Stocks open higher on Wall Street following last week’s rout

A pedestrian walks past the New York Stock Exchange in New York City, Thursday, Oct. 27, 2022. (AP Photo/J. David Ake, File)

NEW YORK (AP) — Stocks are opening higher, clawing back some of the losses from their worst week since early December. The S&P 500 rose 0.8% early Monday and is on pace for just its second gain in the last seven days. The Dow and the Nasdaq also rose. Stocks have struggled in February after a strong start to the year as reports have shown inflation and much of the economy are staying more resilient than expected. That’s forcing Wall Street to raise its forecasts for how high the Federal Reserve will take interest rates and how long it will keep them there.

THIS IS A BREAKING NEWS UPDATE. AP’s earlier story follows below.

Wall Street pointed toward gains before the opening bell Monday after last week's rout and ahead of another full slate of corporate earnings this week.

Futures for the benchmark S&P 500 rose 0.5% and futures for the Dow Jones industrials moved 0.4% higher.

Last week, U.S. shares suffered their worst setback since early December. Reports on inflation, the jobs market and retail spending have come in hotter than expected, raising expectations that the Federal Reserve will have to maintain an aggressive fiscal policy stance in a lengthening battle against inflation, meaning an elevated benchmark interest rate.

Higher rates pressure business activity and investment, and a string of rate hikes has not led to a consistent slowing of growth as hoped.

“It is becoming increasingly apparent that inflation, and associated inflation expectations and wage pressures, will not decline in a predictable linear manner," Mizuho Bank said in a commentary. Geopolitical tensions also were weighing on sentiment, it said, after the U.S. and other western countries imposed new sanctions on Russia for its war on Ukraine.

Fed Chair Jerome Powell has warned that any decline in prices would not be a straight line.

In premarket equities trading, Union Pacific jumped nearly 10% after the railroad announced plans Sunday to replace its CEO later this year. The company has been pressured by a hedge fund that holds a $1.6 billion stake in the railroad went public with its concerns about Lance Fritz' leadership during the past eight years.

Seagen shares jumped more than 14% early Monday on a Wall Street Journal report that the drug giant Pfizer was in talks to acquire the company, adding to its stable of cancer treatments. Seagen was targeted last year by Merck.

The online video conferencing company Zoom reports quarterly earnings after the bell Monday. It's another heavy week for corporate financial results, particularly in the retail sector, with Target, Macy's, Kohl's, Costco and Best Buy all reporting in the coming days.

At midday in Europe on Monday, Germany's DAX rose 1.6%, while the CAC 40 in Paris added 1.7%. Britain's FTSE 100 gained 0.8%.

In Asia, Tokyo's Nikkei 225 index edged 0.1% lower to 27,423.96 and the Kospi in Seoul gave up 0.9% to 2,402.64.

In Hong Kong, the Hang Seng lost 0.3% to 19,943.51 while the Shanghai Composite index was down 0.3% at 3,258.03. Australia's S&P/ASX 200 shed 1.1% to 7,224.80.

Bangkok was 0.2% lower while the Sensex in Mumbai dropped 0.6%.

The measure of inflation preferred by the Fed, reported Friday, said prices were 4.7% higher in January than a year earlier, after ignoring costs for food and energy because they can swing more quickly than others. That was an acceleration from December’s inflation rate and was higher than economists’ expectations for 4.3%.

It echoed other reports earlier in the month that showed inflation at both the consumer and wholesale levels was higher than expected in January.

Other data Friday showed that consumer spending, the biggest piece of the economy, returned to growth in January, rising 1.8% from December. A separate reading on sentiment among consumers came in slightly stronger than earlier thought, while sales of new homes improved a bit more than expected.

Such strength paired with the remarkably resilient job market raises the likelihood the economy might avoid a recession in the near term. But they also make it more likely that the Fed will keep interest rates higher for longer.

The anticipation is growing that the Fed will be forced to raise its benchmark rate to at least 5.25% and keep it that high through the end of the year. It's currently in a range of 4.50% to 4.75%, and it was at virtually zero a year ago.

Expectations for a firmer Fed have caused yields in the Treasury market to shoot higher this month, and they were climbing again early Monday.

The yield on the 10-year Treasury, which helps set rates for mortgages and other important loans, inched up to 3.96% from 3.95% late Friday. The two-year yield, which moves more on expectations for the Fed, rose to 4.84% from 4.81% and is near its highest level since 2007.

In other trading Monday, U.S. benchmark crude oil rose 26 cents to $76.06 per barrel in electronic trading on the New York Mercantile Exchange. It gained 93 cents to $76.32 per barrel on Friday. Brent crude oil, the pricing basis for international trading, gained 28 cents to $82.54 per barrel.

The dollar fell to 136.24 Japanese yen from 136.45 yen. The euro rose to $1.0562 from $1.0549.

The S&P 500 fell 1.1% Friday to cap its third straight loss. The Dow Jones Industrial Average dropped 1% and the Nasdaq composite lost 1.7%.

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Kurtenbach reported from Bangkok; Ott reported from Silver Spring, Md.