Stock Pullback a Bit On Inflation Woes
5:03 pm Wednesday, November 17th, 2021
Stocks fell on concern that inflation could pose a challenge to the global economic rebound, forcing central banks to raise interest rates sooner than expected. Bonds rose.
Nine of the 11 S&P 500 sectors are trading in negative territory, including financials (-1.1%) and energy (-1.1%) with losses over 1.0%. The consumer discretionary (+0.7%) and health care (+0.4%) sectors are the only sectors trading higher right now.
The price action is being influenced by several factors, including growth concerns, a wait-and-see attitude, and reduced speculation.
On earnings growth, there are concerns that inflation pressures could eat into profit margins after Target (TGT) followed in Walmart’s (WMT) footsteps with plans to absorb some of the higher costs to keep prices down. TGT is down 5% despite some pleasing earnings results.
Market participants are also cognizant that a Fed Chair nomination and that a CBO score for the Build Back Better Act could be announced by the end of the week. Presumably, investors would like some clarity on those fronts before embracing a risk-on mindset.
Separately, some of the speculation seen in Rivian (RIVN) and Lucid Motors (LCID) are being reined in today. Some of the money, however, might be rotating back into Tesla (TSLA), which is up 2.5%.
Visa (V) and MasterCard (MA), meanwhile, are down noticeably on news that Amazon.com (AMZN) will stop accepting Visa credit cards in the UK next year due to high transaction fees. On a related note, Goldman named Amazon a Top Pick for 2022.
Elsewhere, investors are taking shelter in Apple (AAPL) and the Treasury market, where the 10-yr yield is down two basis points to 1.61%.
