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Monitors displaying the stock index prices and Japanese yen exchange rate against the U.S. dollar are seen at the Tokyo Stock Exchange in Tokyo

MONEY & BUSINESS: U.S. stocks mixed, Treasury yields flat ahead of Fed indicator



Monitors displaying the stock index prices and Japanese yen exchange rate against the U.S. dollar are seen after the New Year ceremony marking the opening of trading in 2022 at the Tokyo Stock Exchange (TSE), amid the coronavirus disease (COVID-19) pandemic, in Tokyo, Japan January 4, 2022. REUTERS/Issei Kato

January 5, 2022

By Lawrence Delevingne

BOSTON (Reuters) – U.S. stocks were mixed and Treasury yields largely unchanged on Wednesday morning following earlier gains to start the new year and ahead of key Federal Reserve meeting minutes to be released later in the day.

The Dow Jones Industrial Average rose 67.29 points, or 0.18%, to 36,866.94, the S&P 500 lost 8.38 points, or 0.17%, to 4,785.16 and the Nasdaq Composite dropped 134.12 points, or 0.86%, to 15,488.60.

Shares of technology titans Apple Inc Google-owner Alphabet Inc, Amazon.com, Meta Platforms and Microsoft Corp all declined.

With U.S. inflation surging, investors will be looking at the minutes from the Fed’s December meeting, set for release at 2 p.m. EST (1900 GMT), for signs of how willing policymakers are to tighten monetary policy and, if so, how quickly.

“It’s all about the degree to which the evidence in the minutes suggests that the majority of the committee is looking for a faster-than-expected pace of balance-sheet reduction,” said Peter Chatwell, head of multi-asset strategy at Mizuho.

With expectations for rate hikes as early as March, Treasury yields jumped on Monday and Tuesday. But on Wednesday they pulled back slightly, with the U.S. 10-year yield at 1.675%, compared with the previous session’s peak of 1.686%, which was the highest since late November.

One positive economic indicator on Wednesday was the ADP National Employment report, which showed private payrolls increased by 807,000 jobs last month, more than double what economists polled by Reuters had forecast.

Citing an optimistic corporate earnings forecast, market analysts at Citi raised their 2022 S&P 500 index price target to 5,100, a 7% gain from year-end 2021.

“We remain moderately constructive on the broader market outlook, while acknowledging valuation headwinds as the Fed moves down a more hawkish path,” the Citi analysts wrote.

Citi’s target was toward the higher end of other banks, with Morgan Stanley at 4,400 and Goldman Sachs also at 5,100.

“It’s still very much start-of-the-year mode,” said Chatwell of Mizuho. “Risk appetite is, as is seasonally the case, strong at this point, and the consensus view is that there is good upside still in equity markets.”

Oil prices rose, extending gains even after OPEC+ producers stuck to an agreed output target rise for February and U.S. fuel inventories surged due to sliding demand as COVID-19 cases spiked due to the Omicron variant.

U.S. crude futures rose 1.7% to $78.29 per barrel and Brent was at $81.23, up 1.5% on the day.

The dollar dipped around 0.3% on Wednesday, having edged down below recent two-week highs, after the stronger-than-expected labor market report and ahead of the Fed minutes.

In cryptocurrencies, bitcoin was up about 1.8% at $46,653 – still significantly below its most recent all-time high of $69,000 reached in November.

Goldman Sachs said in a research note on Tuesday that bitcoin would likely take market share away from gold as a “store of value” as digital assets become more widely adopted and that its price could hit $100,000 in five years.

Spot gold added 0.5% to $1,822.81 an ounce. U.S. gold futures gained 0.06% to $1,815.10 an ounce.

(Reporting by Lawrence Delevingne, Elizabeth Howcroft and Medha Singh; editing by Jonathan Oatis and Marguerita Choy)





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