US stocks at record high as inflation hits 30-year high

Markets rose on Friday.

The S&P 500 rose 0.2 percent to a record high, the STOXX Europe 600 rose 0.1 percent and the Shanghai Composite rose 0.8 percent.

Investors shrugged off news of continuing high inflation.

In the US, a report on Friday showed that the personal consumption expenditures price index rose 4.4 percent in September from the previous year, the biggest jump since January 1991.

Meanwhile eurozone inflation hit a 13-year high of 4.1 percent in October.

Angelo Kourkafas, an investment strategist at Edward Jones, said that while companies face cost pressures, “profitability has remained fairly resilient because of strong demand and pricing power”.

S&P 500 hits another record high

Markets were mostly higher on Thursday.

The S&P 500 rose 1.0 percent to a record high while the STOXX Europe 600 rose 0.2 percent. However, the Nikkei 225 fell 1.0 percent.

US investors shrugged off a report on Thursday showing that the economy grew at an annualised rate of 2.0 percent in the third quarter, below the 2.8 percent expected.

“Earnings have helped and a reminder that US reporting so far has been better than the long-term average in terms of beats,” Jim Reid, head of thematic research at Deutsche Bank, said in a note.

Elsewhere, the European Central Bank and the Bank of Japan left interest rates unchanged at their monetary policy meetings on Thursday.

“While the current phase of higher inflation will last longer than originally expected, we expect inflation to decline in the course of next year,” ECB President Christine Lagarde said at a press conference after its meeting.

US stocks fall, “economy still fundamentally strong”

The S&P 500 fell 0.5 percent on Wednesday.

However, analysts see scope for more gains ahead.

“Seasonal tailwinds, improving market internals, and clear signs of a peak in the delta variant all provide potential fuel for equities heading into year-end, and we maintain our overweight equities recommendation as a result,” said Ryan Detrick, chief market strategist for LPL Financial.

Economists are also unconcerned about an expected slowdown in US third-quarter GDP growth.

Natixis chief economist for the Americas Joseph LaVorgna said that the slowdown “is a function of supply distortions more than anything” and that the “economy is still fundamentally strong”.

Markets rise, Fed “about to shift course”

Markets rose on Tuesday.

The S&P 500 rose 0.2 percent to a record high, the STOXX Europe 600 rose 0.7 percent and the Nikkei 225 surged 1.8 percent.

Craig Johnson, Piper Sandler’s chief market technician, said: “Corporate earnings have been the key catalyst behind the recent record-high rally as robust demand continues to offset well-known supply constraints and pricing pressures.”

However, Ryan Detrick, chief market strategist at LPL Financial, warned: “With stocks at all-time highs, the bar is indeed quite high and tech will need to impress to help justify stocks at current levels.”

Indeed, David Rosenberg, the president of Rosenberg Research, told CNBC on Monday: “The market has gone up way beyond what should be justified by even strong earnings, and that’s because of the Fed.”

Rosenberg said that “the Fed is about to shift course” and “my advice is to start taking chips off the table at these levels”.

S&P 500 hits record high amid “rising tide of earnings”

The S&P 500 rose 0.5 percent to a record high on Monday.

“Rising tide of earnings is lifting all the boats and adding fuel to the bull market fire,” said Anu Gaggar, global investment strategist at Commonwealth Financial Network.

In the meantime, though, supply chain problems are likely to continue to pose problems for companies.

“Backlogs and elevated shipping costs are likely to persist at least through the middle of next year because no immediate solution for the underlying supply-demand imbalance at US ports is available,” Goldman economist Ronnie Walker said in a note to clients.

Hyperinflation coming soon?

Twitter co-founder Jack Dorsey has warned that hyperinflation is coming.

“It will happen in the US soon, and so the world,” he tweeted on Friday.

While Dorsey's forecast for hyperinflation is an outlier, the expectation for high inflation to be somewhat persistent has become more common.

DoubleLine Capital head Jeffrey Gundlach said that “2021 will end with a 5-handle” on the consumer price index and “we don’t think inflation is going below 4% anytime in 2022”.

Meanwhile, in the UK, the Bank of England's top economist Huw Pill said that the country could “see an inflation print close to or above 5%” in the months ahead.

Capital Economics analysts wrote last week that “we now think temporary shortages will restrain GDP for longer and boost inflation by more than we previously thought”.

Markets mixed, face longer-term “headwinds”

Markets were mixed on Friday.

The S&P 500 dipped 0.1 percent but the STOXX Europe 600 rose 0.5 percent.

In Asia, the Nikkei 225 rose 0.3 percent while China Evergrande Group surged 4.3 percent on a report that the company was preparing to pay the interest on a bond.

Stephen Kolano, chief investment officer of BNY Mellon Investor Solutions, said: “The setup into year-end looks great given the liquidity dynamics on corporate buybacks, but longer term there are still the unresolved headwinds of valuation, the transition to mid-cycle in the economy, and a tightening Fed that may prove challenging now that we’re back at all-time highs.”

S&P 500 hits record high amid strong earnings

The S&P 500 hit a record high on Thursday, rising 0.3 percent.

The rally was widely attributed to strong earnings from companies as inflation concerns get pushed aside.

“There are no signs of widespread erosions of margins at the moment,” Jim Reid, head of thematic research at Deutsche Bank, said in a note.

Indeed, Jim Paulsen of the Leuthold Group noted that “elevated inflation appears to bolster S&P 500 EPS on the whole”.

Adding to the optimism on Thursday was a report showing that jobless claims in the US fell to a new pandemic low of 290,000 last week.

Evergrande plunges after asset sale falls through

China Evergrande shares fell 12.5 percent on Thursday, its first day of trading after a halt that lasted more than two weeks.

The plunge came after a deal to sell some of its assets to Hopson Development Holdings fell through.

Evergrande had said late Wednesday that since selling its US$1.5 billion stake in Shengjing Bank in late September, “there has been no material progress on sale of assets of the Group”.

Elsewhere in Asia, the Nikkei 225 plunged 1.9 percent but the Shanghai Composite rose 0.2 percent.

Supply chain problems may be near an end

The S&P 500 rose 0.7 percent on Tuesday, its fifth consecutive gain.

US stocks have been boosted by strong third-quarter earnings reports. 82 percent of S&P 500 companies that have reported earnings beat expectations, according to FactSet.

“The financials got earnings season off to another strong start, but let’s be honest, COVID and supply chain issues aren’t going to impact this group. Now it gets very interesting to see what other industries will have to say about the health of the economic recovery,” said Ryan Detrick, chief market strategist at LPL Financial.

While supply chain issues has the potential to derail the market rally, some say the worst may be near an end.

“There's a very good chance that a year from now that we won't be talking about supply chains at all,” said JPMorgan Chase CEO Jamie Dimon.

Analysts at Jefferies said in a recent report that while the global supply chain has been stretched thin, “we may be already witnessing the worst of it” and the “impact is likely to ease” by the first half of 2022.

Markets mixed, supply chain problems “will get worse”

Markets were mixed on Monday.

The S&P 500 rose 0.3 percent but the STOXX Europe 600 fell 0.5 percent and the Shanghai Composite fell 0.1 percent.

US investors shrugged off news of a worse-than-expected 1.3 percent decline in industrial production in September.

Edward Moya, senior market analyst at Oanda, noted that “the consumer looks strong heading into the holiday season” while Ed Hyman, Evercore ISI Chairman, said that supply chain problems “are likely to ease” and wages “are likely to increase, lifting consumer incomes”.

However, some analysts are less sanguine about the supply chain problems, with Tim Uy of Moody’s Analytics saying that they “will get worse before they get better”.

China's GDP growth disappoints

China reported disappointing third quarter economic growth on Monday.

The National Bureau of Statistics reported that gross domestic product grew 4.9 percent in the third quarter from a year ago, lower than expectations for a 5.2 percent expansion.

“Since entering the third quarter, domestic and overseas risks and challenges have increased,” Fu Linghui, spokesperson for the National Bureau of Statistics, said at a press conference.

Ahead of this report, most major investment banks had already trimmed their economic predictions for China for the year.

CNBC’s estimate for China’s full-year GDP based on forecasts from 13 major banks shows growth of 8.2 percent this year, down 0.3 percentage points from the prior median forecast.

Markets rise, US retail sales show surprise gain

Markets rose on Friday.

The S&P 500 rose 0.8 percent, the STOXX Europe 600 rose 0.7 percent and the Nikkei 225 surged 1.8 percent.

US stocks were buoyed by strong earnings reports. According to FactSet, 80 percent of the 41 S&P 500 companies that have reported third-quarter results have topped earnings-per-share expectations.

In addition, a report on Friday showed that US retail sales posted a surprise increase in September, rising 0.7 percent.

“Services spending may see some renewed strength over the next couple of months, as virus cases continue to drop back,” Capital Economics senior US economist Andrew Hunter wrote. “But with goods shortages likely to persist, and the resulting surge in prices eating into real incomes, we expect consumption growth to remain subdued.”

Markets rise, supply chain problem to last “well into” 2022

Markets rose on Thursday.

The S&P 500 surged 1.7 percent, the STOXX Europe 600 rose 1.2 percent and the Nikkei 225 jumped 1.5 percent.

“So far, the overwhelming majority of large US companies have been able to generate higher profitability despite rising labor costs because sales growth has been so robust. We expect the same to be true in 3Q,” Mark Haefele, chief investment officer of UBS Global Wealth Management, said in a note.

However, supply chain issues may continue to pose problems.

A survey of CFOs has shown that the majority of them expect the problem to last “well into” 2022.

Markets higher, Fed could begin tapering in November

Markets were mostly higher on Wednesday.

The S&P 500 rose 0.3 percent and the STOXX Europe 600 rose 0.7 percent.

Earlier in Asia, the Shanghai Composite rose 0.4 percent but the Nikkei 225 fell 0.3 percent.

A report in the US showed that the consumer price index rose 0.4 percent in September and 5.4 percent year over year.

Minutes from the Federal Open Market Committee’s September meeting released on Wednesday showed that the central bank could begin tapering its asset-purchase programme as soon as mid-November.

“Much of these inflationary pressures are transitory, but that doesn’t stop them from having a dampening impact on activity,” said Seema Shah, chief strategist at Principal Global Investors.

IMF cuts US growth forecast

Markets were mostly lower on Tuesday, with the S&P 500 falling 0.2 percent.

In the latest International Monetary Fund World Economic Outlook published on Tuesday, global gross domestic product is forecast to grow by 5.9 percent this year, 0.1 percentage point lower than the estimate in July.

The IMF cut its growth forecast for the US this year by 1 percentage point to 6 percent.

Meanwhile, the IMF said that the outlook for the low-income developing country group “has darkened considerably due to worsening pandemic dynamics”.

“Inflation risks are skewed to the upside and could materialize if pandemic-induced supply-demand mismatches continue longer than expected,” the IMF added.

Markets mixed, oil price rise poses recession risk

Markets were mixed on Monday.

The S&P 500 fell 0.7 percent, the Nikkei 225 rose 1.6 percent while the STOXX Europe 600 was little-changed.

US oil benchmark WTI crude oil topped US$82 a barrel at its session highs on Monday and Bernstein’s Neil Beveridge said in a Monday note: “High or rapid increase in energy costs have triggered recessions in the past and there is a possibility that history could repeat itself if energy prices continue to rise.”

Goldman Sachs on Monday cut its US economic growth forecast for 2022 to 4 percent from 4.4 percent.

Meanwhile, analysts estimate an earnings growth rate of 27.6 percent for the S&P 500 in the third quarter, which would be the third-highest growth rate since 2010.

Markets mixed, US jobs report disappoints

Markets were mixed on Friday.

The S&P 500 fell 0.2 percent and the STOXX Europe 600 fell 0.3 percent.

However, Asian stocks rose, with the Shanghai Composite up 0.7 percent and the Nikkei 225 up 1.3 percent.

US stocks were weighed down by a disappointing employment report, which showed just 194,000 job gains in September.

“This jobs number could call into question the starting point for taper late this year,” said Jamie Cox, managing partner for Harris Financial Group.

Still, the Federal Reserve will have to keep an eye on inflation as oil prices rose on Friday, with West Texas Intermediate crude futures crossing US$80 per barrel for the first time since November 2014.

Markets rise, US reaches debt ceiling deal

Markets rose on Thursday.

The S&P 500 rose 0.8 percent, the STOXX Europe 600 jumped 1.6 percent and the Nikkei 225 rose 0.5 percent.

US stocks were boosted by news that lawmakers had reached a deal on a short-term debt ceiling increase.

Economic data on Thursday were mixed.

The US reported that initial filings for unemployment benefits totalled 326,000 for the week ended 2 October, down from the previous week’s 364,000.

However, Germany reported that industrial output fell by 4 percent in August following an increase of 1.3 percent in July.

Markets mixed, “roller-coaster market to stick around”

Markets were mixed on Wednesday.

The S&P 500 rose 0.4 percent but the STOXX Europe 600 fell 1.0 percent and the Nikkei 225 fell 1.1 percent.

News that Senate Minority Leader Mitch McConnell would offer a short-term debt ceiling extension later Wednesday helped shore up US stocks.

Still, some analysts remain cautious on market prospects.

“We expect the October roller-coaster market to stick around for a bit longer,” said Ryan Detrick of LPL Financial.

Markets rise, “equity rally to get back on track”

Markets were mostly higher on Tuesday.

The S&P 500 rose 1.1 percent and the STOXX Europe 600 rose 1.2 percent. However, the Nikkei 225 fell 2.2 percent.

Analysts are optimistic on the prospects for stocks.

“We do not believe the recent bout of de-risking will lead to sustained falls, and maintain the stance to keep buying into any weakness,” Marko Kolanovic, JPMorgan’s chief global markets strategist, said in a note Monday.

Mark Haefele, chief investment officer of global wealth management at UBS, said “we expect the equity rally to get back on track”.

Markets fall even as COVID-19 worries recede

Markets fell on Monday.

The S&P 500 fell 1.3 percent, STOXX Europe 600 fell 0.5 percent and the Nikkei 225 fell 1.1 percent.

Trading in shares of China Evergrande was halted. The company said it requested the trading halt ahead of an announcement about a “major transaction”.

Meanwhile, John Stoltzfus, Oppenheimer Asset Management’s chief investment strategist, noted on Monday that “investor worries about COVID-19 and its variant seem to have begun to play a lesser day-to-day ‘worry role’ in the markets of late”.

“The on-again, off-again nervousness about Federal monetary policy, the disruption among supply chains and the potential for higher taxes (along with other concerns such as inflation risk and higher taxes) have kept market enthusiasm in check,” wrote Stoltzfus.

Leuthold Group chief investment strategist Jim Paulsen said that with the economy reopening from COVID-19-related restrictions, “commodities are rising, bond yields are rising, cyclical sectors and small cap stocks are outpacing, and technology and growth stocks in general are underperforming”.

Higher demand, supply crunch leading to inflationary “perfect storm”

The S&P 500 fell 2.2 percent last week.

Stocks fell amid concerns over persistent inflation and rising bond yields.

Federal Reserve Chair Jerome Powell said at a European Central Bank event on Wednesday that bottlenecks and supply chain problems are “holding up inflation longer than we had thought”.

Data released on Friday showed that the price index for core personal consumption expenditures in the US rose 3.6 percent year-on-year in August, the biggest increase in more than 30 years, while inflation in September in the euro area rose 3.4 percent on an annual basis, the highest reading since September 2008.

Over the weekend, Martin Farrer at the Guardian wrote that “a supply crunch that initially put a question mark over the availability of luxury cars or whether there would be enough PlayStations under our Christmas trees is instead morphing into a full-blown crisis featuring a shortage of energy, labour and transport from Liverpool to Los Angeles, and from Qingdao to Queensland”.

“The supply chain problems are much more persistent than most policymakers expected, although companies are less surprised,” said Mohamed El-Erian, an adviser to the insurance giant Allianz and president of Queens’ College, Cambridge. “Governments are having to rethink quickly because the three elements – supply side, transport, labour – are coming together to blow a stagflationary wind through the global economy.”

“Consumers are crazy to buy things because the world is awash with dollars from government stimulus, higher savings and pent-up demand,” said Flavio Romero Macau, a supply chain expert at Edith Cowan University in Western Australia. “Higher demand and restricted supply equals inflation: there’s no way out of it. You put all these things together and its a perfect storm.”

Markets mixed, “good opportunity for investors”

Markets were mixed on Friday.

The Nikkei 225 plunged 2.3 percent and the STOXX Europe 600 fell 0.4 percent.

However, the S&P 500 rose 1.2 percent and the Nasdaq Composite snapped a five-day losing streak to rise 0.8 percent.

High inflation was apparent in the data released on Friday.

In the US, the price index for core personal consumption expenditures showed a 3.6 percent year-on-year rise in August, the biggest increase in more than 30 years .

In the euro zone, inflation in September rose 3.4 percent on an annual basis, the highest reading since September 2008.

However, Fundstrat’s Tom Lee said that while “there’s a lot of headwinds here...when the wall of worry is big, that’s often a good opportunity for investors”.

Markets fall, “will stay rocky”

Markets were mostly lower on Thursday.

The S&P 600 fell 1.2 percent, the Nikkei 225 fell 0.3 percent and the STOXX Europe 600 closed marginally lower.

Despite the falls, Ed Yardeni of Yardeni Research said that “analysts remain relatively sanguine”.

Indeed, David Bianco of DWS Group said that “we don’t expect a correction”.

Still, Adam Crisafulli of Vital Knowledge said that “the coming weeks will stay rocky”.