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Markets Shake Out Gains Following Murky Inflation Outlook
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Don’t call it a “shake-down;” it’s more of a “shake-out.” Pre-market future this morning painted a dire picture of the immediate future in equities markets, led by the Dow, which was down more than 500 points prior to the opening bell. At the close, the Dow had lost 263 points, -0.75% on the day, while the S&P 500 was -0.86% off its record high close yesterday. The Nasdaq, which also squeaked out a new high close yesterday, wound up -0.72% today.
So, while we saw a definitive drop during the regular session — including -0.94% on the Russell 2000, which has underperformed the other indexes of late — it certainly smacks of a profit-booking exercise than anything else. A dovish ECB shouldn’t create outsized risk for investors by, say, next week, and fundamentally the U.S. economy is still strong. Mohamed el-Erian from Allianz says today’s trading is a mostly technical exercise.
That said, both the S&P and Nasdaq posted their worst trading days since June 8th — and it would have been a longer stretch had the markets closed at session lows rather than above them. But with Bitcoin -4.7% on the day, as well, and all FANG stocks -1%, there was no place left to hide. Especially not Transportation stocks, which closed down 3% today.
This Transportation drop may have something to do with President Biden’s announced executive order to address supply chain and pricing issues still affecting the country. Because Kansas City Southern’s merger with Canadian National (CNI - Free Report) must be approved by the Surface Transportation Board (STB) before going forward. Thus, KSU shares fell 7.9% on the day, even though rail volume is +14% year to date.
What to make of the 10-year bond rate, however? This, after all, may be what set the markets sinking in this morning’s pre-market, suggesting inflation may not be as big a near-term issue as deflation, strange as that may sound. Though at 1.29% on the day, while low, it’s not stepping in quicksand. Near-term inflation reads have been surprisingly below expectations of late, but overall we’re seeing growth; those metrics should record inflation back toward expected levels.
After today’s close, Levi Strauss & Co. (LEVI - Free Report) posted a big beat in its fiscal Q2 earnings today: 23 cents per share versus 9 cents in the Zacks consensus. Revenues of $1.28 billion also outpaced expectations of $1.21 billion. The company is also bumping up their dividend yield by 8 cents per share, while at the same time raising full-year revenue guidance, with Q3 expectations now being favorably compared to 2019 quarters — a better apples-to-apples comparison.
A massive push to rebuild the crumbling U.S. infrastructure will soon be underway. It’s bipartisan, urgent, and inevitable. Trillions will be spent. Fortunes will be made. The only question is “Will you get into the right stocks early when their growth potential is greatest?”
Zacks has released a Special Report to help you do just that, and today it’s free. Discover 7 special companies that look to gain the most from construction and repair to roads, bridges, and buildings, plus cargo hauling and energy transformation on an almost unimaginable scale.
Image: Bigstock
Markets Shake Out Gains Following Murky Inflation Outlook
Don’t call it a “shake-down;” it’s more of a “shake-out.” Pre-market future this morning painted a dire picture of the immediate future in equities markets, led by the Dow, which was down more than 500 points prior to the opening bell. At the close, the Dow had lost 263 points, -0.75% on the day, while the S&P 500 was -0.86% off its record high close yesterday. The Nasdaq, which also squeaked out a new high close yesterday, wound up -0.72% today.
So, while we saw a definitive drop during the regular session — including -0.94% on the Russell 2000, which has underperformed the other indexes of late — it certainly smacks of a profit-booking exercise than anything else. A dovish ECB shouldn’t create outsized risk for investors by, say, next week, and fundamentally the U.S. economy is still strong. Mohamed el-Erian from Allianz says today’s trading is a mostly technical exercise.
That said, both the S&P and Nasdaq posted their worst trading days since June 8th — and it would have been a longer stretch had the markets closed at session lows rather than above them. But with Bitcoin -4.7% on the day, as well, and all FANG stocks -1%, there was no place left to hide. Especially not Transportation stocks, which closed down 3% today.
This Transportation drop may have something to do with President Biden’s announced executive order to address supply chain and pricing issues still affecting the country. Because Kansas City Southern’s merger with Canadian National (CNI - Free Report) must be approved by the Surface Transportation Board (STB) before going forward. Thus, KSU shares fell 7.9% on the day, even though rail volume is +14% year to date.
What to make of the 10-year bond rate, however? This, after all, may be what set the markets sinking in this morning’s pre-market, suggesting inflation may not be as big a near-term issue as deflation, strange as that may sound. Though at 1.29% on the day, while low, it’s not stepping in quicksand. Near-term inflation reads have been surprisingly below expectations of late, but overall we’re seeing growth; those metrics should record inflation back toward expected levels.
After today’s close, Levi Strauss & Co. (LEVI - Free Report) posted a big beat in its fiscal Q2 earnings today: 23 cents per share versus 9 cents in the Zacks consensus. Revenues of $1.28 billion also outpaced expectations of $1.21 billion. The company is also bumping up their dividend yield by 8 cents per share, while at the same time raising full-year revenue guidance, with Q3 expectations now being favorably compared to 2019 quarters — a better apples-to-apples comparison.
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Infrastructure Stock Boom to Sweep America
A massive push to rebuild the crumbling U.S. infrastructure will soon be underway. It’s bipartisan, urgent, and inevitable. Trillions will be spent. Fortunes will be made. The only question is “Will you get into the right stocks early when their growth potential is greatest?”
Zacks has released a Special Report to help you do just that, and today it’s free. Discover 7 special companies that look to gain the most from construction and repair to roads, bridges, and buildings, plus cargo hauling and energy transformation on an almost unimaginable scale.
Download FREE: How to Profit from Trillions on Spending for Infrastructure >>