* S&P 500 and Nasdaq end higher; Dow closes flat
* Utilities lead gainers; financials weakest group
* Gold and bitcoin up; dollar and crude fall
* U.S. 10-Year Treasury yield ~1.55%
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S&P 500 ENDS HIGHER, LIFTED BY BIG TECH (1603 EDT/2003 GMT)
The S&P 500 and Nasdaq ended higher on Wednesday after a
choppy session, with Big Tech doing much of the heavy lifting.
Microsoft, Amazon, Alphabet and
Nvidia buoyed the S&P 500 and Nasdaq
more than any other shares.
Minutes from the September Federal Reserve policy meeting
showed central bankers signaled they could start reducing
crisis-era support for the economy in mid-November, although
they remained divided about how soon they may need to raise
Earlier, a Labor Department report showed consumer prices
increased solidly in September, further strengthening the case
for a Fed interest-rate hike.
JPMorgan Chase & Co fell, even after its
third-quarter earnings beat expectations, helped by global
dealmaking boom and release of more loan loss reserves.
Bank of America, Citigroup, Wells Fargo
and Morgan Stanley are set to report results on
Thursday, while Goldman Sachs will publish earnings on
Utilities and materials posted the
biggest percentage gains among major S&P 500 sectors. Financials
and energy were the only losing groups.
With quarterly reporting season getting underway, analysts
on average expect third-quarter earnings per share to have
increased almost 30% year-over-year, and investors are keen to
hear what CEOs say about the global supply chain crisis and
tight labor markets in some industries.
Here is your closing snapshot:
HALTING CLIMATE CHANGE WOULD COST $5 TRILLION PER YEAR -
REPORT(1445 EDT/1845 GMT)
Saving the world from climate change would require investing
$5 trillion per year over the next three decades, and would
probably increase global inflation by 3% a year, BofA Global
Research says in a report on Wednesday.
The research released ahead of the United Nations' COP26
global climate conference later this month argues that reaching
net zero carbon emissions is possible, but would require a
"mind-boggling" amount of investment, greater than the U.S. tax
"A transition to clean technologies in all sectors at an
unprecedented pace would be required, with the steering of
governments and willingness of society," the report says.
However, doing nothing to stop climate change could cut
global GDP by 3% a year by 2030, and 5% of global stock market
value could be erased, the report warns.
As well, the $5 trillion in annual investments, as well as
$2 trillion in research and development and 42 million related
jobs, could generate "an unprecedented global opportunity,"
according to the report.
BofA Global Research also lists stocks its equity analysts
believe stand to benefit most from COP26, scheduled to be held
in Glasgow, Scotland from Oct. 31 to Nov. 12.
In renewables, BofA Global Research recommends stocks
including NextEra Energy and Enphase Energy.
Among industrials focused on energy efficiency, BofA suggests
companies including Kingspan and Generac. Other
recommended stocks include renewable diesel seller Neste
and lithium battery maker Contemporary Amperex
WORRIED ABOUT STAGFLATION? TD SAYS BUY GOLD (1345 EDT/1745
Investors worried that rising inflation will collide with an
increasingly weak economic outlook should turn to gold, which
may be “an ideal hedge against the rising risk of stagflationary
trends,” analysts at TD Securities said in a report on
Precious metals have been suffering from outflows from
exchange traded funds and reduced interest from speculative
investors, TD said, and gold futures have dipped to
$1,795, from $1,916 in June.
Much of the reduced interest in gold has come as investors
prepare for the Federal Reserve to reduce its bond purchases.
However, the U.S. central bank is likely to maintain its
uber-easy monetary policies for longer than many expect as it
continues to aim for full employment, TD analysts including Bart
Reasons to own the yellow metal are growing as the global
energy crisis intensifies, and “a cold winter could send energy
prices astronomically higher, asymmetrically fueling
stagflationary winds,” they said, adding that “this translates
into a fat right tail in gold prices.”
The bank recommends going long an $1850/$2000 call spread on
April 2022 Gold futures.
IT'S NOT ABOUT COST PRESSURES - GOLUB (1240 EDT/1640 GMT)
U.S. companies will talk about the cost pressures they are
facing as they report third-quarter results in the coming weeks,
but investors should focus more on what they say about sales,
Jonathan Golub, chief U.S. equity strategist for Credit Suisse
in New York, said during the firm's conference call on the U.S.
earnings outlook Tuesday.
"What we're going to hear in earnings season is that
companies are feeling cost pressures, that that's the problem.
And while they're saying that, they're going to be fibbing to
you," he said.
"The real issue is that sales are going to be coming in
weaker, and ultimately sales are necessary to fuel the margins."
The reason for that is that labor and supply shortages are
not allowing companies to fill orders.
"It's not a cost squeeze," he said.
GOOD NEWS – RISING TREASURY YIELDS ARE BULLISH FOR STOCKS -
BOFA (1225 EDT/1625 GMT)
Sharp increases in Treasury yields have raised fears that
rising borrowing costs will spook riskier assets including
stocks, but equities actually perform better on days that yields
rise, according to Bank of America.
Data going back to 2005 show that the S&P 500 and
NYSE breadth are stronger on days when 10-year Treasury yields
rise, and weaker when the yields fall, Stephen Suttmeier said in
a report sent on Tuesday.
On days when the 10-year yield rose by more than 0.10% the
S&P 500 gained 69.3% of the time with an average return of
1.18%, and NYSE breadth was positive 73.3% of the time. When
yields fell by 0.10% or more, by contrast, the S&P 500 rose only
20% of the time, and posted an average loss of 1.90%, with NYSE
breadth only improving 15.3% of the time, Suttmeier said.
That pattern may bode well for stocks in the near-term, with
several market breadth indicators making higher lows as they
entered this month, even as the S&P 500 posted lower lows.
Treasury yields have also increased more aggressively since late
September, Bank of America said.
The improvement in market breadth, and a rising 200-day
moving average, indicates that recent weakness in stocks is a
correction driven by rotation within an uptrend, the bank said.
EUROPE CLOSES ON A HIGH AS TECH SHINES (1200 EDT/1600 GMT)
The STOXX 600 ended the day close to the session's high, up
0.7% and now set for weekly gains.
While the Q3 earnings season will only begin in earnest next
week in Europe, Germany's SAP lifting its guidance gave a big
boost to the tech sector and to sentiment in general.
The tech index rose 2.6%, its best session since May, and
was the most performing segment of the stock market.
The Personal and Household Goods index was second, up 1.8%,
boosted by UK house-builder Barratt Developments, which reported
that forward sales for the past three months had risen above
Banks weren't that popular, losing 1.5% while in the U.S.,
JPMorgan fell after announcing its results.
After their recent surge, yields are taking a breather
across euro zone government bonds, which typically doesn't help
Among individual stocks, France's Spie gained a handsome
8.5% after walking out the auction to buy Engie's unit Equans.
THE SHRINKING RANKS OF HIGHLY RATED CORPORATE ISSUERS (1101
The number of non-financial corporate debt issuers rated in
the AAA or AA categories by Fitch Ratings has steadily shrunk
over the past 20 years, falling to around 10 from nearly 50, the
credit rating agency said in a report on Wednesday.
"Many downgrades were caused by fundamental changes in the
underlying business environments, mostly due to increased
competition and technological changes," Fitch said, pointing to
affected sectors such as telecoms, electric utilities, and
"However, downgrades were also driven by financial policy
decisions to increase leverage," it added.
Technology was the only sector where upgrades into highly
rated categories were growing over the past decade. The report
cited technology's increasing economic role that was
strengthened by accelerated digitalization trends during the
Meanwhile, the oil and gas sector faces long-term pressure
due to energy transition factors.
"As a result of the associated execution risk, ratings could
come under some pressure in the medium term if the transition is
not managed successfully," Fitch said. "However, the relatively
slow decline in oil consumption that we currently expect gives
the rated entities some time to adapt."
INDIAN SUMMER: CPI, MORTGAGE RATES PUT THE HEAT ON (1042
Leaves are falling - and even snow in some parts of the
country - but consumer prices and mortgage rates are pushing the
The prices U.S. urban consumers pay for a basket of goods
rose by 0.4% in August, an acceleration from the
previous month and hotter than the 0.3% consensus.
"We need to bifurcate and see where the inflation is,"
writes Oliver Pursche, senior vice president at Wealthspire
Advisors. "It's not a one-size fits all answer."
Fair enough, so let's delve deeper into the Labor
Department's consumer price index (CPI) report. A 6.4% drop in
air fares - a predictable adjustment following the spikes in
early summer - was more than offset by gains in housing, new
cars and gasoline, among others.
Core CPI, which excludes volatile food and
energy prices, rose at 4% year-over-year, inline with
As to whether this report is likely to accelerate or have
little effect on the U.S. Federal Reserve's expected timeline
for tightening its monetary policy, opinions differ.
"It reassures the Fed because there were no surprises,"
But Peter Cardillo, chief market economist at Spartan
Capital, isn't quite so sure.
"Inflation is going to be more long-lasting than the Fed
expects," Cardillo says. "In my opinion this accelerates the
tapering move and we’ll probably get an announcement next
Minutes from the central bank's most recent monetary policy
meeting could shed light in that direction.
Core CPI, shown along with other major indicators in the
graphic below, continue to soar well above the Fed's average
annual 2% inflation target:
Separately, demand for home loans eked out a nominal gain
last week, according to the Mortgage Bankers Association (MBA),
despite yet another uptick in rates.
The average 30-year fixed contract rate grew by 4
basis points to 3.18%, marking the third consecutive weekly
Even so, applications for loans to purchase homes
jumped by 1.5%, a gain that was nearly completely
offset by a 0.5% decline in refi demand, which
constitutes the bulk of the total.
"Mortgage rates reached their highest level since June 2021,
but application activity changed little this week," notes Joel
Kan, associate vice president of economic and industry
forecasting at MBA.
Nancy Vanden Hauten, lead economist at Oxford Economics,
believes this data points to resiliency in the housing market
and suggests home sales could bounce back in September from
"We expect the housing market to continue to be buffeted by
the crosscurrents of strong demand, limited supply and high
prices," Hauten writes. "While mortgage rates remain relatively
low on a historical basis, the recent backup in mortgage rates
will take an added toll on homebuying affordability at the
Wall Street appeared to be dancing the same tango it's been
doing over the last few sessions - starting strong then steadily
running out of gas.
Most recently, all three major U.S. stock indexes were well
off their opening highs.
The S&P 500 and the Dow were dragged into negative territory
by weak financial stocks, while a meager gain in tech
is helping to keep the Nasdaq modestly green.
INITIAL U.S. STRENGTH FADES, INDEXES TURN MIXED (1005
After an opening push higher, Wall Street's main indexes
have turned mixed. This as investors are digesting a solid rise
in monthly consumer prices, and a dip in bond yields.
The Dow and S&P 500 are now trading down on
the day. The Nasdaq, although already off its early
high, is being boosted by tech stocks, and is still in
Of note, the major indexes, as well as the S&P tech sector,
have all fallen three-straight days.
Meanwhile, with the U.S. 10-Year Treasury yield
back down to the 1.54% area, financials are taking the
biggest hit among S&P sectors.
Here is where markets stand in early trade:
NASDAQ 100 TRIPLE-Qs: GOING WITH THE FLOW (0907 EDT/1307
The Invesco QQQ Trust Series 1, which tracks the
Nasdaq 100 index, is down around 6% from its early
September high. In so doing, it has also violated a monthly
support line from its March 2020 low.
Meanwhile, one indicator that incorporates both price and
volume, the Money Flow index (MFI), continues to track within
On a monthly basis, and since early 2018, the MFI has been
trapped between a resistance line from its 2014 high and a
support line from its 2009 low.
After once again topping shy of the resistance line this
past August, the MFI appears on track for another test of the
support line. Another test of that support line could suggest
risk for greater QQQ weakness.
However, if the support line can continue to work its magic,
and the MFI can bottom, a significant QQQ low may once again be
Conversely, an MFI support line break will end what has been
a consistent pattern, and instead suggest potential that QQQ
weakness may become a waterfall slide.
FOR WEDNESDAY'S LIVE MARKETS' POSTS PRIOR TO 0907 EDT/1307
GMT - CLICK HERE:
(Terence Gabriel is a Reuters market analyst. The views
expressed are his own)