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Business

U.S. Stocks Open Higher After Powell Says Fed Is Ready to Be More Aggressive

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U.S. stocks opened higher and government-bond yields jumped Tuesday, as investors digested Federal Reserve Chairman

Jerome Powell’s

more aggressive tone on reining in inflation.

The Dow Jones Industrial Average rose 157 points, or 0.4%, shortly after the opening bell. The S&P 500 also added 0.4% and the Nasdaq Composite climbed 0.4%. Major U.S. stock indexes ended lower Monday after Mr. Powell said the Fed was prepared to raise interest rates in half-percentage-point steps if needed to tamp down inflation.

In the U.S. Treasury market, a selloff in government bonds intensified, sending the yield on the 10-year U.S. Treasury note climbing to 2.364%, from 2.315% Monday. The yield on the benchmark note is now hovering around its highest yield since May 2019, before the Covid-19 pandemic upended financial markets. Yields rise when bond prices decline. 

Stocks, bonds, commodities and currencies have been whipsawed by volatility for the past month as investors have tried to assess the economic fallout from Russia’s war in Ukraine. Many investors now fear that the war could keep inflation sustained and stunt economic growth in the U.S. and Europe.

Traders worked on the floor of the New York Stock Exchange on Monday.



Photo:

BRENDAN MCDERMID/REUTERS

This week, however, investors were thrown a new curveball when Mr. Powell spoke Monday and struck a tougher tone than the one he used when the Fed lifted interest rates from near zero last week. He stressed the uncertainty facing the central bank and said officials are ready to move their policy in a more disruptive direction, saying the Fed would shift into a more restrictive stance if needed.

The comments prompted some analysts and investors to reassess interest-rate expectations. Economists at Goldman Sachs Group said in a note after Mr. Powell’s remarks that they now expect half-percentage-point increases at both of the Fed’s May and June meetings. That compares with expectations of quarter-percentage-point increases at both of the meetings previously.

“The message that came out of the [Fed] meeting last week is that they are going to be tightening [monetary policy] but the U.S. economy is resilient enough to withstand that,” said Huw Roberts, head of analytics at Quant Insight, a data analytics firm. “The equity market chose to emphasize the economic resilience portion.”

Monday’s comments rattled some of those expectations, he said, and heightened fears that the Fed could be tightening more quickly just as the economy is slowing. “The big variable now is the economic growth side of things,” Mr. Roberts continued. 

An inversion of the U.S. Treasury yield curve has been seen as a recession warning sign for decades, and it looks like it’s about to light up again. WSJ’s Dion Rabouin explains why an inverted yield curve can be so reliable in predicting recession and why market watchers are talking about it now. Illustration: Ryan Trefes

Many investors are keeping a close watch on the so-called yield curve, which measures the spread between short- and long-term rates and is often seen as a strong indicator of sentiment about the prospects for economic growth. Recently, the gap between yields on shorter-term and longer-term U.S. Treasury bonds has been shrinking, stirring anxieties that the bond market is close to signaling a potential recession. 

The two-year Treasury yield—which is especially sensitive to changes in monetary policy—climbed to 2.179% Tuesday, from 2.132% Monday. 

To get a better a read on the U.S. economic landscape, investors on Tuesday morning will parse data from the Federal Reserve Bank of Richmond on manufacturing activity. The economic data, due at 10 a.m. ET, is expected to register an increase from the prior month. 

In morning trading in New York, shares of banks rose, tracking similar moves in Europe. In the U.S.,

Morgan Stanley

and

Citigroup

each added more than 0.8%. In Europe,

Société Générale

advanced 0.9% and

Deutsche Bank

jumped 3.6%. 

In other sectors,

Nike

advanced 4.8% after it reported revenue that beat analyst expectations. Shares of

Okta

fell 4.5% after a hacking group posted screenshots purporting to show that it had gained access to Okta.com’s administrator and other systems. The company said Tuesday that a preliminary investigation found no evidence of any malicious activity, adding that the screenshots were most likely related to a January security incident.

In the energy markets, futures for Brent crude, the international benchmark, rose 0.7% to $116.43 a barrel. Last week, Brent prices fell below $100 before reversing and climbing higher. Support for a European Union-wide ban on the purchase of Russian oil is growing inside the bloc, raising the possibility of more volatility ahead. 

In cryptocurrency markets, bitcoin rose about 4.2% from its 5 p.m. ET level Monday to trade around $42,896. The price of the cryptocurrency has swung sharply within the past month but has largely traded above $40,000 since the middle of last week.

In Europe, the pan-continental Stoxx Europe 600 increased 0.5%, putting it on pace to rise for a fifth consecutive session. 

In Asia, major indexes also largely ended higher. Hong Kong’s Hang Seng gained about 3.2%, while Japan’s Nikkei 225 rose 1.5%. China’s Shanghai Composite advanced 0.2%.

Write to Caitlin McCabe at caitlin.mccabe@wsj.com

Copyright ©2022 Dow Jones & Company, Inc. All Rights Reserved. 87990cbe856818d5eddac44c7b1cdeb8

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Business

Stocks Open Lower on Ukraine Escalation Fears

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U.S. stocks edged down as investors showed concern about further escalation in the Ukraine war leading to shortfalls of commodities supply. 

The S&P 500 slipped 0.3% in early New York trading, a modest pullback in the broad-market index after it closed 1.3% higher on Thursday. The tech-heavy Nasdaq Composite Index fell 0.4%, while the Dow Jones Industrial Average retreated 0.3%, or 108 points. 

Stocks have advanced for the past three days, putting the S&P 500 on track for the best weekly performance in over a year. It is up 4.5% so far this week. Investors said they were assessing the impact the war in Ukraine could have on the U.S. economy and that companies still have strong fundamentals. The recent upward march in oil prices could potentially damp sentiment and spur more worries about inflation, investors said. 

“Sentiment remains fragile, and that the risk of further escalation remains a real concern despite the gains of the last two weeks,” said Michael Hewson, chief markets analyst at CMC Markets.

Oil prices hovered at elevated levels, with Brent crude ticking down 0.4% after jumping more than 8% on Thursday. The global benchmark traded at $106.28 a barrel. Traders remain concerned about lower oil supplies due to longer-term sanctions on Russia amid signs that the conflict may drag on. 

Russian and U.S. officials said Thursday that talks between Moscow and Kyiv on a cease-fire hadn’t yielded progress. President Biden is scheduled to speak with China’s

Xi Jinping

on Friday, and is expected to try to deter Beijing from supporting Russia in the Ukraine war. 

Traders worked on the floor of the New York Stock Exchange on Wednesday.



Photo:

Spencer Platt/Getty Images

The yield on the benchmark 10-year Treasury note slid to 2.167% from 2.192% on Thursday, reversing direction after four straight days of rises. Prices rise when yields fall.  

Meme stock

GameStop

dropped 9% after the company posted a surprise loss in the last quarter on Thursday after markets closed.

FedEx

fell 3.7% after it reported lower shipping volumes and said profit margins were coming under pressure.

Overseas, the pan-continental Stoxx Europe 600 ticked down 0.4%. 

The Russian stock market remained closed and the central bank hasn’t yet said if it will open next week. The central bank kept its key policy rate steady at 20%. The ruble appreciated 1.3% against the dollar, trading at around 105 rubles to $1, after the Russian state avoided default by making coupon payments on dollar-denominated sovereign bonds on Thursday. 

“Markets were positioned for a technical default of Russia, people were surprised,” said Ludovic Subran, chief economist at Allianz. This is delivering a boost to the currency, he added. 

Russian government bonds rallied as well. A bond maturing next year traded at around 55 cents on the dollar, up from 25 cents at the beginning of the week, according to AdvantageData. 

In Asia, most major benchmarks rose. Chinese stocks were mixed, with the Shanghai Composite Index rising for the third consecutive trading session and extending the momentum catalyzed by policy makers in Beijing signaling support for capital markets earlier in the week. Hong Kong’s Hang Seng Index slid 0.4% on Friday but still closed more than 4% higher for the week. 

Write to Anna Hirtenstein at anna.hirtenstein@wsj.com

Corrections & Amplifications
European stocks began trading at 4 a.m. ET. An earlier version of this article mistakenly described moves as of Thursday’s close as having taken place Friday morning.

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Business

Stocks Close Sharply Higher As Fed Raises Interest Rates

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U.S. stocks rocketed higher in a volatile session and bond yields jumped to the highest level in almost three years after the Federal Reserve officially said it would raise interest rates for the first time since 2018.

Major indexes rallied at the open, pared their gains after the Fed announcement and then raced to finish the session near their highs of the day.

The S&P 500 rose 95.41 points, or 2.2%, to 4357.86. The broad stock-market gauge has risen 4.4% over the past two trading days, the biggest two-day percentage gain since April 2020. The tech-focused Nasdaq Composite advanced 487.93 points, or 3.8%, to 13436.55, its best day since November 2020. The Dow Jones Industrial Average rose 518.76 points, or 1.5%, to 34063.10.

The Fed raised interest rates by a quarter-percentage-point and new projections show that most officials expect the fed-funds rate to rise to at least 1.875% by the end of the year and to around 2.75% by the end of 2023. That implies a total of seven quarter-percentage-point increases this year and more next year.

The Fed’s interest rate increase on Wednesday marks the end of a historic wave of stimulus enacted while the Covid-19 pandemic was first spreading through the U.S. The pandemic put a halt to a yearslong bull market in stocks and tipped the economy into a recession. The stimulus helped the economy bounce back faster than many had expected and drive the stock market to new heights. Now, investors are faced with a different challenge: inflation that’s at a 40-year high. Some are even worried about a looming recession.

“It seems very much like they wanted to send a message that they’re fighting inflation and they’re going to fight it fast and get it under control,” said Kathy Jones, chief fixed income strategist at the Schwab Center for Financial Research.

The prospect of the Fed interest rate increases have roiled markets for months, though investors appeared to take the announcement in stride. The Nasdaq Composite is now on track for its longest bear market since the financial crisis. The S&P 500 is down about 9% from its high.

The central bank is navigating an unusually complicated environment of a tight labor market, supply disruptions, spiraling inflation, Russia’s invasion of Ukraine and Covid-19 lockdowns in China—the latter two of which are likely to compound inflationary and supply-chain issues. 

Bond yields rose after the announcement. The yield on the benchmark 10-year Treasury note climbed to 2.185%, the highest level since May 2019. Yields and prices move inversely. The sharp climb in bond yields reflects investors’ growing bets that Russia’s invasion of Ukraine won’t slow the momentum toward higher interest rates. 

U.S. retail-sales data for February showed increased spending from the month prior as households adapt to the crosscurrents of a strong labor market, falling coronavirus cases and inflation running at the highest annual rate in 40 years.

Shares of tech and growth companies, which had been battered in recent months, fared particularly well in trading Wednesday, a move that puzzled some traders. Tech and growth stocks have been the most sensitive to the path of interest rate increases, and some traders said they interpreted Mr. Powell’s stance on monetary policy as more aggressive than they had initially anticipated.

Some investors had aggressively dumped these positions since the start of the year while bond yields had risen, potentially setting the sector up for a reversal, some traders said.

“I thought it was a little bit more hawkish than anticipated,” said R.J. Grant, director of equity trading at KBW, of the Fed’s announcement and press conference. But, he said positioning “was kind of flushed out into the Fed decision.”

The S&P 500’s tech sector was one of the best performing, gaining 3.3%. Shares of the

ARK Innovation ETF

soared $5.65, or 10%, to $60.04.

Nvidia

shares jumped $15.23, or 6.6%, to $244.96.

PayPal

added $7.46, or 7.4%, to $107.92.

Traders work at the New York Stock Exchange.



Photo:

Xinhua/Zuma Press

In the commodities market, oil prices have fallen below $100 a barrel in recent days, helping the stock market rebound. Moves in oil were muted Wednesday as investors weighed whether lockdowns in some Chinese cities will sap demand for energy even as Russia’s invasion of Ukraine has bolstered concerns of supply disruptions. Brent-crude futures, the international benchmark, edged down 1.9% to $98.02 a barrel, the third consecutive day of losses.

Elevated oil prices have prompted concerns that the U.S. and Europe could see sustained inflation and lower economic growth, as higher gas and energy prices eat away at household spending on other goods and services. 

The rally in technology shares wasn’t limited to the U.S. Technology stocks led a blistering rebound in Chinese markets after supportive comments from Beijing policy makers. Hong Kong’s Hang Seng Index soared 9.1%, led by gains in technology stocks. China’s Shanghai Composite climbed 3.5%. 

Chinese officials said they would “coordinate pandemic prevention and control and economic development, keep the economy operating within a reasonable range and keep the capital market running smoothly,” according to a report on Wednesday by Xinhua, China’s state news agency. This helped soothe some fears over an economic slowdown in China that would also sap growth globally. 

The KraneShares CSI China Internet ETF soared 40% after falling to a record low earlier in the week, recording its biggest one-day gain since it started trading in 2013.

“The bounceback in Chinese equities shows you how sensitive the markets are,” said

Peter Garnry,

head of equity strategy at Saxo Bank, noting wide swings in markets in recent weeks as investors watch headlines on a number of events. 

Overseas, the pan-continental Stoxx Europe 600 climbed 3.1%, led by a jump in its technology sector. Russia’s stock market remains closed through the rest of the week.

—Joe Wallace contributed to this article.

The Federal Reserve’s main tool for managing the economy is to change the federal-funds rate, which can affect not only borrowing costs for consumers but also shape broader decisions by companies like how many people to hire. WSJ explains how the Fed manipulates this one rate to guide the entire economy. Illustration: Jacob Reynolds

Write to Caitlin Ostroff at caitlin.ostroff@wsj.com

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Business

Shell, BP to Withdraw From Russian Oil, Gas

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European oil giants

Shell

SHEL 2.85%

PLC and

BP

BP 5.53%

PLC said they were stepping back further from doing business with Russia, with Shell saying it will immediately halt all spot purchase of crude from the country and will phase out its other trading and business dealings.

A spokesman for BP said it won’t enter into new business with Russian entities or business involving Russian ports “unless essential for ensuring security of supply.”

The two made their moves ahead of what people familiar with the matter say is a plan by the Biden administration to ban Russian oil imports into the U.S. The Wall Street Journal reported an announcement on the issue is imminent. The administration’s deliberations about the ban have ramped up as lawmakers of both parties, including House Speaker

Nancy Pelosi,

called for action on the issue.The White House declined to comment.

Futures for Brent crude, the global oil benchmark, rose more than 5% early Tuesday. Oil prices for both measures were already up before the Journal report but rose further after.

Shell had previously said it would pull out of a number of joint ventures in the country. On Tuesday, it said it would also shut its service stations and aviation fuels and lubricants operations in Russia, and it won’t renew any Russian term contracts. It said it would find alternative supplies of oil as soon as possible, though it cautioned it could take weeks to fully make up the difference, leading to reduced production at some refineries.

Shell faced a backlash last week and over the weekend when it snapped up a cargo of Russian crude at a bargain price, after many other players had started to curtail their purchases, creating an informal embargo from some buyers in response to Russia’s invasion of Ukraine.

The company on Tuesday apologized for the purchase and said it would commit from its Russian oil purchases to humanitarian funds aimed at alleviating the crisis in Ukraine. Shell had previously said it would exit its joint ventures with Russian energy giant

Gazprom PJSC.

BP won’t charter Russian-owned or Russian-operated vessels where possible, the spokesman said. In cases where it already has, the company “will continue to monitor their safe passage and comply with all applicable sanctions and local restrictions.” The spokesman said the decisions were made in the middle of last week, calling the situation a “rapidly changing and complex area” that BP continues to review. Previously, BP said it would relinquish its nearly 20% stake in oil giant

Rosneft,

following pressure from the U.K. government.

Russia’s attack on Ukraine helped push the price of oil to over $100 a barrel for the first time since 2014. Here’s how rising oil costs could further boost inflation across the U.S. economy. Photo illustration: Todd Johnson

The U.S. and its allies left energy out of an array of economic sanctions imposed on Moscow in response to the invasion. Many refiners, though, went further, shunning Russian crude. Such self-sanctioning has taken a chunk out of global supplies, pushing prices for international benchmark Brent sharply higher. Traders say it is also causing a backup in Russia’s energy supply chain, prompting refiners to cut back production.

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Business

European stocks rally at the open and bund yield turns positive on report of joint European Union spending

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European stocks enjoyed an unusually strong open on Tuesday after a weak Wall Street finish, after a report the European Union will consider jointly issuing bonds to finance energy and defense spending.

The Stoxx Europe 600
SXXP,
+0.60%
gained over 1% in early action, as the French CAC 40
PX1,
+1.47%
gained 2.5%, the German DAX
DAX,
+0.96%
rose 1.8% and the U.K. FTSE 100
UKX,
-0.14%
rose 0.6%.

Bloomberg News reported the EU will unveil a plan this week for the joint spending after leaders hold an emergency summit in Versailles. The report said officials are still working out how much money they intend to raise. The joint fund raising would be the second pan-EU spending plan after the NextGenerationEU package to repair the damage from the COVID-19 pandemic.

The yield on the 10-year German bund
TMBMKDE-10Y,
0.069%
shot up 9.5 basis points to 0.08%.

U.S. stock futures responded positively to the European open, with futures on the S&P 500
ES00,
-0.07%
rising 0.4% after a 3% nosedive for the index
SPX,
-2.95%
on Monday in the wake of U.S. Secretary of State Anthony Blinken saying allies were considering a ban on Russian oil imports.

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World

U.S. Stocks Fall After Russia Shells Ukrainian Nuclear Plant

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U.S. stocks and global equity indexes fell as investor concerns mounted about Russia’s intensifying military campaign in Ukraine.

The Dow Jones Industrial Average dropped 404 points, or 1.2%. The S&P 500 fell 1.5% and the Nasdaq Composite declined 2%. Nine of the S&P 500’s 11 sectors were in the red, with only energy and utility companies rising.

A strong jobs number early Friday wasn’t enough to push major indexes higher. Many investors remained focused on Russia’s escalating military campaign and trying to assess how much tough Western sanctions on Russia will damage economic growth. The invasion and rising commodity prices could further stoke inflation at a time when prices have already been at a 40-year high.

New data on Friday showed that the U.S. added 678,000 jobs in February, more than the 440,000 expected by economists surveyed by The Wall Street Journal. The Federal Reserve has signaled that it is on track for a quarter-percentage-point interest-rate increase at its March meeting, removing some near-term uncertainty about interest rates.

“The jobs report was strong,” said

Amy Kong,

chief investment officer at Barrett Asset Management. But “it doesn’t necessarily change the Fed stance,” she said.

In bond markets, the yield on the benchmark 10-year U.S. Treasury note declined to 1.721%, down from 1.843% Thursday. Bond yields have swung wildly throughout the week as investors have monitored the Russian invasion, comments from Federal Reserve Chairman

Jerome Powell

and economic data.

Bitcoin prices slipped to around $40,700 in recent trading.

Rising oil prices and the prospect of slower economic growth have also pushed investors into traditionally safer investments such as government bonds. Bond yields decline as prices rise. The pan-continental Stoxx Europe 600 index fell 3.5% to trade close to its lowest level in nearly a year, reflecting concerns that Europe will bear the brunt of the economic fallout from the Russia-Ukraine crisis.

“The U.S. is less vulnerable to the Russia-Ukraine crisis than what you would see in Europe,” said

Seema Shah,

chief strategist at Principal Global Investors. For now, she said, “The market is looking at [the situation] and saying the U.S. economy is strong.”

European bank stocks were hit particularly hard Friday.

Société Générale

lost around 9.5% after the French lender said Thursday that its exposure to Russia stood at 18.6 billion euros, equivalent to over $20 billion, at the end of 2021. Shares of Italian bank UniCredit tumbled around 13.6%. Meanwhile,

Uniper,

a major German energy company that is owed about 950 million euros by the Russia-owned company behind the Nord Stream 2 pipeline, fell 12%.

Friday’s moves cap a haywire week for global markets, with giant swings across currencies, commodities and stock markets around the globe. Many traders were scrambling to understand the impact of the sanctions and the subsequent changes made by exchanges and financial firms around the globe.

The New York Stock Exchange halted trading in three Russia-linked exchange-traded funds, following a similar move with NYSE-listed Russian stocks earlier this week. Russia’s central bank kept the Moscow stock market largely closed for a fifth straight day, shielding local shares from a potential selloff.

The Russian ruble declined again, with the currency down 2.2% against the greenback, trading at 112.53 per U.S. dollar. The U.S. dollar gained, with the WSJ Dollar Index, which measures the currency against a basket of 16 others, up 0.5% to trade near its highest level since July 2020. Meanwhile, the euro continued its recent fall. 

Traders are trying to assess how much the Ukraine crisis will damage growth and stoke inflation.



Photo:

BRENDAN MCDERMID/REUTERS

Global stock, bond, currency and commodity markets have swung significantly this week. A sharp run-up in oil prices, during which West Texas Intermediate crude briefly topped $116 for the first time since 2008, raised concerns about stagflation, a combination of muted economic growth and inflation.

“It’s beginning to look a little stagflationary,” said

Anwiti Bahuguna,

a senior portfolio manager at Columbia Threadneedle. “We have inflation sticking around longer and growth taking a leg down.” 

Goldman Sachs Group analysts said Thursday that higher oil and gas prices are the “key inflation risk for the United States” and that higher commodity prices threaten economic growth. Each 10% increase in crude oil prices can lower GDP growth, they said, as consumers pull back on spending because of higher gas prices.

On Friday, front-month futures prices for Brent crude oil, the global benchmark, rose 3% to $113.81 a barrel.

Russian shelling in southern Ukraine, which caused a fire at a nuclear power plant, intensified fears among investors Friday about Moscow’s tactics and concerns about a nuclear disaster. However, officials said the fire didn’t affect essential equipment, lessening worries about reactor damage.

Despite the volatility, stocks in New York have been relatively resilient amid the conflict. All three major U.S. indexes are up 2% or more since Russia invaded Ukraine last week. Yet trading has grown choppier in recent days.

Shares of

Smith & Wesson Brands

dropped almost 15% after the gun maker reported that sales fell more than 30% during the holiday quarter.

Gap

fell about 3% after the clothing retailer reported results that beat expectations.

Asian stocks dropped, in part reflecting Thursday’s action on Wall Street, where technology stocks sold off more than the broader market and U.S.-listed Chinese companies stumbled.

Japan’s Nikkei 225 closed 2.2% lower Friday. Hong Kong’s benchmark

Hang Seng

Index fell 2.5%, registering its lowest close since March 2020. In mainland China, the CSI 300 index fell 1.2% to its lowest close since July 2020.

—Joe Wallace and Alexander Osipovich contributed to this article.

The U.S. and allied countries have imposed heavy sanctions on Russia. WSJ’s Shelby Holliday dives into how these sanctions are affecting everyone from President Vladimir Putin to everyday Russian citizens. Photo: Pavel Golovkin/Associated Press

Write to Caitlin McCabe at caitlin.mccabe@wsj.com and Clarence Leong at clarence.leong@wsj.com

Corrections & Amplifications
Anwiti Bahuguna is a senior portfolio manager at Columbia Threadneedle. An earlier version of this article misspelled Ms. Bahuguna’s last name as Bahugana. (Corrected on March 4)

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Business

U.S. Stocks Open Higher, Extending Rally

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U.S. stocks rose and government-bond yields fell Wednesday following a recent climb, potentially easing some pressure on technology shares. 

The S&P 500 rose 0.9% shortly after the opening bell. The broad index rose Tuesday as investors snapped up shares of companies across industries. The Dow Jones Industrial Average climbed 243 points, or 0.6%, and the Nasdaq Composite added 1.0%.

Shares of

Facebook

parent Meta Platforms rose 1.6% and Google parent Alphabet added 1.1% in morning trading. Technology companies tend to benefit from low bond yields as some investors will pay more for shares that they expect to churn out outsize profits in the future. This reverses when yields rise.

The yield on the benchmark 10-year Treasury note ticked down to 1.930% Wednesday from 1.954% Tuesday, its highest closing level since July 2019. Yields move inversely to prices and have been rising amid expectations for Federal Reserve interest-rate increases. 

The Federal Reserve has signaled it plans to raise interest rates in 2022 in response to stubbornly high inflation. WSJ’s J.J. McCorvey explains what higher rates could mean for your finances. Photo illustration: Todd Johnson

European bonds yields also fell Wednesday, with the yield on the 10-year German bund ticking down to 0.218% from 0.264% Tuesday, according to

Tradeweb.

Uber Technologies and Walt Disney are slated to post results late Thursday. Shares of

Chipotle Mexican Grill

rose 7.8% after it said it had increased menu prices again and was likely to raise them further this year.

Lyft

fell 2.1% after the ride-hailing company posted weaker-than-expected ridership numbers.

CVS Health

fell 3.4% after the drugstore chain reported quarterly results that beat expectations, but provided a mixed full-year outlook.

Investors are monitoring factors that could affect earnings, including the anticipated increase in interest rates, elevated inflation and supply-chain disruptions. As of late last week, 34 companies in the S&P 500 had given lower earnings guidance than analysts expected, while 13 companies had issued higher guidance, according to FactSet.

Fresh inflation data due Thursday is expected to give investors additional clues as to how quickly the Fed may raise rates, having slashed them in 2020 to cushion the economy from the impact of Covid-19. The prospect of higher borrowing costs globally has heightened volatility in stocks this year, particularly tech ones.

The prospect of higher borrowing costs globally has heightened volatility in stocks this year.



Photo:

David L. Nemec/Associated Press

“All market participants are now trying to gather more information on how this global turnaround of central banks will happen,” said

Carsten Brzeski,

ING Groep’s

global head of macro research. “There’s a question of how stock markets will adjust to this new normal.”

Overseas, the pan-continental Stoxx Europe 600 rose 1.7%. Shares of Dutch payment company Adyen jumped around 9% after it reported a profit rise that beat market expectations. 

The Russian ruble rose 0.4% against the dollar. French President

Emmanuel Macron

shuttled from Moscow to Kyiv on Tuesday in an attempt to avert conflict between Ukraine and Russia. Some investors hope that continuing communication will reduce the chances of tensions escalating, Mr. Brzeski said. 

In Asia, major stock indexes closed with gains. Hong Kong’s Hang Seng jumped 2.1% and Japan’s Nikkei 225 added 1.1%. China’s Shanghai Composite and South Korea’s Kospi gained 0.8% each.

Write to Caitlin Ostroff at caitlin.ostroff@wsj.com

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Business

U.S. Stocks Waver Between Small Gains and Losses

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The S&P 500 waffled between small gains and losses Monday, continuing a volatile stretch for the stock market.

The broad stock-market gauge added 0.1%. The Nasdaq Composite hugged the flatline. The Dow Jones Industrial Average gained 0.4%.

Stocks have had a turbulent start to the year, amplified in recent days by extreme moves in big tech stocks. Last week saw a record-breaking decline in Meta Platforms shares and the biggest rise since 2015 for Amazon.com shares, after the companies posted earnings. Friday’s better-than-expected jobs report also turned traders’ attention back to central-bank policy, which is set to tighten as the economy continues to recover.   

On Monday, major indexes wavered between small gains and losses before turning higher toward the end of the day. Some analysts said the latest earnings season has helped draw investors back into stocks in recent sessions. Last week, the S&P 500 capped off its best week since December after several twists and turns.

“We think the earnings season has been pretty constructive,” said Greg Boutle, head of U.S. equity and derivative strategy at BNP Paribas.

Companies scheduled to post results this week include

Pfizer

and

KKR

on Tuesday and Uber Technologies and Walt Disney on Wednesday.

Coca-Cola,

PepsiCo

and

Twitter

are slated for Thursday. 

Despite the recent rebound, it’s been hard to impress investors this earnings season. Companies that are beating estimates are performing worse than they had historically, while those that are missing estimates are being punished,

JPMorgan Chase & Co.

strategists wrote in a note to clients Monday. This is one of several signs that investors have grown overly bearish in recent weeks, according to JPMorgan’s Marko Kolanovic.

“As overly bearish sentiment clears, we expect the market to lift,” Mr. Kolanovic said.

Shares of Meta and

Netflix

dropped Monday, losing 3.9% and 1%, respectively. Amazon continued to rise, adding 1.4%. The moves continue a recent divergence in so-called FAANG stocks that have led investors to shift how they trade the hot tech group.

The monthly jobs report reveals key indicators about the labor market and the overall state of the economy, but it doesn’t show the entire picture. WSJ explains how to read the report, what it shows and what it doesn’t. Photo illustration: Liz Ornitz

“We’ve been taking advantage of some volatility,” said Mike Bailey, director of research at FBB Capital Partners. “We’ve been adding to some of the tech names during the past few weeks.”

In corporate news, Peloton shares soared 23% after The Wall Street Journal reported that the stationary-bike company was drawing interest from Amazon and other potential suitors.

Spirit Airlines

added 17% after it said it was merging with Frontier Group.

Tyson Foods

climbed around 12% after it said it expected its sales for the year to be at the upper end of its guidance.

Hasbro

slipped around 0.5% after reporting revenue and profit that beat Wall Street’s estimates.

The yield on the 10-year Treasury note hovered at 1.914%, from 1.930% Friday.

“Markets have been repricing, as seen in the move up in yields, but I think we’re arriving at a point where it’s difficult to price in a much more hawkish outlook than we have today. We could now see a bit of stabilization,” said

Esty Dwek,

chief investment officer at FlowBank.

Friday’s better-than-expected jobs report turned traders’ attention back to central-bank policy, which is set to tighten as the economy continues to recover.



Photo:

David L. Nemec/Associated Press

Cryptocurrencies gained Monday, with bitcoin rising 5% from its level at 5 p.m. ET on Friday. It traded around $42,800. The digital currency rose above $40,000 Friday after spending two weeks below that level and has maintained its gains. 

Overseas, the pan-continental Stoxx Europe 600 added 0.7%. European government bond yields extended last week’s gains as markets continued to price in hawkish signals from the European Central Bank’s press conference on Thursday. Benchmark 10-year Italian and Greek bond yields rose to the highest levels since spring 2020.

In Asia, major benchmarks were mixed. The Shanghai Composite Index climbed 2%, reopening after China’s New Year holiday week, despite a private gauge of China’s services sector slipping to a five-month low. The gain was its best one-day rise since May.

Hong Kong’s Hang Seng Index closed roughly flat and Japan’s Nikkei 225 declined 0.7%. 

Write to Anna Hirtenstein at anna.hirtenstein@wsj.com and Gunjan Banerji at gunjan.banerji@wsj.com

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Business

Amazon Breaks Record for One-Day Gain in Market Cap

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Investors in big technology stocks have a serious case of whiplash.

Amazon.com Inc.

AMZN 13.54%

on Friday notched the largest-ever one-day gain in market value for a U.S. company—just a day after Facebook parent

Meta Platforms Inc.

suffered the largest-ever loss.

The dramatic moves suggest investors are moving quickly to draw distinctions among the growth prospects of some of the biggest U.S. companies as they reassess their valuations in anticipation of higher interest rates.

Both stocks have surged so far, so fast in recent years that any big move can rattle the broader market and set various records. Amazon is the fourth-biggest company in the U.S. by market value, behind

Apple Inc.

AAPL -0.17%

,

Microsoft Corp.

and

Alphabet Inc.,

with a market capitalization of about $1.6 trillion, while Meta is No. 7, even after Thursday’s declines. 

In recent days, investors have shown more faith in the tech companies whose services are seen as staples than in those whose offerings are more elective, said

John Lynch,

chief investment officer at Comerica Wealth Management, which manages $175 billion.

“Within tech we’re starting to see a delineation between necessities and wants,” he said. “In a rising rate environment, you’re going to have noncorrelated moves in the market.”

Amazon relieved investors with a near doubling in profit in the holiday period and said it is raising the price of its Prime membership in the U.S. to $139 a year from $119. The results showed Amazon was able to control labor and supply costs better than had been expected. The company also saw growth in its cloud-computing and advertising businesses.

“The big thing was more of a sigh of relief with Amazon because there’s been so many worries in regards to that stock in terms of the comparisons after the pandemic being much more difficult,” said

Daniel Morgan,

senior portfolio manager at Synovus Trust Co.

Shares surged 14% Friday, their biggest one-day jump in almost seven years. The added $191 billion to Amazon’s market value, eclipsing the record

Apple

set just last week when it added $181 billion after posting quarterly results that shattered previous records.

Amazon’s rally helped the broader market stabilize Friday, as did a stronger-than-expected monthly jobs report. The S&P 500 added 0.5%, and the tech-focused Nasdaq Composite rose 1.6%.

Meta, meanwhile, warned it expects revenue growth to slow because users are spending less time on more lucrative services. The 26% drop in its shares Thursday erased $232 billion in market value.

Investors are grappling with the question of whether the company’s bet on the metaverse as its future growth engine will work out, Mr. Morgan said.

“That’s what the mystery behind Facebook (is) right now,” he said. “A lot of people can see their core business is really maturing.”

Investors are intensely focused on the Federal Reserve’s plans to begin raising interest rates in mid-March, ratcheting back the monetary stimulus that has helped power stocks since early in the Covid-19 pandemic. Near-zero rates pushed investors into risky assets like stocks and particularly into corners of the market that are valued based on growth far into the future.

The pace and scale of rate increases will depend in part on incoming data on inflation and the jobs market, leaving investors without a clear sight into the ultimate environment for stocks. Friday’s employment report showed the U.S. economy added more jobs in January than had been expected, a development that some investors said could support a more hawkish attitude from the Fed.  

“The uncertainty created by the mere possibility of rate hikes contributes to the large moves that we’re seeing from stocks,” said Andy Kern, senior portfolio manager at asset management firm New Age Alpha.

In another outsize move,

Snap Inc.

shares leapt 59%, more than unwinding Thursday’s 24% slide, when Meta’s report prompted investors to dump shares of social-media companies.

Prompting the turnaround: Snap posted its first quarterly profit. The image-sharing firm also signaled it is adjusting to disruptions in the digital-advertising market caused by Apple privacy-policy changes that are affecting Meta.

Pinterest Inc.

reversed course, too, climbing 11% following a 10% skid in Thursday’s session. After markets closed Thursday, Pinterest reported a 20% rise in sales in the fourth quarter from a year earlier.

Companies such as Apple, Microsoft, Amazon,

Alphabet Inc.

GOOG 0.26%

and Meta have powered the stock market higher in recent years. They have become so big that their moves can cause swings in the S&P 500 index, whose members are weighted by market capitalization. As of Thursday, Apple, Microsoft, Amazon, Alphabet, Meta,

Tesla Inc.

and

Nvidia Corp.

accounted for more than 25% of the weighting of the index, according to S&P Global.

Write to Karen Langley at karen.langley@wsj.com and Joe Wallace at joe.wallace@wsj.com

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Business

Disappointing Meta, PayPal Earnings Send Shudders Through Stock Market

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Facebook’s parent company shed more than $230 billion in market value Thursday, a one-day loss that would be the biggest ever for a U.S. company and increase the pressure on a stock market long powered by technology shares.

The setbacks reflect the increased scrutiny companies are under as major U.S. stock indexes remain near record highs and the Federal Reserve is preparing to raise interest rates for the first time since 2018. Rising rates tend to reduce the multiples that investors are willing to pay for a share of company profits, a trend that stands to mean pain for stocks that are already trading at lofty valuations.

That has put heightened pressure on the companies to show their financial results justify their price tags. In recent days, several have fallen short, raising concerns among investors that further declines in major indexes could lie ahead.

“The level of forgiveness has gone down,” said

Daniel Genter,

chief executive and chief investment officer at RNC Genter Capital Management. “When boards come to their shareholders to confess their sins, they’re just not going to be pardoned with one Hail Mary.”

Some strategists say the recent slide in shares of speculative tech companies should serve to remind investors that a robust market rally relies on advances by a variety of stocks. And they warn they expect more big stock swings ahead at any hint of slowing growth.

“The market can’t just be driven by a small number of megacap companies or tech companies,” said

Yung-Yu Ma,

chief investment strategist at BMO Wealth Management. “There should start to be more of a recognition that it’s not going to be technology that leads us out of this pullback.”

Earnings season had been overshadowed until recent days as investors fretted over the Fed’s plans to raise rates. They sold stocks across sectors, helping to send the S&P 500 down 5.3% in January, its worst monthly performance since the March 2020 slump.

The market briefly stabilized this week—with all three major stock indexes rising for four consecutive sessions—before tumbling again Thursday. The S&P 500 dropped 2%, while the tech-heavy Nasdaq Composite fell 3.1%.

All eyes have now turned to

Amazon.com Inc.,

which reports after the closing bell. The e-commerce company warned in late 2021 of a challenging end of the year as it confronted global supply-chain problems.

Amazon shares dropped more than 7% ahead of the report, while shares of speculative tech stocks like

Snap Inc.

and

Pinterest Inc.

also tumbled. Snap fell 24%, while Pinterest declined 10%.

The giant stock moves show how serious investors have become about demanding that companies deliver on their promises for growth after a steep and swift climb in share prices.

Meta, PayPal and Spotify entered 2022 at rich valuations. While the S&P 500 ended December trading at 21.5 times its projected earnings over the next 12 months, Meta was trading at 23.6 times, PayPal at 36 times and Spotify at 543.9 times, according to FactSet. Spotify isn’t an index constituent.

By Wednesday, Meta’s multiple had pulled back to 22.6 times forward earnings, while PayPal traded at 27.2 times, and Spotify at 287.6 times.

“Those stocks were really priced way beyond perfection,” Mr. Genter said. “People are saying, well, guess what, perfection is not here.”

The Facebook parent company surprised investors late Wednesday with a deeper-than-expected decline in profit and a downbeat outlook. The company said it expects revenue growth to slow and shared that it lost about one million daily users globally. Shares declined 27%, on course for their worst daily performance since they started trading in 2012.

The company’s challenges include a new ad-privacy policy from Apple Inc. that Meta expects to cost it more than $10 billion in lost sales for 2022. The requirement that apps ask users whether they want to be tracked limited the ability to gather data used to target digital ads, driving advertisers to change their spending.

Meta’s $234 billion drop in market value is set to exceed the record that Apple Inc. set in September 2020 when the iPhone-maker lost about $182 billion in a single day, according to Dow Jones Market Data.

PayPal lowered its profit outlook for 2022 and abandoned a target it set last year of roughly doubling its active user base. Executives said business this year will be pressured by forces including inflation, supply-chain problems, the Omicron variant and the runoff in government stimulus. Shares slumped 25% Wednesday in their worst selloff on record and continued sliding Thursday.

PayPal Holdings lowered its profit outlook.



Photo:

Justin Sullivan/Getty Images

And Spotify, which is embroiled in a controversy over

Joe Rogan’s

podcast, said it added users but declined to give annual guidance, pulling shares down 16% on Thursday.

Earnings results out of the tech segment haven’t been all bad. Google parent

Alphabet Inc.

reported robust sales growth and unveiled plans for a stock split this week, helping the company add more than $135 billion in market value Wednesday.

Alphabet has outperformed the other stocks in the popular FAANG trade lately. Its shares are about flat this year, while Meta, Amazon and

Netflix Inc.

are down by double-digit percentages.

Apple Inc.

is off modestly.

Broadly, the corporate earnings season has surpassed expectations. With results in from about half the constituents of the S&P 500, analysts estimate that profits from index constituents rose 26% in the holiday quarter from a year earlier, according to FactSet. That is up from forecasts for 21% growth at the end of September.

Money managers, though, say they have been particularly focused on what company executives have to say about their expectations for the coming months in the wake of higher rates and the continuing Covid-19 pandemic.

“Not too many of them are painting a rosy picture because of the uncertainty,” said

Robert Schein,

chief investment officer at Blanke Schein Wealth Management.

How the Biggest Companies Are Performing

Write to Karen Langley at karen.langley@wsj.com

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