© Reuters. FILE PHOTO: Traders work on the floor of the New York Stock Exchange (NYSE) in New York City, U.S., October 27, 2021. REUTERS/Brendan McDermid
By Devik Jain and Bansari Mayur Kamdar
(Reuters) – U.S. stock indexes eased from intraday record highs on Monday, dragged down by Microsoft and other mega-cap technology stocks, while data showed U.S. manufacturing activity slowed in October amid supply chain disruptions.
All the major indexes had scaled new peaks earlier in the session, with the blue-chip Dow hitting 36,000 points for the first time.
The Institute for Supply Management (ISM) said its index of national factory activity slipped to a reading of 60.8 last month, as a measure of new orders dropped to a 16-month low and factories continued to experience delays with deliveries of raw materials.
The report came ahead of the Federal Reserve’s policy meeting on Nov. 2-3, when the central bank is expected to announce the tapering of its $120 billion monthly bond buying program amid rising price pressures.
Still, investors have looked past a mixed macro economic picture, helped by a largely upbeat earnings season.
“We had a little bit of chasing this morning and now that’s coming off. This market keeps getting driven by the likes of Tesla (NASDAQ:) really,” said Dennis Dick, a trader at Bright Trading LLC.
“People believe that we’re going to be strong into the year end and so they’re chasing the winners. It’s a momentum market right now, where what is hot is hot and what is not is not.”
Five of the 11 major S&P sectors advanced, with energy shares rising more than 1%.
Tesla Inc rose 1.2% to a record high after it notched a trillion dollars in market capitalization last week, while Meta Platforms , formerly Facebook Inc (NASDAQ:), added 2.7% to provide the biggest boost to the and the Nasdaq.
At 10:36 a.m. ET, the was up 28.06 points, or 0.08%, at 35,847.62, the S&P 500 was down 4.41 points, or 0.10%, at 4,600.97, and the was up 20.71 points, or 0.13%, at 15,519.10.
Other mega-cap technology stocks Google-owner Alphabet (NASDAQ:) Inc, Microsoft Corp (NASDAQ:), Amazon.com (NASDAQ:) and Apple Inc (NASDAQ:) slipped between 0.9% and 1.2% to weigh the most on the S&P 500 and the Nasdaq.
The market has also started pricing in rate hikes next year. November and December tend to be among the strongest months for stocks and any hawkish tilt in the Fed’s message could catch equities by surprise.
Goldman Sachs (NYSE:) has brought forward its forecast by a year to July 2022 for the first post-pandemic U.S. interest rate hike, as the investment bank expects inflation to remain elevated.
Harley-Davidson Inc (NYSE:) jumped 7.9% after the European Union removed retaliatory tariffs on U.S. products including whiskey, power boats and company’s motorcycles.
gained 1.2% after J.P. Morgan upgraded the Sharpie pen maker’s stock to “overweight” from “neutral”.
Advancing issues outnumbered decliners by a 2.53-to-1 ratio on the NYSE and by a 2.72-to-1 ratio on the Nasdaq.
The S&P index recorded 40 new 52-week highs and two new lows, while the Nasdaq recorded 151 new highs and 28 new lows.
Morgan Stanley: bear market rally to continue
One of Wall Street’s best-known bears, Michael Wilson, thinks the S&P 500 will rise another 7% before turning down, so the bear market rally will continue for now, writes Market Watch.
After the Dow Jones, S&P 500 and Nasdaq Composite joined their strongest weekly gains since at least May last Friday, Wilson, who is chief strategist and head of U.S. equity markets at Morgan Stanley (NYSE:MS), told clients that there could be another 5% to 7% before the downward trajectory of U.S. stocks resumes during the latest bear market recovery.
Wilson has held a bearish view of the stock market for about 2 years and correctly predicted a sell-off this year.
Wilson explained in a research note sent out to clients on Monday that a pullback in the 38-50% drop in the stock market this year “would not seem like something unnatural, not consistent with the previous bear market rally.”
While growth concerns have triggered a sell-off in commodities and lowered inflation expectations, the fact that the U.S. economy is already slowing and heading toward recession means that any market rally is likely to be short-lived, and U.S. stocks are likely to eventually fall.
Wilson mentioned in the note that the bear market is not over yet, although it may appear otherwise in the next few weeks as the market takes the rate cut as a sign that the Fed can still manage a “soft landing” and prevent a meaningful revision to earnings forecasts.
U.S. stocks rose last week as investors now hope the slowing economy and falling commodity prices may inspire the Fed to raise interest rates less sharply. Federal funds futures, a derivative used by investors to bet on the pace of the Fed’s monetary policy changes, estimate with a high probability that the Fed will be forced to start cutting interest rates again as soon as next summer.
They also consider the lower peak in the federal funds rate: it will peak around 3.5% at the end of 2022 instead of 3.75% just a couple of weeks ago. Wilson also pointed out the drop in Treasury yields: the 10-year Treasury bond yield went from 3.230% to a low of 3.07% on Friday before rebonding again on Monday.
Wilson expects the S&P 500 index to fall to around 3,400 points if the U.S. Federal Reserve manages to get a “soft landing” for the economy — which Fed Chairman Jerome Powell said last week would be “a very difficult thing to do.”
Wilson expects that if the U.S. economy plunges into recession, the S&P 500 index will fall to around 3,000 points. In any case, Wilson believes that U.S. stocks are still highly valued because the risk premium — that is, the measure of compensation that investors receive for the extra risk of owning stocks instead of bonds — remains about 300 basis points higher than the 10-year Treasury bond yield, which is considered a “risk-free rate.”
Easing chip shortages to help Volkswagen in H2 – CEO
© Reuters. FILE PHOTO: Volkswagen logo is pictured at the 2022 New York International Auto Show, in Manhattan, New York City, U.S., April 13, 2022. REUTERS/Brendan McDermid/File Photo
BERLIN (Reuters) – Volkswagen (ETR:VOWG_p) sees a strong second half of 2022 and expects progress in catching up with rival Tesla (NASDAQ:TSLA) as easing chip shortages start to offset supply chain bottlenecks and rising costs, the carmaker’s CEO said on Tuesday.
“We are earning more than ever,” Chief Executive Herbert Diess said at a works meeting, adding Volkswagen is ramping up electric vehicle volumes in its biggest markets in Germany and China thanks to easing semiconductor shortages.
This should allow the carmaker to narrow the Volkswagen-Tesla gap this year and meet its goal of becoming market leader by 2025 if it seizes the moment while the U.S. electric car maker burns cash on large investments, the CEO said.
“Elon (Musk) has to ramp up two highly complex factories in Austin and Gruenheide at the same time – as well as expand production in Shanghai. That’s going to take strength out of him,” Diess said.
Reliance Chairman Mukesh Ambani steps down as director of telecom arm
© Reuters. FILE PHOTO: Mukesh Ambani, Chairman and Managing Director of Reliance Industries, arrives to address the company’s annual general meeting in Mumbai, India July 5, 2018. REUTERS/Francis Mascarenhas
BENGALURU (Reuters) – Reliance Industries Chairman Mukesh Ambani has stepped down as director of Reliance Jio Infocomm Ltd, the conglomerate’s telecom arm said on Tuesday.
Reliance Jio said https://refini.tv/3Nrs773 it has appointed Mukesh’s son and non-executive director Akash Ambani as the chairman of its board. Akash has been involved with the telecom unit since its launch in late 2016, where he started as a director.
India’s telecoms sector had been upended after the entry of Jio, which triggered a price war that forced some rivals out of the market and turned profits into losses.
Jio, which started out offering mobile teleservices, has been aggressively investing in services like internet broadband and forging ties with handset makers to launch low-cost smartphones and providing 5G services.
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