Tuesday November 16th


Dow futures gain after better-than-expected earnings from big retailers

U.S. stock index futures gained after better-than-expected results from Walmart and Home Depot. Futures contracts tied to the Dow, which contains the two big retailers, added 56 points, or 0.1%. S&P 500 added 0.05% and Nasdaq 100 futures were slightly in the green. Walmart kicked off a busy week of retail earnings by saying third-quarter profit and revenue was well above estimates with U.S. same-store sales jumping 9.2%, excluding fuel. The company also raised its forecast for 2021, saying adjusted earnings per share will be around $6.40 versus its prior expectations of between $6.20 and $6.35. The shares were higher by more than 1% in premarket trading. Home Depot’s third-quarter earnings beat estimates on a 9.8% sales burst. Shares gained 1.2% in premarket trading. A slew of economic data will be released on Tuesday, including retail sales figures for October. Economists surveyed by Dow Jones are expecting sales to have jumped by 1.5% last month, compared with 0.7% in September. Industrial production numbers will also be released, as well as the NAHB housing market index survey. During regular trading Monday, the Dow dipped about 13 points, or 0.04%, for its fourth negative session in the last five. At the high of the day the 30-stock index gained about 136 points. The S&P 500 finished the day unchanged at 4,682.87. The benchmark index moved between gains and losses during the session, at one point gaining 0.3%, while also trading 0.21% lower. The Nasdaq Composite dipped 0.04%. The Russell 2000 was the relative underperformer, declining 0.45%. Stocks’ move came as interest rates rose, with the yield on the 10-year Treasury note topping 1.62% while the 30-bear Treasury bond rose above 2%. Inflation fears are weighing on the market after last month’s consumer price index posted its largest annual increase in more than three decades. Paul Christopher, head of global market strategy at Wells Fargo Investment Institute, said he believes inflation will moderate in 2022, but that “the path to lower inflation [will] begin with higher inflation in the front half of the year.” “The stickier drivers of inflation are likely to persist, but our base case is that they will not outweigh the improvement we expect in the transitory elements,” he wrote in a note to clients. On Monday afternoon President Joe Biden signed the $1 trillion bipartisan infrastructure bill into law. The package includes funding for transportation, broadband and utilities. The major averages are coming off their first negative week in six, but stocks are still trading around all-time high levels. As Wall Street strategists look to 2022 some, including Morgan Stanley’s Michael Wilson, believe the picture looks muted. “With financial conditions tightening and earnings growth slowing, the 12-month risk/reward for the broad indices looks unattractive at current prices,” he said Monday in a note to clients. “However, strong nominal GDP growth should continue to provide plenty of good investment opportunities at the stock level for active managers,” he added. His 12-month base target for the S&P 500 is 4,400, which is 6% below where the index closed on Monday. Shares in Asia-Pacific were mixed on Tuesday as investors reacted to a virtual meeting between U.S. President Joe Biden and Chinese President Xi Jinping. Hong Kong’s Hang Seng index closed 1.27% higher at 25,713.78. Mainland Chinese stocks ended the trading day lower, with the Shanghai composite falling 0.33% to 3,521.79 while the Shenzhen component fell 0.153% to 14,613.97. Japanese stocks closed higher, with the Nikkei 225 up 0.11% to 29,808.12 while the Topix index climbed 0.11% to 2,050.83. In South Korea, the Kospi finished the trading day fractionally lower at 2,997.21. Oil rebounded from a weak start on Tuesday as worries over tight inventories underpinned prices, although optimism was limited by fears over demand following a pickup in Covid-19 cases in Europe. Brent futures added 96 cents, or 1.2%, to $83.01 a barrel, as of 0712 GMT, while U.S. West Texas Intermediate (WTI) crude climbed 80 cents, or 1%, to $81.68 a barrel. Gold prices rose on Tuesday, holding close to an over five-month peak hit in the previous session as investors feared that inflation would persist for longer, driving demand for bullion as a hedge against inflation. Spot gold rose 0.1% to $1,864.80 per ounce by 0836 GMT. U.S. gold futures were up 0.1% at $1,868.20. Gold prices have rallied 1.9% since last Tuesday after data showed U.S. consumer prices accelerated in October.