The S&P 500 and Nasdaq Composite indexes were facing some pressure to start the week, as investors remain focused on rising inflation and its impact on yields for government debt and borrowing costs. Meanwhile, Dow industrials were buoyed byshares of Boeing Co. after the aerospace giant reported a number of orders for its planes from the 2021 Dubai Airshow.
The Dow Jones Industrial Average
rose 20 points, or less than 0.1%, to 36,120.
The S&P 500 index
fell almost 0.1%, or 3 points, to 4,679.
The Nasdaq Composite Index
fell 0.3%, or 46 points, to 15,815.
On Friday, the major U.S. benchmarks each snapped a stretch of five straight weekly gains, though the retreat was modest, leaving the S&P 500 just 0.4% away from a record close.
What’s driving markets
Stocks were trading on a relatively bullish footing on Monday, with a report on New York state manufacturing activity boosting sentiment on Wall Street.
The New York Fed’s Empire State manufacturing business conditions index rose 11.1 points to 30.9 in November, the regional Fed bank said Monday. Economists had expected a reading of 22, according to a survey by The Wall Street Journal.
The upbeat manufacturing report comes after the University of Michigan consumer-sentiment survey released Friday showed inflation data weighing on consumer attitudes, though it isn’t clear that will translate into weaker spending. The Chicago Fed ‘s advance retail trade summary expects a 2.6% jump in retail sales excluding auto, far stronger than the 1% gain seen in an economist poll. The retail sales report is due Tuesday.
“We see equities as a potential buffer against inflation because we expect a more muted response of yields to inflation than in the past,” according to Jean Boivin and others at the research arm of BlackRock Inc., the world’s largest money manager. “Real, or inflation-adjusted, yields should remain low or negative as a result, making equities attractive. In addition, many companies so far have been able to pass on higher input costs and keep their margins intact.”
Strong third-quarter earnings have been a pillar of this recent run-up in equities, with consumers central to the economic rebound from the debilitating COVID-19 crisis.
“The strong demand from households despite depressed attitudes suggests that heavy fiscal support and highly accommodative financial conditions are outweighing the constraining influence of weak sentiment. If fiscal support and monetary accommodation are strong enough to counter depressed attitudes, they are probably strong enough to push inflation higher,” said Michael Moran, chief economist at Daiwa Capital Markets America.
The inflation backdrop makes the next choice of Federal Reserve chair all the more important politically for President Joe Biden. The Wall Street Journal reported that Biden is said to be deciding between reappointing Chairman Jerome Powell or choosing Fed Gov. Lael Brainard as early as this week. Biden interviewed both candidates earlier this month, and the meeting with Brainard was described by people familiar with the matter as going better than expected, the report said.
Biden is due to sign the infrastructure bill into law in a signing ceremony Monday afternoon. He’s also due to hold a virtual meeting with Chinese President Xi Jinping in the evening.
Meanwhile, European Central Bank President Christine Lagarde told the European Parliament that the central bank expects inflation to moderate next year, though prices will take longer to decline than originally expected. She also said that it was “very unlikely” conditions would be met by next year that would allow for an interest-rate hike. European inflation data is due for release this week.
Which companies are in focus?
Share of WeWork Inc. WE were in focus after the flexible workspace company reported its first quarterly report since going public last month through a merger with a special-purpose acquisition company, or SPAC, with losses narrowing but revenue falling. WeWork shares rose 2%.
Shares of Boeing
rallied 5% after the company said it signed an order with Icelease for 11 of its 737-800 Boeing Converted Freighters, while logistics company DHL Express placed an order for nine more 767-300BCF and Emirates announced an order for two 777 Freighters.
Oatly Group AB OTLY shares plunged 20% in Monday trading after the plant-based beverage company reported a third-quarter revenue miss and issued a revenue warning for the year.
Restaurant Brands International Inc. QSR said Monday that it has agreed to acquire Firehouse Subs, a sub sandwich chain founded in Jacksonville, Fla., for $1 billion in cash, funded through cash-on-hand and debt. Restaurant Brand shares rose 1.2%.
How are other assets faring?
The yield on the 10-year Treasury note TMUBMUSD10Y rose 3 basis points to around 1.61%. Yields rise while prices fall and vice versa.
The ICE U.S. Dollar Index DXY, a measure of the currency against a basket of six major rivals, was edging higher, up around 0.2%, on Monday and trading at the highest level in more than a year.
The U.S. benchmark crude contract CL00 CLZ21 slipped roughly 1% to trade at $79.76 a barrel. Gold futures GC00 retreated 0.2% to reach around $1,865 an ounce, threatening to end seven straight sessions of gains.