Stocks Climb After Solid Economic Data; Bonds Fall: Markets Wrap
(Bloomberg) -- Stocks advanced after the biggest increase in U.S. retail sales since March, with results from industry giants Walmart Inc. and Home Depot Inc. showing robust demand even as inflation squeezes purchasing power.
The strong retail figures alongside better-than-estimated factory output and homebuilder confidence helped lift equities, overshadowing comments from Federal Reserve Bank of St. Louis President James Bullard that the central bank should speed up its reduction of monetary stimulus to offset inflation. All major equity benchmarks climbed, with the S&P 500 extending its November rally. Treasuries fell.
“With the robust retail sales read and solid start to retail earnings, it’s crystal clear that inflation isn’t standing in the way of consumers,” said Mike Loewengart, managing director of investment strategy at E*Trade Financial. “Despite some hiccups on the labor market and inflation fronts, this could serve as the vote of confidence investors needed, signaling that the economy is still chugging along nicely.”
President Joe Biden told reporters to expect him to announce a nominee for Fed chair in “the next four days.” Biden is weighing whether to reappoint Jerome Powell as leader of the central bank. He’s also interviewed Fed Governor Lael Brainard for the job, who is preferred by some progressive lawmakers and activists. The president hasn’t yet made a decision, according to a person familiar with the matter.
“Based on how markets reacted when they learned Brainard was in the running, it’s clear who’s viewed as the more dovish between the two,” wrote Craig Erlam, senior market analyst at Oanda. Ordinarily, that would make her the stock market’s pick, but it “may not necessarily be the case if investors view inflation as a greater risk than the central bank perceives, making inaction the less desirable approach longer term,” he added.
Goldman Sachs Group Inc. strategists lifted their outlook for American stocks, saying the rally that has pushed the benchmark index to successive record highs will continue into 2022. Global fund managers in Bank of America Corp.’s November survey are ending the year with the biggest overweight in U.S. shares since August 2013, and JPMorgan Chase & Co. strategists remain bullish on equities amid bets central banks will stay dovish.
Crescat Capital says it’s time for a “great rotation” away from shares of faster-growing U.S. companies and toward cheaper stocks. The money manager cited a comparison of enterprise value relative to sales for the Russell 1000 growth and value indexes in a blog post Saturday. The growth-value gap recently widened to 3.41 points, according to data compiled by Bloomberg. The differential exceeded a peak of 3.40 points from July 2000, shortly after the end of an internet-driven bull market.
Some corporate highlights:
- Home Depot posted stronger-than-expected results, a sign that spending on home improvement continues to stretch through the pandemic.
- Walmart signaled that it’s bracing for more pressure from global transportation snarls despite a broadly positive outlook.
- Qualcomm Inc., the biggest maker of chips that run smartphones, gave an upbeat sales forecast, fueled by growth in new markets.
- Netflix Inc. will start releasing lists of its most-popular TV shows and movies globally each week.
- Peloton Interactive Inc.’s $1 billion stock offering drew the interest of major investors.
Elsewhere, cryptocurrencies fell, with Bitcoin trading near $60,000 amid a broad-based retreat from recent record highs.
What to watch this week:
- Euro region CPI. Wednesday
- U.S. housing starts. Wednesday
- Conference Board U.S. leading index, initial jobless claims. Thursday
- Fed’s Richard Clarida and Mary Daly speak at Asia Economic Policy Conference. Friday
For more market analysis, read our MLIV blog.
Some of the main moves in markets:
- The S&P 500 rose 0.4% as of 4 p.m. New York time
- The Nasdaq 100 rose 0.7%
- The Dow Jones Industrial Average rose 0.2%
- The MSCI World index rose 0.1%
- The Bloomberg Dollar Spot Index rose 0.4%
- The euro fell 0.5% to $1.1313
- The British pound was little changed at $1.3423
- The Japanese yen fell 0.6% to 114.81 per dollar
- The yield on 10-year Treasuries advanced two basis points to 1.64%
- Germany’s 10-year yield declined one basis point to -0.24%
- Britain’s 10-year yield advanced three basis points to 0.99%
- West Texas Intermediate crude was little changed
- Gold futures fell 0.8% to $1,851.90 an ounce
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