Stocks were mostly lower Wednesday to hover below record levels, as investors digested a set of solid corporate earnings results from more major retailers.
The S&P 500, Dow and Nasdaq were slightly lower. Tesla (TSLA) shares bucked the trend of the market and extended gains, after jumping 4% on Tuesday. Peloton (PTON) shares fell after surging by nearly 16% on Tuesday in its best day since May 2020, after the company announced a secondary stock offering that would net more than $1 billion.
Despite the mild pullback on Wednesday, stocks remained close to record levels. Better-than-expected economic data, with retail sales growing by the most since March in October, and strong earnings results from major companies including Walmart (WMT) and Home Depot (HD) helped buoy the broader markets in recent sessions. The latest earnings results from Target (TGT) and Lowe’s (LOW) on Wednesday showed continued strength, albeit alongside some lingering concerns over the impacts of supply-side disruptions and rising input costs.
Target posted better-than-expected third-quarter sales and earnings per share as customer traffic picked up both in-stores and online, but the report also showed that supply chain snarls and rising labor costs were weighing on margins. This echoed tones from Walmart executives, who during their earnings call on Tuesday also said that they were “seeing inflationary cost pressures in some areas” but were working with suppliers to “manage margins appropriately.” Lowe’s, meanwhile, posted stronger-than-expected sales and raised its full-year revenue guidance, suggesting demand for home-improvement projects was holding up.
The general strength of corporate earnings for the latest quarter has helped investors at least temporarily look beyond concerns over still-elevated inflation. And indeed, some of the growth in Tuesday’s retail sales report likely stemmed from rising prices, given that the Commerce Department reports retail sales nominally.
Despite these inflationary concerns and the potential impacts of rising prices on corporate profits and spending, stocks have hovered near record highs. The S&P 500 was within 0.5% of its all-time intraday high by Tuesday’s close. And according to some strategists, these moves suggest markets may be warming to the notion that inflationary pressures will ultimately moderate below current levels.
“The markets generally are looking at it benignly – they are not discounting some longer-term inflation of more than, let’s say, 2.5%,” Steven Wieting, Citi Global Wealth chief investment strategist, told Yahoo Finance Live. “You can see this in the pricing out on the yield curve of Treasuries. You can see this in the composition of the market with growth stocks not really being beaten down by any concerns about some lurch higher, tightening of monetary policy. We think that story is largely correct – it’s benign for markets. It doesn’t mean we get to repeat the returns the past year, however.”
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10:30 a.m. ET: Biden asks FTC to investigate ‘evidence of anti-consumer behavior by oil and gas companies’
President Joe Biden on Wednesday sent a letter to the Federal Trade Commission requesting that the agency investigate “mounting evidence of anti-consumer behavior by oil and gas companies,” according to the letter.
The move comes just days after Biden said combatting rising prices was a “top priority” for him, after the Consumer Price Index for October showed consumer price inflation rose at the fastest annual rate in over three decades last month. A jump in energy prices contributed heavily to the top-line gain.
“Prices at the pump have continued to rise, even as refined fuel costs go down and industry profits go up,” Biden said in the letter to the FTC. “I do not accept hard-working Americans paying more for gas because of anti-competitive or otherwise potentially illegal conduct.”
Energy prices have surged so far in 2021 as vaccinations and reopenings took place and stoked consumer mobility and fuel demand. West Texas intermediate crude oil prices have jumped by nearly 65% for the year-to-date, but fell by more than 1% Wednesday morning.
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9:30 a.m. ET: Stocks open lower
Here’s where markets were trading just after the opening bell:
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S&P 500 (^GSPC): -5.06 points (-0.11%) to 4,695.84
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Dow (^DJI): -68.34 (-0.19%) to 36,073.88
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Nasdaq (^IXIC): -17.71 (-0.11%) to 15,956.14
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Crude (CL=F): -$0.81(-1.00%) to $79.95 a barrel
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Gold (GC=F): +$11.90 (+0.64%) to $1,866.00 per ounce
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10-year Treasury (^TNX): +0.3 bps to yield 1.637%
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9:07 a.m. ET: Housing starts unexpectedly dropped in October while permits rose
U.S. housing starts fell for a back-to-back month in October as rising materials costs and labor shortages weighed on homebuilding. Building permits rose, however, in an upbeat sign of the prospects of future home construction.
Residential starts were down by 0.7% in October compared to September, reaching a seasonally adjusted annualized rate of 1.520 million. This was the lowest level for housing starts since February. Consensus economists had been looking for a 1.5% rise in starts, according to Bloomberg data. Starts for September were also downwardly revised to post a 2.7% drop, compared to the 1.6% decline previously reported.
Building permits, however, rebounded by a greater-than-expected margin, rising by 4.0% in October versus the 2.8% rise anticipated. This came following a 7.8% monthly decline during the previous month.
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7:45 a.m. ET: Stock futures point to a mixed open
Here’s where markets were trading Wednesday morning:
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S&P 500 futures (ES=F): +1.75 points (+0.03%), to 4,697.25
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Dow futures (YM=F): -8 points (-0.02%), to 36,053.00
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Nasdaq futures (NQ=F): +25.75 points (+0.16%) to 16,326.50
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Crude (CL=F): -$0.47 (-0.58%) to $80.29 a barrel
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Gold (GC=F): +$11.50 (+0.62%) to $1,865.60 per ounce
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10-year Treasury (^TNX): +0.3 bps to yield 1.637%
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7:31 a.m. ET: Mortgage applications dropped last week as rates moved higher
An index tracking mortgage application volume decreased last week after rising during the prior period, with a rising rate environment deterring some looking to buy and refinance.
The Mortgage Bankers Association’s weekly market composite index of mortgage loan application volume fell 2.8% during the week ended Nov. 12. This followed a 5.5% rise during the previous week. Refinances decreased by 5% compared to the previous week and by 31% compared to the same week a year ago. Purchases increased 2% week-on-week on a seasonally adjusted basis, but unadjusted, fell by the same margin and dropped by 6% compared to the same week last year.
“Refinance applications decreased for the seventh time in eight weeks, as mortgage rates moved higher after two weeks of declines,” Joel Kan, MBA associate vice president of economic and industry forecasting, said in a statement. “Activity has been particularly sensitive to rate movements, and last week’s decline was driven by a drop in conventional and FHA refinance applications, which offset an increase in VA refinance applications.”
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6:15 p.m. ET Tuesday: Stock futures open mixed
Here’s where markets were trading Tuesday evening:
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S&P 500 futures (ES=F): +0.75 points (+0.02%), to 4,696.75
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Dow futures (YM=F): +14 points (+0.04%), to 36,075.00
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Nasdaq futures (NQ=F): -4.75 points (-0.03%) to 16,296.50
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Emily McCormick is a reporter for Yahoo Finance. Follow her on Twitter