Stocks Rise After Wednesday Selloff as Tech Eyes Recovery

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Stocks were rising after an ugly selloff in the last session, though equities around the world tumbled to follow Wall Street’s Wednesday performance.

Futures for the

Dow Jones Industrial Average
indicated an open 70 points or 0.2% higher, after the index dropped 392 points Wednesday to close at 36,407. The wider

S&P 500
was set to start 0.1% higher, while futures for the

Nasdaq
signaled an open near flat. The tech-heavy index bore the brunt of the market rout Wednesday, plunging 3.3%, leading it to the worst three-day start to a calendar year since 2008.

Investors’ nerves were shaken Wednesday by December meeting minutes from the Federal Open Market Committee suggesting a hawkish turn for the Federal Reserve. Minutes show the central bank’s monetary policy body considering earlier and faster interest-rate increases and a quicker start to policy tightening through the normalization of its massive balance sheet.

Overseas markets were closed before the minutes were released, so the response of traders in Europe and Asia was delayed until Thursday. Tokyo’s

Nikkei 225,
which analysts say has been closely correlated with the Nasdaq, dropped 2.9%. The pan-European

Stoxx 600
was 1% lower.

“The December FOMC minutes last night shattered the early year calm in financial markets,” said Jim Reid, a strategist at

Deutsche Bank

in the U.K. 

“The shift in sentiment came against the backdrop of continued rises in sovereign bond yields,” Reid added. “There are a few other big questions outstanding, including how many rate hikes would take place before quantitative tightening begins and how Treasury and mortgage-back security holdings would be treated during runoff.”

The Fed minutes came after a rally in recent days amid positive signs for the U.S. economy, which has been echoed by a rise in Treasury yields. The yield on the benchmark 10-year U.S. note was up again Thursday to near 1.73%; it started the week at 1.54%. 

The move in bonds exacerbated a selloff in tech stocks, because higher yields tend to discount the present value of future cash flows; the valuations of many tech companies rely on the notion of profits years into the future.

Jeffrey Halley, an analyst at broker Oanda, said that the recent selloff “is more about positioning than anything.”

“When you look at what the Fed members said in the FOMC minutes, it wasn’t really anything different than what we already knew,” Halley said. “I wouldn’t write off the irresistible power of the buy-the-dippers turning things around once again before the end of the week, especially if the U.S. Nonfarm Payrolls comes in under 400k.”

Later in the week, the spotlight will fall on Friday’s jobs report; that includes nonfarm payrolls, with expectations for 422,000 jobs to have been added.

In commodity markets, crude prices were rising, with futures contracts for international oil benchmark Brent up 0.4% to above $81 a barrel. U.S. futures for West Texas Intermediate crude rose similarly to above $78.

A lift for oil came despite data showing a significant rise in U.S. gasoline inventories.

“That should all have been bad news for oil prices, implying that Omicron is weighing on mobility and consumption,” said Halley, adding that higher U.S. yields and movement in the dollar should have added pressure to crude. “Instead, oil prices hardly budged and this, despite higher OPEC+ production, suggests that oil demand remains very robust indeed.”

Bitcoin
and other cryptocurrencies continued to feel the pressure after the leading digital asset sold off after the Fed minutes were released. Bitcoin was down 9% to below $42,700, according to price data from CoinDesk, with

Ether
down 13% to just above $3,300.

In the day ahead, investors will watch economic data including weekly initial jobless claims, the ISM services index for December, and the trade balance as well as factory orders for November.

Here are seven stocks on the move Thursday:

Crypto exchange

Coinbase

(ticker: COIN) was down 1.8% in the U.S. premarket, after a 6.4% fall Wednesday. It and other stocks linked to cryptocurrencies have felt the heat from a slide in digital asset prices.

Marathon Digital

(MARA) fell 2.5% in the premarket with

Riot Blockchain

(RIOT) slipping 2.7%; both stocks fell 12% to 13% Wednesday.

MicroStrategy

(MSTR) was down 2.6%.

Tesla

(TSLA) was down 1% in the premarket after a 5.4% slide Wednesday.

Some big tech names were poised to jump higher ahead of the Nasdaq.

Meta Platforms

(FB) was up 0.9% in the premarket while

Nvidia

(NVDA) rose 0.6%. Meta fell 3.7% Wednesday and Nvidia 5.8%.

Write to Jack Denton at [email protected]