(Bloomberg) -- Global stocks extended a rally as Federal Reserve officials cautioned against disruptive policy tightening and U.S. companies signaled another strong earnings season. U.S. index futures swung from gains to losses in line with volatile moves seen over the past several days.
Futures on the Nasdaq 100 Index were little changed, while those on the S&P 500 Index were 0.3% lower, after a two-day rally in New York led by dip-buying. A gauge of world stocks outside the U.S. headed for the biggest two-day gains in almost three weeks. The dollar weakened, while Treasury yield curves flattened. Advanced Micro Devices Inc. rose in premarket trading amid expectations its results Tuesday will show market-share gains.
Four Fed officials said they’ll back interest-rate increases at a pace that doesn’t disrupt the economy, calming markets unnerved by previous hawkish messages from the central bank. Investors are now debating whether the rally that pared the worst monthly rout in the S&P 500 since March 2020 will continue. They are also focusing on earnings releases to gauge the strength of the economic recovery.
“Good news is that some Fed officials are finally out trying to soothe investors’ nerves saying that they still want to avoid unnecessarily disrupting the US economy,” Ipek Ozkardeskaya, a senior analyst at Swissquote, wrote in a note. “But what will really make the difference is the quantitative tightening and given the steep rise in Fed’s balance sheet since March 2020, even halting the growth would be an abrupt change.”
Waves of volatility have swept across markets after the Fed signaled swifter monetary-policy tightening to curb inflation than many had expected. Investors need to “get used to this up and down volatility” as there’ll likely be more of it, Nancy Davis, chief investment officer at Quadratic Capital Management, said on Bloomberg Television.
The CBOE Volatility Index, also known as Vix or the U.S. fear gauge, resumed an increase Tuesday after three days of decreases.
Fed officials expressing caution over faster-than-necessary tightening included San Francisco Fed chief Mary Daly, who cited a number of risks facing the economy in addition to the ongoing pandemic, including headwinds as fiscal support fades. Kansas City Fed President Esther George also said it’s in “no one’s interest to try to upset the economy with unexpected adjustments.”
Meanwhile, the corporate-earnings outlook continues to underpin the case for stocks. Of the 174 companies in the S&P 500 that have reported earnings so far this season, 81% have beaten or met projections. Profits are coming in about 5.1% higher than forecast levels.
Treasuries erased their losses, with the 10-year rate shedding two basis points. Bonds in Europe also rallied, with the German benchmark yield falling below zero again, after a report showed euro-area manufacturing was expanding at a slower-than-forecast pace.
AMD advanced in early New York trading. The second-biggest maker of computer processors, will report quarterly results Tuesday afternoon and provide its forecast for the year, giving investors a sense of whether the chipmaker can continue to make gains against larger rival Intel Corp. UBS jumped 6% in Zurich as earnings beat estimates.
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