U.S. Stocks Showing A Lack Of Direction Amid Interest Rate Uncertainty

wallstreet 10feb23 lt

Following the significant downturn seen over the course of the previous session, stocks have shown a lack of direction over the course of morning trading on Friday. The major averages have spent the morning bouncing back and forth across the unchanged line.

Currently, the major averages are turning in a mixed performance. While the Nasdaq is down 39.83 points or 0.3 percent at 11,749.75, the Dow is up 83.28 points or 0.3 percent at 33,783.16 and the S&P 500 is up 3.80 points or 0.1 percent at 4,085.30.

The choppy trading on Wall Street partly reflects lingering uncertainty about the outlook for interest rates amid worries the Federal Reserve may need to raise rates higher than currently anticipated in order to bring down inflation.

Traders are also reacting to mixed February consumer sentiment data released by the University of Michigan this morning.

While consumer sentiment saw a continued improvement in February, the report also showed a rebound in near-term inflation expectations.

The report showed the consumer sentiment index rose to 66.4 in February from 64.9 in January. Economists had expected the index to inch up to 65.0.

The consumer sentiment index increased for the third straight month, reaching its highest level since hitting 67.2 in January 2022.

Meanwhile, one-year inflation expectations climbed to 4.2 percent in February from 3.9 percent in January, with expectations rebounding after falling for three straight months.

The lackluster performance on Wall Street also reflects a mixed reaction to the latest batch of corporate earnings news.

Shares of Lyft (LYFT) have plummeted after the ride-sharing company reported an unexpected fourth quarter loss and provided disappointing revenue guidance for the current quarter.

Travel company Expedia (EXPE) has also moved to the downside after reporting fourth quarter results that missed analyst estimates on both the top and bottom lines.

At the same time, shares of Yelp (YELP) have moved sharply higher after the consumer review platform reported fourth quarter results roughly in line with estimates and provided upbeat guidance for 2023.

Sector News

Most of the major sectors are showing only modest moves on the day, contributing to the lackluster performance by the broader markets.

Airline stocks are extending the sell-off seen in the previous session, however, with the NYSE Arca Airline Index slumping by 2.1 percent after plummeting by 3.6 percent on Thursday.

Notable weakness is also visible among semiconductor stocks, as reflected by the 1.2 percent drop by the Philadelphia Semiconductor Index.

On the other hand, energy stocks are moving sharply higher along with the price of crude oil. Crude for March delivery is jumping $1.18 to $79.24 a barrel.

Reflecting the strength in the energy sector, the NYSE Arca Oil Index is up by 2.9 percent, the Philadelphia Oil Service Index is up by 2.1 percent and the NYSE Arca Natural Gas Index is up by 1.7 percent.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region turned in another mixed performance on Friday. Japan's Nikkei 225 Index rose by 0.3 percent, while China's Shanghai Composite Index fell by 0.3 percent and Hong Kong's Hang Seng Index plunged by 2.0 percent.

Meanwhile, the major European markets have all moved to the downside on the day. While the German DAX Index has tumbled by 1.3 percent, the French CAC 40 Index is down by 1.0 percent and the U.K.'s FTSE 100 Index is down by 0.6 percent.

In the bond market, treasuries are extending the notable downturn seen over the course of the previous session. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, is up by 2.8 basis points at 3.711 percent.

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