(Bloomberg) – Shares hit a record high after the biggest increase in U.S. retail sales since March, with industry giants Walmart Inc. and Home Depot Inc.’s results showing robust demand even as inflation reduces purchasing power.
Strong retail numbers, along with higher than estimated factory output and homebuilder confidence, helped lift stocks, eclipsing comments from Federal Reserve Bank of St. Louis Chairman James Bullard, that the central bank should accelerate the reduction of its monetary stimulus measures to offset inflation. All major stock indexes rose, with the S&P 500 extending its November rally. Treasury bills have fluctuated.
âWith strong retail sales and a strong start to retail earnings, it’s clear that inflation is not hindering consumers,â said Mike Loewengart, managing director of investment strategy at E * Trade Financial. “So despite some hiccups in the job market and inflation fronts, this could serve as a vote of confidence investors needed to signal that the economy is still doing well.”
Traders were also awaiting the selection of the next Fed chief after the Senate Banking Chairman said the decision was “imminent”. President Jerome Powell’s term ends in February, and President Joe Biden interviewed him and Fed Governor Lael Brainard for the top post this month. Brainard, a Democrat, garnered support from progressive elements for her stronger stance on financial regulation.
âFrom the reaction of the markets when they learned that Brainard was in the running, it’s clear who is considered the more accommodating of the two,â wrote Craig Erlam, senior market analyst at Oanda. While this would make her the choice of the stock market, it “may not necessarily be the case if investors view inflation as a greater risk than the central bank perceives, making inaction l ‘least desirable long-term approach,’ he added.
Read: Yellen says US Treasury liquidity won’t last long after December 3
Goldman Sachs Group Inc. strategists raised their outlook for US stocks, saying the recovery that pushed the benchmark to successive record highs will continue until 2022. Global fund managers surveyed November of Bank of America Corp. end the year with the largest overweighting in US stocks since August 2013, while strategists at JPMorgan Chase & Co. said they remained bullish on stocks on bets that central banks will remain accommodating.
Crescat Capital says it’s time for a “big rotation” of stocks from fast-growing US companies to cheaper stocks. The fund manager cited a comparison of the company’s value to sales for the Russell 1000 growth and value indices in a blog post on Saturday. The growth-to-value gap recently widened to 3.41 points, according to data compiled by Bloomberg. The differential topped a peak of 3.40 points from July 2000, shortly after the end of an internet-induced bull market.
Some highlights of the company:
- Walmart beat Wall Street earnings expectations and the company raised its outlook again, but signaled that supply chain growls and inflation were wreaking havoc.
- The Home Depot posted stronger-than-expected results, a sign that the increase in home improvement spending continues to expand throughout the pandemic.
- Fitness company Peloton Interactive Inc. has announced that it will sell roughly $ 1 billion in stock.
- Rivian Automotive Inc. has more than doubled since its commercial debut last week, with the electric truck startup’s value surpassing that of Volkswagen AG.
- Elon Musk exercised options and offloaded more Tesla Inc. stock, continuing a selling streak that helped push the stock down last week the most since March 2020.
Elsewhere, cryptocurrencies have fallen, with Bitcoin briefly dipping below $ 60,000 and Ether hitting its lowest level this month, in a widespread pullback from recent highs.
What to watch this week:
- Eurozone CPI. Wednesday
- Housing starts in the United States. Wednesday
- US Conference Board leading index, initial jobless claims. Thursday
- The Fed’s Richard Clarida and Mary Daly speak at the Asia Economic Policy Conference. Friday
For more market analysis, read our MLIV blog.
Some of the main movements in the markets:
- The S&P 500 rose 0.5% at 11:50 a.m. New York time
- The Nasdaq 100 rose 0.6%
- The Dow Jones Industrial Average rose 0.5%
- The Stoxx Europe 600 is up 0.2%
- The MSCI World index rose 0.2%
- Bloomberg Dollar Spot Index rose 0.3%
- The euro fell 0.3% to $ 1.1334
- The British pound was little changed at $ 1.3423
- Japanese yen fell 0.4% to 114.63 per dollar
- The yield on 10-year Treasuries rose 1 basis point to 1.62%
- German 10-year rate fell one basis point to -0.24%
- UK 10-year yield rose two basis points to 0.99%
- West Texas Intermediate crude rose 0.4% to $ 81.19 a barrel
- Gold futures fell 0.5% to $ 1,857.20 an ounce
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