US stocks futures sink as strong inflation data raises rate hike fears

Jerome Powell

Higher inflation puts pressure on new Fed chair Jerome Powell to raise interest rates more quickly Credit SAUL LOEB AFP

"Since 1971, the S&P 500 [Total Return] has gained about 20 percent on average in rising rate periods, has gained 8 of 9 times and has gained nearly 40 percent twice with less than a 4 percent loss for its worst rising rate period".

Advancing issues outnumbered decliners on the NYSE by 1,856 to 716.

- Stocks powered higher Monday, sending the Dow Jones industrial average up 410 points, as the market clawed back more of its massive losses from the previous two weeks.

The market will close on Thursday afternoon for the Lunar New Year holiday, and will resume trading on February 20.

Health care companies were posting some of the biggest gains in early trading Friday.

Global markets moved higher overnight, shrugging off a stronger-than-expected inflation report out of the United States.

The DAX closed 1.17 per cent higher at 12,339.16.

TransCanada was the biggest advancer on the index, rising 3.7 per cent to $55.64, after its fourth-quarter profit beat expectations due to lower costs and an expansion of gas lines.

Tripadvisor Inc (NASDAQ:TRIP), shares which have taken a battering over the past year amid an advertising war with rivals Expedia Inc (NASDAQ:EXPE) and Priceline Group Inc (NASDAQ:PCLN), rose 17.2% to US$47.66 before the opening bell on Thursday.

The mixed close on Wall Street came after Special Counsel Robert Mueller's office revealed that a federal grand jury has indicted several Russian nationals for allegedly interfering in the 2016 presidential election.

But once higher yields start to bite economic growth and earnings growth expectations - driven by the inevitability of higher inflation - we will see a repeat of the recent market unpleasantness.

US stocks managed to shake off inflation data as consumer prices increased more than expected. The company had recorded revenue growth for the first time in a year and a half. And the 10-year yield has hit its highest level since January 2014.

MSCI's index of stock markets across the globe .MIWD00000PUS rose 0.26 percent to gain 4.3 percent for the week, the best weekly performance since December 2011.

"A lot of investors are looking for opportunities or pull backs to put money to work, there's still a lot of cash out there looking for something to do", said Scott Brown, chief economist at Raymond James in St. Petersburg, Florida. A drop of that size is known on Wall Street as a market "correction".

Indices are weighted by the market value of the bonds, which must have a maturity of one month or greater to be eligible for index inclusion.

Wall Street has now refocused on strong corporate earnings and the fact that the market has gotten less expensive.

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The stock market sell-off earlier this month that caused the Dow to fall over 1,000 points in a single day began after a Labor Department report showed wages grew at a better-than-expected pace in January.

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