900

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Goodbye, summer bounce.

The S&P 500 finished Friday below a crucial chart support level that’s served as a battleground in recent years, leading technical analysts to warn of a potential test of the stock market’s June lows.

“Over the last three years, the level on the [S&P 500] with the most amount of volume traded has been 3,900. It closed below that on Friday for the first time since July 18 which, in our view, opens the door down to the June lows” near 3,640, said Jonathan Krinsky, chief market technician at BTIG, in a Sunday note (see chart below).


BTIG

The S&P 500
SPX,
-0.72%
ended Friday at 3,873.33 — falling 0.7% in the session and 4.8% for the week for its lowest close since July 18. That left the index up 5.7% from its June 16 closing low of 3,666.77. The S&P 500 logged an intraday low for the selloff at 3,636.87 on June 17, according to FactSet.

The Dow Jones Industrial Average
DJIA,
-0.45%
fell 4.1% last week to end Friday at 30,822.42, while the Nasdaq Composite
COMP,
-0.90%
saw a 5.5% weekly drop to 11,448.40. Stock-index futures
ES00,
-0.19%

YM00,
-0.12%

NQ00,
-0.42%
were trading flat to slightly late Sunday.

A move back to the June lows likely won’t be a straight line, Krinsky wrote, but the lack so far of discernible “panic” in the Cboe Volatility Index
VIX,
+0.11%
futures curve and the lack of a drop to more extreme oversold conditions as measured by monthly relative strength index don’t bode well, he said.

Other analysts have noted the lack of a sharper rise in the spot VIX, often referred to as Wall Street’s “fear gauge.” The options-based VIX ended Friday at 26.30 after trading as high as 28.42, above its long-term average near 20 but well below panic levels often seen near market bottoms above 40.

Stocks had bounced back sharply from the June lows, which had seen the S&P 500 down 23.6% from its Jan. 3 record finish at 4,796.56. Krinsky and other chart watchers had noted the S&P 500 in August completed a more-than-50% retracement of its fall from the January high to the June low — a move that in the past had not been followed by a new low.

Krinsky at the time had warned, however, against chasing the bounce, writing on Aug. 11 that the “tactical risk/reward looks poor to us here.”

Michael Kramer, founder of Mott Capital Management, had warned in a note last week that a close below 3,900 would set up a test of support at 3,835, “where the next big gap to fill in the market rests.”

Stocks fell sharply last week after a Tuesday reading on the August consumer-price index showed inflation running hotter than expected. The data cemented expectations for the Federal Reserve to deliver another supersize 75-basis-point, or 0.75-percentage-point, rise in the fed-funds rate, with some traders and analysts penciling in a 100-basis-point hike when policy makers complete a two-day meeting on Wednesday.

Preview: The Fed is ready to tell us how much ‘pain’ the economy will suffer. It still won’t hint at recession though.

The market’s bounce off its June lows came as some investors had grown more confident in a Goldilocks scenario in which the Fed’s policy tightening would wring out inflation in relatively short order. For bulls, the hope was that the Fed would be able to “pivot” away from rate increases, averting a recession.

Stubborn inflation readings have left investors to raise expectations for where they think rates will top out, heightening fears of a recession or sharp slowdown. Aggressive tightening by other major central banks has stoked fears of a broad global slowdown.

See: Can the Fed tame inflation without crushing the stock market? What investors need to know.

Hear from Ray Dalio at the Best New Ideas in Money Festival on Sept. 21 and Sept. 22 in New York. The hedge-fund pioneer has strong views on where the economy is headed.

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Business

Ray Dalio says watch out for rates reaching this level, because Wall Street stocks will take a 20% hit

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After that CPI shock earlier in the week, Wall Street is fielding a fresh batch of data on Thursday, with the headline retail sales number coming in stronger than expected. And a disastrous rail strike may be inverted.

But there’s no cheering up billionaire investor and hedge-fund manager Ray Dalio who in our call of the day asserts the Fed has no choice but to keep driving up interest rates, at a high price to stocks.

And he’s putting some fairly precise guesswork out there. “I estimate that a rise in rates from where they are to about 4.5% will produce about a 20% negative impact on equity prices,” Dalio said in a LinkedIn post dated Tuesday.

Some are forecasting the Fed could hike interest rates by 100 basis points next week, a move not seen since the likewise inflationary 80s. The central bank’s short-term rate hovers between 2.25% to 2.5%, but Nomura, for one, sees that rate headed to 4.75% by 2023.

But Dalio thinks interest rates could even reach the higher end of a 4.5%-to-6% range. “This will bring private sector credit growth down, which will bring private sector spending, and hence the economy down with it,” he says.

Behind this prediction is the Bridgewater Associates founder belief that the market is severely underestimating where inflation will end up — at 2.6% over the next 10 years versus what he sees as 4.5% to 5% in the medium term, barring shocks.

Read: Why a single U.S. inflation report roiled global financial markets — and what comes next

As for what happens when people start losing money in the markets — the so-called “wealth effect” — he expects less spending as they and their lenders grow more cautious.

“The upshot is that it looks likely to me that the inflation rate will stay significantly above what people and the Fed want it to be (while the year-over-year inflation rate will fall), that interest rates will go up, that other markets will go down, and that the economy will be weaker than expected, and that is without consideration given to the worsening trends in internal and external conflicts and their effects.”

The markets

Stock futures
ES00,
-0.25%

YM00,
+0.02%

NQ00,
-0.48%
are slightly lower post data, as Treasury yields
TMUBMUSD10Y,
3.437%

TMUBMUSD02Y,
3.852%
keep climbinging and the dollar
DXY,
-0.10%
firms up.

Oil prices
CL.1,
-1.63%
are lower, along with gold
GC00,
-0.83%.
China stocks
SHCOMP,
-1.16%

HSI,
+0.44%
slipped after the country’s central bank left rates unchanged. European natural-gas prices
GWM00,
+4.13%
are on the rise again. Bitcoin
BTCUSD,
+0.64%
is trading at just over $20,000.

The buzz

Shares of Union Pacific
UNP,
-3.69%,
Norfolk Southern 
NSC,
-2.16%
and CSX
CSX,
-1.05%
 are rallying in premarket after the White House said it has reached a tentative railway agreement with unions. No deal by Friday would mean strikes and havoc for supply chains, grain markets and even the coming holidays. Read more here.

August retail sales rose a stronger-than-expected 0.3% as Americans spent on new cars while weekly jobless claims came in lower for a fifth-straight week and import prices dropped 1%. Elsewhere, the Empire State manufacturing index perked up on the heels of a deep negative reading, but the Philly Fed factory index worsened. Industrial production and business inventories are still to come.

Adobe shares
ADBE,
+0.85%
are dropping after a report the software company is mulling a $20 billion deal to buy graphic design startup Figma .

Vitalik Buterin, one of the co-founders of Ethereum, says the so-called “merge” is done, meaning the birth of a more environmentally friendly crypto. Ethereum
ETHUSD,
-1.22%
is up just a little right now.

A new lawsuit claims Tesla
TSLA,
+3.59%
has made false promises over Autopilot and Full Self Driving features. And move over Tesla, Apple
AAPL,
+0.96%
is now Wall Street’s biggest short bet.

Ericsson
ERIC,
-3.32%

ERIC.A,
-1.78%

ERIC.B,
-3.34%
is dropping after a double downgrade at Credit Suisse, who cited inflationary headwinds. Analysts lifted Nokia
NOKIA,
-0.51%

NOK,
-0.40%
to outperform, though the stock is barely moving.

Cathie Wood’s Ark Investment Management went on a dip-buying spree after Tuesday’s market meltdown, scooping up chiefly Roku
ROKU,
+0.44%.

Opinion: Pinterest never considered itself a social network. Until now.

Patagonia billionaire Yvon Chouinard is donating his entire company — worth $3 billion — to the climate fight.

Best of the web

No U.S. shale rescue for Europe.

Turkey finds an extra $24.4 billion laying around.

Queue to pay respects to Queen is 2.6 miles long and counting.

The tickers

These were the top-searched tickers on MarketWatch as of 6 a.m. Eastern Time:

Ticker Security name
TSLA,
+3.59% 		Tesla
GME,
+1.01% 		GameStop
AMC,
+1.95% 		AMC Entertainment
BBBY,
+4.66% 		Bed Bath & Beyond
HKD,
+311.78% 		AMTD Digital
NIO,
-0.14% 		NIO
AAPL,
+0.96% 		Apple
APE,
+0.94% 		AMC Entertainment preferred shares
AMZN,
+1.36% 		Amazon
NVDA,
-0.02% 		Nvidia
Random reads

Scientists try to teach robots comedic timing

Sausage, mozzarella, batter. Meet South Korea’s hot dog.

Need to Know starts early and is updated until the opening bell, but sign up here to get it delivered once to your email box. The emailed version will be sent out at about 7:30 a.m. Eastern.

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Business

U.S. stocks push higher as Powell sees path back to 2% inflation while sustaining strong labor market

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U.S. stock indexes pushed higher after a wobbly start Wednesday, leaving Wall Street potentially on to gain ground after back-to-back losses, as investors tune in to remarks by central bankers while fretting that soaring inflation is damaging the world’s biggest economy.

How are stock indexes trading?
  • The Dow Jones Industrial Average
    DJIA,
    +0.12%
     was up 196 points, or 0.6%, at 31,143.
  • The S&P 500
    SPX,
    -0.23%
     traded up 15 points, or 0.4%, at 3,836.
  • The Nasdaq Composite
    COMP,
    -0.43%
    gained 42 points, or 0.4%, to 11,223.

On Tuesday, the Dow fell 491.27 points, or 1.6%. The S&P 500 fell 2% and the Nasdaq Composite dropped 3%. All three booked their worst daily percentage declines since June 16, according to Dow Jones Market Data.

What’s driving markets?

Federal Reserve Chair Jerome Powell said Wednesday at a European Central Bank forum on central banking that he sees a path back to 2% inflation while sustaining strong labor market, but warned there was “no guarantee that we can do that.”

Investors were also listening to remarks from European Central Bank President Christine Lagarde, Bank of England Gov. Andrew Bailey and Augustin Carstens, head of Bank for International Settlements, to speak at speak at the same conference.

On U.S. economic data, the first-quarter GDP was revised to show an 1.6% decline, compared with the prior 1.5% drop.

Equities were limping toward the end of a miserable first half of the year. The S&P 500 is down 19.6% so far in 2022, hit by concerns that inflation rates at multidecade highs are badly damaging household sentiment and that the Federal Reserve’s response to surging prices may tip the economy into recession.

Read: What’s next for the stock market after the worst 1st half since 1970? Here’s the history.

On Tuesday, the Conference Board’s consumer-confidence index dropped in June to a 16-month low of 98.7, with consumers’ outlook on the state of the economy at the most cautious in nearly 10 years. The news helped turn early gains for Wall Steet into heavy losses, with the Nasdaq Composite shedding 3%, leaving the tech-heavy index nursing a loss of 28% for the year to date.

“Last week, U.S. equity markets rallied on the back of the arcane logic that a U.S. recession would mean a lower terminal Fed funds rates and thus, was bullish for stocks… That premise was boosted by weak Michigan Consumer Sentiment data,” said Jeffrey Halley, senior market analyst at OANDA, in a note to clients.

See: Wall Street’s favorite stock sector has potential upside of 43% as we enter the second half of 2022

On Tuesday, “even weaker U.S. Conference Board Consumer Confidence data provoked the opposite reaction, with U.S. stocks plummeting,” he added.

Wall Steet’s dive left Asian and European bourses floundering. Hong Kong’s Hang Seng
HSI,
-1.88%
fell 2% and the Nikkei 225
NIK,
-0.91%
in Japan slipped 0.9%. China’s Shanghai Composite
SHCOMP,
-1.40%
shed 1.4% after President Xi Jinping reiterated that the regime’s strict COVID-19 policy was “correct and effective.”

The comments added to worries that supply constraints in China could exacerbate global inflationary pressures. And such concerns were illustrated in Spain on Wednesday, where data showed prices rising by 10.2% in June, their fastest pace in 37 years. Europe’s Stoxx 600
SXXP,
-0.41%
fell 0.8%.

Oil prices crept higher, with WTI crude
CL.1,
+1.61%,
up 1.5% to $113.41 a barrel.

The yield on the U.S. 10-year Treasury note
TMUBMUSD10Y,
3.135%
eased 1.3 basis points to 3.167%.

Companies in focus
  • Shares of Pinterest Inc.
    PINS,
    -2.36%
    rose 0.2% after the social-media company said co-founder Ben Silbermann is stepping down as chief executive and is being replaced by an e-commerce executive from Google.
  • Bed Bath & Beyond Inc.
    BBBY,
    -22.21%
    shares fell 18.7% after it announced disappointing fiscal first-quarter results and the ouster of its chief executive, Mark Tritton.
  • General Mills Inc.
    GIS,
    +5.31%
    shares rose 4.7% after beating quarterly expectations. The company posted fourth-quarter net income of $822.8 million, or $1.35 per share, nearly double $416.8 million, or 68 cents per share, last year. Adjusted EPS of $1.12, ahead of the FactSet consensus for $1.01 per share. 
Other assets
  • The ICE U.S. Dollar Index
    DXY,
    +0.30%
     edged down 0.01%.
  • Bitcoin
    BTCUSD,
    -1.04%
     fell 4.6% to trade near $20,120.
  • August gold futures
    GCQ22,
    -0.12%
    gained $6.30, or 0.4%, to settle at $1,827.90 an ounce.

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Business

U.S. stock futures sink after Wall Street’s worst week since January

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U.S. stock-index futures sank Sunday after Wall Street’s worst week since January.

Dow Jones Industrial Average futures
YM00,
-1.25%
fell about 300 points, or 1%, as of midnight Eastern, while S&P 500 futures
ES00,
-1.65%
and Nasdaq-100 futures
NQ00,
-2.17%
posted even steeper declines.

Prices of bitcoin and other cryptocurrencies also slid over the weekend, with bitcoin
BTCUSD,
-7.71%
falling below the $26,000 level to its lowest point in 18 months, and more than 60% off its all-time high reached last November. Crude prices
CL.1,
-1.31%
dipped Sunday as well.

Also: Crypto lending platform Celsius pauses withdrawals, transfers amid ‘extreme market conditions’

Stocks finished sharply lower Friday. The Dow
DJIA,
-2.73%
dropped 880 points, or 2.7%, to close at 31,392.79; the S&P 500
SPX,
-2.91%
 slid 116.96 points, or 2.9%, to finish at 3,900.86; and the Nasdaq Composite
COMP,
-3.52%
 slumped 414.20 points, or 3.5%, to end at 11,340.02.

For the week, the Dow fell 4.6%, the S&P 500 dove 5.1% and the Nasdaq sank 5.6%. It was the biggest weekly loss since January for all three major benchmarks, according to Dow Jones Market Data.

Read: Stocks sink again as hot inflation reading triggers market shock waves: What investors need to know

Markets fell following renewed inflation worries, as a new report showed hotter-than-expected readings. The consumer-price index on Friday showed U.S. inflation increased 1% in May, well above the 0.7% monthly rise forecast by economists surveyed by the Wall Street Journal. The year-over-year rate rose 8.6%, topping the 40-year high of 8.5% seen in March.

Federal Reserve policy-makers are set to meet this week, and are expected to raise interest rates by 50 basis points, though some economists think that after Friday’s CPI report, there may be support for a more aggressive 75-basis-point hike.

Also see: ‘Doves don’t exist on the FOMC right now’: Economists expect hawkish Fed meeting this week

“U.S. CPI for May was a nightmare for risk markets,” Stephen Innes, managing partner at SPI Asset Management, wrote in a note Sunday. “The market is now thinking much more about the Fed driving rates sharply higher to get on top of inflation and then having to cut back as growth drops.

That will leave traders and investors “deliberating how much further tightening central banks’ will be able to deliver and, therefore, how much higher yields can go from here. And we all know nothing ever good happens when interest rate volatility spikes in capital markets,” he said.

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Business

Why is the stock market falling? Dow drops nearly 900 points as investors weigh Fed’s policy path, earnings

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U.S. stocks fell sharply Friday, as investors continued to weigh hawkish comments on interest rates by Federal Reserve Chairman Jerome Powell a day earlier, as well as a fresh batch of corporate earnings that largely disappointed.

How are stocks trading?
  • The Dow Jones Industrial Average
    DJIA,
    -2.18%
    was down 879 points, or 2.5%, at 33,914.
  • The S&P 500
    SPX,
    -2.18%
    fell 107 points, or 2.4%, to 4,286, and was on track for a third straight weekly fall.
  • The Nasdaq Composite
    COMP,
    -2.03%
    shed 298 points, or 2.3%, to trade at 12,875.

On Thursday, the Dow shed 368.03 points, or 1.1%, reversing a gain of as much as 331.43 points in intraday trading. The more-than 700-point intraday swing was its biggest since March 8, according to Dow Jones Market Data. The S&P 500 fell 1.5%, while the Nasdaq Composite slumped 2.1%.

What’s driving the market?

Stock-market weakness picked up Friday where Thursday’s selloff left off, when equities tumbled into the afternoon after Powell added his support for moving faster on raising interest rates to cool inflation, measures that would include a possible 50 basis point interest rate hike in May.

“It would seem investors have been too complacent about the upcoming [Fed] meeting, which will need to change,” said Michael Kramer, founder of Mott Capital, in a note.

The Cboe Volatility Index
VIX,
+20.55%,
an options-based measure of expected volatility over the next 30 days, had been too low heading into the May 3-4 Federal Open Market Committee, or FOMC, meeting, Kramer said. It rose Thursday and was up another 19.5% at 27.1- on Friday, moving above its long-term average just below 20.

Powell’s remarks appeared to make a half percentage point rate hike the base case, with the central bank also likely to announce the beginning of the unwinding of its balance sheet, Kramer said.

Meanwhile, traders of fed funds futures have priced in a 94% chance that the Federal Reserve will deliver a 75 basis point rate hike in June, up from 70% on Thursday and 28% a week ago, according to the CME FedWatch Tool. 

The benchmark 10-year Treasury yield 
TMUBMUSD10Y,
2.895%,
meanwhile, pulled back slightly to around 2.89% after climbing about 8.1 basis points to 2.917% on Thursday, the highest since Dec. 4, 2018.

Read: How to invest as inflation, higher interest rates and war roil markets

And some are warning that the Nasdaq is looking particularly vulnerable. The week has delivered some big earnings news for the technology sector, with investors cheering Thursday’s results from Tesla
TSLA,
-0.12%,
on the heels of deeply disappointing Netflix
NFLX,
-0.91%
results.

The Fed’s hawkish shift and the relentless rise in Treasury yields may be sapping the previous appeal of equities, which had previously been seen as the only viable avenue for many return-seeking investors.

“Investors appear to be moving away from the TINA (There is no Alternative) narrative as of late when it comes to equities,” said Brian Price, head of investment management at Commonwealth Financial Network, in a note. “This is the second straight week of significant outflows from equity mutual funds and days like today are unlikely to change the sentiment moving forward. The one positive takeaway may be that sentiment has become too bearish and we could see a countertrend rally at some point in the coming weeks.”

In One Chart: Investors just pulled a massive $17.5 billion out of global equities. They’re just getting started, says Bank of America.

All 11 major S&P 500 sectors fell Friday, with healthcare stocks dropping the most after a downbeat profit forecast from HCA Healthcare Inc.
HCA,
-20.47%
sent its shares tumbling. Other hospital operators, including Tenet Healthcare Corp.
THC,
-13.49%,
Community Health Systems Inc.
CYH,
-17.36%
and Universal Health Services
UHS,
-12.70%
also fell between 10.4% and 13.2%.

However, of the 99 companies in the S&P 500 that have reported earnings for the first quarter, 77.8% of them have beat market expectations. Typically, 66% of companies beat estimates, according to Refinitiv data.

Next week will mark another big week for earnings, with 558 companies reporting, Saxo noted. “It is the big test of companies’ ability to pass on costs to their customers,” they said.

Investors may also be skittish ahead of the final round of France’s presidential election on Sunday. An upset victory by far-right candidate Marine Le Pen over incumbent Francois Macron would likely spark market volatility, analysts said.

See: Here’s how markets are positioned for Sunday’s presidential election in France between Macron and Le Pen

What companies are in focus?
  • HCA shares were down 19.6%, on pace for their largest percentage decrease since March 16, 2020, when they fell 19.02%, according to Dow Jones Market Data.
  • Gap Inc.
    GPS,
    -18.51%
    stock tumbled nearly 19%, following a bigger-than-expected drop in sales and as the retailer announced the depature of Old Navy CEO Nancy Green.
  • Shares of Qualtrics International Inc.
    XM,
    -9.41%
    fell 9.5% after the experience-management software company reported fiscal first-quarter forecast-beating revenue.
  • Snap Inc.
    SNAP,
    -0.27%
    shares lost 0.7% after the social media group reported quarterly revenue that fell short of Wall Street’s expectations.
  • Shares of American Express Co.
    AXP,
    -1.87%
    fell 1.4% after topping earnings expectations Friday amid a continued rebound in travel and strong spending trends among younger consumers.
  • Verizon Communications Inc.
    VZ,
    -5.30%
    fell after its earnings report showed a net loss of postpaid phone subscribers in its latest quarter, calling out “competitive dynamics within the industry,” though it said it had its best quarter of broadband net additions in more than a decade.
How are other assets trading?
  • The ICE U.S. Dollar Index 
    DXY,
    +0.56%
     rose 0.7% to trade at its highest since March 2020.
  • Bitcoin 
    BTCUSD,
    -2.51%
    fell 2.4% to trade near $39,500.
  • The U.S. oil benchmark
    CL.1,
    -1.90%
     fell $1.72, or 1.7%, to settle at $102.07 a barrel on the New York Mercantile Exchange, falling 4.1% for the week.
  • Gold
    GC00,
    -0.60%
    fell $13.90, or 0.7%, to settle at $1,934.30 an ounce, leaving a 2.1% weekly fall.
  • The Stoxx Europe 600
    SXXP,
    -1.79%
    dropped 1.5% while London’s FTSE 100 
    UKX,
    -1.39%
    fell 1.4%.
  • The Shanghai Composite 
    SHCOMP,
    +0.23%
     rose 0.2%, while the Hang Seng Index 
    HSI,
    -0.21%
    slipped 0.2% in Hong Kong and Japan’s Nikkei 225 
    NIK,
    -1.63%
    fell 1%.

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Business

U.S. stock futures fall amid Ukraine invasion jitters, despite late rally on Wall Street

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U.S. stock-index futures fell in volatile trading Thursday night, following a late rally that sent stocks closing higher during the regular trading session despite market jitters caused by the Russian invasion of Ukraine.

Dow Jones Industrial Average futures
YM00,
-0.47%
were down about 130 points at midnight Eastern, while S&P 500 futures
ES00,
-0.60%
and Nasdaq-100 futures
NQ00,
-0.83%
also declined.

For more: Complete MarketWatch coverage of the Russian invasion of Ukraine

Crude prices continued to rise after rising above $100 a barrel during intraday trading for the first time since 2014. West Texas Intermediate crude for April delivery
CLV22,
+1.39%
was last at about $95 a barrel, while April Brent crude
BRNJ22,
+1.82%,
the global benchmark, was at $101 a barrel.

Gold prices
GC00,
-0.47%
slipped, last trading at about $1,913 an ounce, while cryptocurrencies such as bitcoin
BTCUSD,
+0.94%
and ethereum
ETHUSD,
-0.02%
were fairly stable.

Earlier in the day, the Dow
DJIA,
+0.28%
snapped a five-session losing streak, closing up 92.07 points, or 0.3%, at 33,223.83, after falling as far as 2.6% in morning trading. The S&P 500
SPX,
+1.50%
 climbed 63.2 points, or 1.5%, finishing at 4,288.70, but in correction territory, while the Nasdaq Composite
COMP,
+3.34%
 rose 436.1 points, or 3.3%, ending at 13,473.59, but bouncing off a session low at 12,587.88.

Read: Nasdaq Composite turns a 3.5% loss into 3.3% gain as stock market stages epic turnaround after Russia invaded Ukraine. Here are 3 reasons for the rebound.

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Business

Stock futures reverse early losses after Biden, Putin agree ‘in principle’ to summit

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U.S stock-index futures bounced back from early-session losses Sunday after an announcement that President Joe Biden and Russia’s Vladimir Putin have agreed in principle to a summit to ease tensions over Ukraine.

Dow Jones Industrial Average futures
YM00,
+0.93%,
S&P 500 futures
ES00,
+1.01%
and Nasdaq-100 futures
NQ00,
+0.99%
fell sharply to start Sunday’s trading session, but recovered and surged into positive territory following news of the potential summit. Dow futures, once down nearly 100 points Sunday, were up about 150 points as of 11:30 p.m. Eastern.

Oil prices
CLH22,

BRNJ22,
-0.27%
initially jumped near $93 a barrel before settling back down following the summit announcement. As of late Sunday night, West Texas intermediate crude was back in positive territory, at around $91.50 a barrel. A potential war between Russia and Ukraine could send oil prices over $100 a barrel, analysts have warned.

Late Sunday, French President Emmanuel Macron’s office said that Biden and Putin have agreed “in principle” to a summit in the coming weeks, after a series of conversations with the French leader, but only if Russia does not invade Ukraine

The U.S. confirmed the announcement. “President Biden accepted in principle a meeting with President Putin … again, if an invasion hasn’t happened. We are always ready for diplomacy,” White House press secretary Jen Psaski said Sunday night.

That sharply defused investors’ concerns as tensions had ratcheted higher earlier Sunday, after Russia reneged on a pledge to withdraw tens of thousands of troops from neighboring Belarus at the conclusion of military exercises. U.S. officials said Sunday that Russia has decided to invade Ukraine, based on intelligence that field commanders have been given final to prepare for an attack.

Read: What a Russian invasion of Ukraine would mean for the stock market, oil and other assets

The U.S. and its Western allies have vowed to impose tough sanctions against Russia if it invades, and Russia could retaliate by cutting oil and gas exports. Speaking at the Munich Security Conference on Sunday, Vice President Kamala Harris warned that U.S. consumers could be affected, paying higher energy prices.

Stocks have fallen for two consecutive weeks amid fears of a land war in Europe combined with rising inflation and the likelihood of multiple hikes in interest rates.

On Friday, the Dow
DJIA,
-0.68%
dropped 232.85 points, or 0.7%, to close at 34,079.18; the S&P 500 index
SPX,
-0.72%
 fell 31.39 points, or 0.7%, to end at 4,348.87; and the Nasdaq Composite Index
COMP,
-1.23%
 declined 168.65 points, or 1.2%, to finish at 13,548.07, forming a bearish “death cross” chart for the first time in two years.

For the week, the Dow dropped 1.9%, the S&P 500 fell 1.6% and the Nasdaq declined 1.8%.

U.S. markets will be closed Monday in observance of Presidents Day.

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Business

Brace for a volatile 2022, but cling to this tech stalwart when the storm comes, says investment adviser

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The pain is piling up for equity investors after the long U.S. holiday weekend, with bond yields at levels not seen since early 2020, and oil prices tapping 2014 highs.

The pace of Federal Reserve monetary policy tightening amid the highest inflation in about 40 years, a bumpy start to the corporate earnings reporting season and pandemic uncertainties are just a few things on the worry list. Technology stocks
COMP,
-1.12%
are set to take the biggest hit on Tuesday, as a rapid rise in short term interest rates tends to make their future cash flows less valuable.

While a Deutsche Bank chart (below) reveals more tech-bubble worries, our call of the day makes a case for one of the biggest tech stalwarts, Apple
AAPL,
-0.43%,
saying the iPhone maker has an ace in the hole that few are paying attention to.

That call comes from investment adviser Wedgewood Partners, who kick off their fourth-quarter 2021 client letter with a warning about market volatility for 2022, triggered by central bankers who are about to usher in some market chaos by pulling the plug on years of cheap money. Even Chinese President Xi Jinping was heard warning the Fed not to hike interest rates at a virtual Davos on Tuesday.

However, the adviser also sees opportunities ahead as selling picks up speed, and they plan to stick to Apple, which they’ve owned for 16 years.

While Wedgewood said it couldn’t foresee the many products the company unveiled, “we did know that Apple’s vertically integrated [software and hardware] product development strategy was unique and extremely capable of creating products and experiences that customers thought worthwhile enough to spend growing amounts of time and money on,” said the adviser.

Today, that strategy remains intact, but more important Apple is commanding a key new realm, having developed over a dozen custom processors and integrated circuits, since launching its “A-series” processors. For example, one it produced in 2017 provided the iPhone X with enough power to operate FaceID 3-D algorithms, used to unlock phones and make digital payments.

“Apple has effectively created a semiconductor business that rivals and even surpasses some of the most established semiconductor-focused businesses in the industry,” said Wedgewood. “Apple continues to differentiate through vertical integration, which has been a hallmark of Apple’s long-term strategy to grow and capture superior profitability. It is difficult to predict what new products will be unveiled; however, we think this strategy should continue to serve
shareholders quite well.”

Other top positions recommended by Wedgewood include telecom group Motorola
MSI,
-1.73%,
another tech stalwart Microsoft
MSFT,
-0.23%
and retailer Tractor Supply
TSCO,
-1.14%.

Here’s a final comment from Wedgewood about the stock storm it sees brewing. “The graphic below reminds us that when speculation reigns, markets can go far higher than what seems sober,” but when they fall “markets will repeat their long history of falling faster and further than what seems sober.”


Wedgewood Partners

“Long term investors should root for such downside. Such times are opportunities to improve portfolios. Our pencils are sharpened for opportunities as Mr. Market serves them up.”

The markets

Microsoft shares are slipping after the tech group confirmed it will buy Activision Blizzard
ATVI,
+27.39%
in a $68.7 billion cash deal. The gaming group’s shares are flying, along with those of rival Electronics Arts
EA,
+6.72%.

Goldman Sachs
GS,
-7.72%
added to a disappointing batch of bank results from last week, with shares down as earnings came up short, with Charles Schwab
SCHW,
-4.29%
also falling on gloomy results. Kinder Morgan
KMI,
-0.14%
and Alcoa
AA,
-1.43%
are still to come.

Airbnb shares
ABNB,
-2.49%
are slumping after ratings and target cut from an analyst who sees multiple headwinds and too-few catalysts.

The New York Empire state manufacturing index for January fell well short of expectations. A National Association of Home Builders index for the same month is still ahead.

An unpublished study by an Israeli hospital showed second Pfizer
PFE,
-1.78%
-BioNTech
BNTX,
-7.77%
or Moderna
MRNA,
-4.70%
boosters aren’t halting omicron infections. Separately, Moderna’s CEO Stephane Bancel said his company is working on a combined flu/COVID booster, while White House chief medical advise Dr. Anthony Fauci, said it’s too soon to tell if omicron will bring us out of the pandemic.

Another study says COVID infections are turning children into fussy eaters due to parosmia disorders that distort their sense of smell. And China state media says packages from the U.S. and Canada had helped spread omicron, as Hong Kong gets ready to cull thousands of hamsters.

An airline lobby group is warning of “chaos” for U.S. air travelers due to 5G services rolling out this month, in a letter signed by big carriers, UPS
UPS,
-1.55%
and FedEx
FDX,
-1.39%.

Larry Fink, chairman and chief executive of BlackRock
BLK,
-1.72%
said investors need to know where company leaders stand on societal issues.

Retailer Walmart 
WMT,
-1.28%
is looking at creating its own cryptocurrency and nonfungible tokens, according to U.S. patent filings.

The markets

Uncredited

The Nasdaq Composite
COMP,
-1.12%
is sprinting ahead with losses, with the Dow
DJIA,
-1.43%
and S&P 500
SPX,
-1.24%
also lower Tuesday led by those for the Nasdaq-100
NQ00,
-1.28%
as bond yields
TMUBMUSD10Y,
1.848%

TMUBMUSD02Y,
1.034%
surge across the curve. Oil prices
BRN00,
+1.06%

CL00,
+1.56%
are surging after Iran-backed Houthi rebels launched a deadly drone attack on a key oil facility in Abu Dhabi. Goldman Sachs also predicted Brent could top $100 a barrel in 2023, while the OPEC left its 2022 global oil-demand forecast unchanged.

Losses spread to Asian
NIK,
-0.27%
and Europe stocks
SXXP,
-0.77%,
with a key German bund yields
TMBMKDE-10Y,
-0.012%
about to turn positive for the first time in three years.

The chart

A January survey of more than 500 investors polled by Deutsche Bank shows a slightly gloomier mood. For example, they are more bearish:


Uncredited

Many, especially those over 34, think tech shares are in a bubble:


Uncredited

And they continue to see inflation as the biggest risk to markets, but are also fretting a more aggressive Fed:


Uncredited

Here are the top stock tickers on MarketWatch as of 6 a.m. Eastern Time.

Ticker Security name
TSLA,
+1.47% 		Tesla
GME,
-5.61% 		GameStop
AMC,
-6.32% 		AMC Entertainment
BBIG,
+29.75% 		Vinco Ventures
NIO,
-0.71% 		NIO
AAPL,
-0.43% 		Apple
CENN,
-4.72% 		Cenntro Electric Group
NVDA,
-1.57% 		Nvidia
BABA,
-0.85% 		Alibaba
NVAX,
-4.04% 		Novavax
Random reads

Tulsa pastor apologizes for wiping his saliva on a man’s face during a sermon.

The high environmental cost of your beloved fish-oil pills.

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Business

There’s a lesson from Charlie Munger’s increased bet on Alibaba

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You wouldn’t expect a 97-year-old to necessarily have a lot of patience, but legendary investor Charlie Munger is doing just that with one of his holdings.

Munger’s Daily Journal
DJCO,
+2.17%
nearly doubled its stake in Chinese internet giant Alibaba Group Holding
BABA,
+8.26%
in the third quarter, a Securities and Exchange Commission filing released this week showed. (Holdings in Bank of America
BAC,
-0.27%,
Posco
PKX,
+1.37%,
US Bancorp
USB,
+0.70%
and Wells Fargo
WFC,
-0.23%
were unchanged.)

Munger, also the vice chairman of Berkshire Hathaway
BRK.B,
+0.97%,
now has about 18% of Daily Journal’s portfolio in Alibaba, at a basis of between $180 and $200 per share, says Tom Hayes, chairman and managing member of Great Hill Capital, who has also invested in Alibaba. Alibaba closed Thursday at $156.

Hayes says there are key lessons to be learned from Munger’s investment. “For starters, successful people do what unsuccessful people won’t. He’s willing to take some short-term pain for long-term gain. Not on the basis of wishing or hoping, but on the basis of facts and data,” says Hayes.

Granted, yes, Alibaba has been fined for monopolistic practices, and China has aggressively sought to tame its big businesses. There also are efforts afoot by the Securities and Exchange Commission to delist Chinese companies, though Hayes points out that Alibaba’s auditor is PwC, and he doesn’t believe Chinese listings with big four auditors will be removed.

Alibaba has been growing its top line, and cash flow is forecast to more than double in the next few years. You can now pay less for Alibaba than it was when the company was less than a third of its current size, says Hayes. And it will be tough to find one billion users elsewhere. “And that’s why Buffett and Munger are the best investors around,” Hayes said.

The chart

The spread between the yield on the 10-year Treasury note and the 3-month bill has the highest correlation to gross domestic product growth one year out, of any yield curve indicator. And, at the current spread, the economy will expand at 2.3% next year, a far cry from the 3.8% the Federal Reserve is projecting. “While the yield curve may not be able to give an exact estimate of future economic activity, it sure can give an indication about the general direction of growth. And right now, what the curve is saying is that growth will be way below where the consensus and the Fed expect it to be, thus leaving enough room for disappointment,” said David Rosenberg, chief economist and strategist at Rosenberg Research.

The buzz

The big event of the day is the Canadian jobs report. Nah, just kidding, it’s the U.S. nonfarm payrolls report, which is expected to show a 500,000 increase in jobs and the unemployment rate ticking down to 5.1%. Federal Reserve officials have set a low bar for this report to clear in order to initiate the bond taper program, with Chair Jerome Powell saying it only has to be “reasonably good.”

Strategists at Bank of America point out that 10 of the last 12 payrolls report have sparked risk-on behavior in markets.

U.S. stock futures
ES00,
+0.12%

NQ00,
+0.09%
were a touch higher ahead of the report, while the yield on the 10-year Treasury
TMUBMUSD10Y,
1.585%
edged up to 1.58%.

The Senate voted Thursday night to lift the debt ceiling by $480 billion, moving the legislation to the House, which is expected to do likewise.

Electric-car maker Tesla
TSLA,
+1.39%
announced it was moving its headquarters to Texas from California.

Oshkosh
OSK,
+1.16%
warned that supply-chain and logistics disruptions were hurting its ability to make and ship units, as it lowered guidance for its fiscal fourth quarter.

The 2021 Nobel Peace Prize was awarded to journalists Maria Ressa of the Philippines and Dmitry Muratov of Russia for their fight for freedom of expression.

Random reads

Walmart’s
WMT,
+1.18%
Sam’s Club is offering bigger turkeys this year. Here’s why.

A six-year-old is Georgia’s youngest certified farmer.

A remote stun gun-style device is being used — to quiet dancing grannies in China.

Need to Know starts early and is updated until the opening bell, but sign up here to get it delivered once to your email box. The emailed version will be sent out at about 7:30 a.m. Eastern.

Want more for the day ahead? Sign up for The Barron’s Daily, a morning briefing for investors, including exclusive commentary from Barron’s and MarketWatch writers.

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