Earnings Season Kicks Off Amid Market Volatility and Fear of Inflation
Earnings Season Kicks Off Amid Market Volatility and Fear of Inflation
By:JJ Kinahan
Meanwhile, the jobs report surged past expectations, and bond yields hit multi-year highs
- The stronger-than-expected jobs report is intensifying concern about inflation, driving bond yields and mortgage rates higher.
- Global divergence is sharpening as fear of inflation takes hold in the U.S. and U.K. while China faces recession.
- Earnings season begins with strong results, but inflation and oil prices are clouding the economic outlook.
Markets were closed yesterday in honor of Jimmy Carter’s passing, though Wednesday felt similarly subdued as stocks showed little movement. That calm is expected to end today with the release of the December jobs report, which was much stronger than anticipated.
Economists had forecast 164,000 new jobs and a 4.2% unemployment rate, but the actual figures were 256,000 jobs and a reduced unemployment rate of 4.1%. Revisions to previous months’ data resulted in a net loss of 8,000 jobs, but the overall report signals a resilient labor market.
Bond yields increase
Bond yields continue to climb, a topic I’ve emphasized in recent weeks. The 30-year Treasury yield is at 4.99%, while the benchmark 10-year yield stands at 4.78%. These rates have pushed mortgage rates to 6.93%, levels not seen since summer.
The trend extends internationally, with the U.K.’s 30-year gilt yield at 5.45% and its 10-year at 4.92%—the highest since 2008. Meanwhile, China’s 10-year yields are just 1.6%, highlighting a stark divergence in global economic conditions.
This contrast reflects fears of inflation in the U.S. and U.K., while China grapples with recessionary pressures exacerbated by U.S. tariffs. The MSCI emerging markets index has dropped 10% since October, entering correction territory and underscoring these global disparities.
Companies report strong earnings
As earnings season begins, Delta Air Lines (DAL) and Walgreens Boots Alliance (WBA) reported strong results in the premarket. Delta beat on both revenue and profit, driven by robust demand in late 2024, and provided better-than-expected full-year guidance. Its stock is up 8% in premarket trading. Walgreens also exceeded expectations and reaffirmed its annual guidance, pushing its stock up 11%.
Conversely, insurance companies are trading lower as California wildfires have caused damage estimates to double from $10 billion to $20 billion, with shares of Travelers (TRV) and Allstate (ALL) down 4% and 5%, respectively.
In other news, an East Coast port strike has been averted with dockworkers securing a 62% pay increase over six years. While positive, such raises could affect inflation through higher import and export costs. Crude oil prices also rose over 3.5% to nearly $77 per barrel, nearing the $80 threshold that often pressures consumer prices.
Markets are poised to open lower as fear of inflation dominates sentiment. With next week’s bank earnings reports on the horizon, investors should remain focused on long-term goals amid growing uncertainty.
JJ Kinahan is CEO of IG North America—which includes tastylive, tastytrade and IG's FX Business. Kinahan traded for 21 years at the Chicago Board Options Exchange. He serves on the CBOE Advisory Board and the SIFMA Options Committee. @thejjkinahan
For live daily programming, market news and commentary, visit tastylive or the YouTube channels tastylive (for options traders), and tastyliveTrending for stocks, futures, forex & macro.
Trade with a better broker, open a tastytrade account today. tastylive, Inc. and tastytrade, Inc. are separate but affiliated companies.
Options involve risk and are not suitable for all investors. Please read Characteristics and Risks of Standardized Options before deciding to invest in options.