Market Analysis

Beyond the Numbers

Easing Inflation Concerns May Lead To Strength On Wall Street
11/12/2021 8:43 AM

The major U.S. index futures are currently pointing to a higher open on Friday, with stocks likely to see initial strength after ending the previous session mixed.

The markets may benefit from easing concerns about the outlook for inflation after a report released earlier in the week showed consumer prices rose at their fastest annual rate in over thirty years.

Analysts have suggested the current wave of price spikes due to chronic worldwide supply constraints will not last long and inflationary pressure will eventually ease.

Federal Reserve officials have also repeatedly described the factors driving inflation as “transitory,” indicating the central bank is not currently considering accelerating monetary policy tightening.

After ending Thursday’s trading lower amid a steep drop by Disney (DIS), the Dow may also benefit from a notable advance by shares of Johnson & Johnson (JNJ).

J&J is up by 2.8 percent in pre-market trading after the healthcare giant announced plans to separate its consumer health business from its pharmaceutical and medical device operations.

The company said the planned separation would create two global leaders that are better positioned to deliver improved health outcomes for patients and consumers through innovation, pursue more targeted business strategies and accelerate growth.

Following the notable pullback seen on Tuesday and Wednesday, the major U.S. stock indexes turned in a mixed performance during trading on Thursday. While the Nasdaq and the S&P 500 regained some ground, the narrower Dow saw further downside.

The tech-heavy Nasdaq climbed 81.58 points or 0.5 percent to 15,704.28 after underperforming its counterparts in the previous session.

The S&P 500 also inched up 2.56 points or 0.1 percent to 4,649.27, while the Dow slid 158.71 points or 0.4 percent to 35,921.23.

The rebound by the Nasdaq and S&P 500 came as some traders looked to pick up stocks at somewhat reduced levels after the drop seen on Tuesday and Wednesday dragged the major averages down well off Monday's record closing highs.

Nonetheless, overall trading activity remained somewhat subdued, as some traders stuck to the sidelines amid the Veterans Day holiday.

While the stock markets were open as usual on the day, banks, federal offices and the bonds markets all remained closed.

Lingering concerns about inflation also limited buying interest after Wednesday's Labor Department report showing consumer prices rose at their fastest annual rate in over thirty years in October.

A notable decline by shares of Disney (DIS) weighed on the Dow, with the entertainment giant slumping by 7.1 percent.

The drop by Disney came after the company reported third quarter results that missed analyst estimates on both the top and bottom lines. Disney+ subscriptions also came in below expectations.

Steel stocks showed a substantial move back to the upside on the day, with the NSYE Arca Steel Index surging up by 3.8 percent after ending the previous session at its lowest closing level in over seven months.

Significant strength was also visible among gold stocks, as reflected by the 2.6 percent jump by the NYSE Arca Gold Bugs Index. The index ended the session at a nearly five-month closing high. The rally by gold stocks came as the price of the previous metal extended a recent upward move.

Semiconductor, natural gas and computer hardware also regained ground after coming under pressure during trading on Wednesday.

Commodity, Currency Markets

Crude oil futures are tumbling $1.16 to $80.43 a barrel after rising $0.25 to $81.59 a barrel on Thursday. Meanwhile, after climbing $15.60 to $1,863.90 an ounce in the previous session, gold futures are falling $5.30 to $1,858.60 an ounce.

On the currency front, the U.S. dollar is trading at 113.97 yen versus the 114.06 yen it fetched at the close of New York trading on Thursday. Against the euro, the dollar is valued at $1.1446 compared to yesterday’s $1.1451.


Asian stocks ended broadly higher on Friday as cash-strapped Chinese property developer Evergrande averted a default and investors expressed hopes that the worst price hikes could be soon over.

Chinese shares eked out modest gains after a major Communist Party meeting ended with a resolution paving the way for President Xi Jinping to potentially rule for life.

The benchmark Shanghai Composite Index edged up 6.31 points, or 0.2 percent, to 3,539.10, while Hong Kong's Hang Seng Index ended up 79.98 points, or 0.3 percent, at 25,327.97.

Japanese shares rose sharply on optimism over strong corporate earnings. The Nikkei 225 Index rallied 332.11 points, or 1.1 percent, to settle at 29,609.97, while the broader Topix closed 1.3 percent higher at 2,040.60.

Market heavyweight SoftBank Group climbed 2.6 percent, while automakers Honda Motor, Mazda and Toyota rose 1-2 percent. In the tech space, Advantest, Tokyo Electron and Screen Holdings gained 1-2 percent.

Australian markets rose notably after four straight sessions of losses. The benchmark S&P/ASX 200 Index advanced 61.10 points, or 0.8 percent, to 7,443.00, while the broader All Ordinaries Index ended up 64.60 points, or 0.8 percent, at 7,765.80.

A rebound in iron ore prices helped lift miners, with BHP, Rio Tinto, South32 and Fortescue Metals Group climbing 2-3 percent. Tech stocks followed their U.S. peers higher, with Wisetech Global, Afterpay and Xero rising 2-3 percent.

Greenland Minerals shares plunged nearly 30 percent as Greenland's parliament passed legislation to ban uranium mining and exploration in the Danish territory.

Seoul stocks rallied as investors went bargain hunting in beaten-down tech, auto and bio stocks. The Kospi jumped 43.88 points, or 1.5 percent, to close at 2,968.80.

Samsung Electronics gained 1 percent, Hyundai Motor added 1.5 percent, Samsung Biologics advanced 1.7 percent and LG Chem climbed 2.3 percent.


European stocks are turning in a mixed performance on Friday, with commodity-related stocks declining as a stronger dollar dents oil and metal prices.

Inflation worries ebbed somewhat, with analysts saying that the current wave of price spikes due to chronic worldwide supply constraints would not last long and inflationary pressure will eventually ease.

The dollar has climbed for a third day and is headed for its best week in almost five months against major peers amid bets for earlier Federal Reserve interest rate hikes.

Short-dated U.S. Treasury yields have edged higher as traders price in two rate hikes next year - a first rate increase by July and a high likelihood of another by November.

Closer to home, the European Central Bank appears unlikely to change its extremely dovish policy settings in the near term against a backdrop of a slowing economy.

While the U.K.’s FTSE 100 Index is down by 0.4 percent, the German DAX Index is up by 0.1 percent and the French CAC 40 Index is up by 0.3 percent.

Anglo American, Antofagasta and Glencore have fallen, as the dollar has risen against major peers on bets of an earlier-than-expected interest rate hike.

TotalEnergies, BP Plc and Royal Dutch Shell have also moved lower as oil has dropped and is headed for its longest run of weekly losses since March.

Drug major AstraZeneca has also shown a notable move to the downside after its quarterly operating profit missed the consensus estimate.

John Wood Group shares have plunged. The company said it has started a strategic review of the part of its Consulting business facing the built environment end market.

Steelmaker Salzgitter Group has also moved sharply lower on the day despite reaffirming its 2021 guidance.

On the other hand, telecommunications company Deutsche Telekom has moved higher after raising its EBITDA guidance for fiscal 2021.

Swiss luxury group Richemont has soared. The company said higher sales, a higher gross profit and good cost control have resulted in a six-month operating profit of 1.95 billion euros, up by 331 percent over the prior-year period.

Redrow has also shown a strong move to the upside. The homebuilder said its results in the 2022 financial year will approach those achieved in 2019.

Real estate investment trust Land Securities Group has also risen after it announced the sale of Harbour Exchange to Blackstone European Property Income Fund for 196.5 million pounds.

Deutsche Wohnen SE shares have also moved higher. The German property firm has reaffirmed its earnings guidance for the current fiscal after reporting an increase in Funds From Operations for the nine-month period ended in September.

U.S. Economic Reports

The University of Michigan is scheduled to release its preliminary report on consumer sentiment in the month of November at 10 am ET. The consumer sentiment index is expected to inch up to 72.4 in November from 71.7 in October.

Also at 10 am ET, the Labor Department is scheduled to release the results of its Job Openings and Labor Turnover Survey for September. Job openings are expected to edge down to 10.3 million in September from 10.4 million in August.

New York Federal Reserve President John Williams is scheduled to speak before a virtual Heterogeneity in Macroeconomics: Implications for Policy conference at 12:10 pm ET.

Stocks In Focus

Shares of Blink Charging (BLNK) are seeing significant pre-market strength after the electric vehicle charging company reported third quarter revenues that exceeded analyst estimates.

Casino operator Caesars Entertainment (CZR) may also move to the upside after B. Riley Securities initiated coverage of the company’s stock with a Buy rating.

On the other hand, shares of Lordstown Motors (RIDE) may come under pressure after the electric vehicle maker delayed the launch of its Endurance electric pickup truck.

IT hardware and software company Hewlett Packard Enterprise (HPE) may also move to the downside after Goldman Sachs downgraded its rating on the company’s stock to Sell from Neutral.
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