Stock Market Today: November 22, 2021
William G. Ferguson | 11/22/2021
Before The Bell - The most recent five-day stretch of trading on Wall Street proved bifurcated for those long equities, with the attention of investors mainly focused on the consumer discretionary sector as quarterly results from a number of the major retailers, the October retail sales data, and concerns about inflation following hotter-than-expected consumer and producer pricing data earlier this month drove trading for most of last week.
As has been the case for most of the year, the movement in the 10-year Treasury bond yield had a big impact on trading, with a pullback in the rate later in the week boosting the high-growth technology sector. By contrast, some of the inflation-trade groups (i.e., the energy and financial stocks) did not perform well, with the declines in fixed-income yields, especially on the long end of the bond curve, hurting the financial services and banking stocks. Meanwhile, reports of a buildup in crude stockpiles as the OPEC+ nations have begun to pump more oil led to a retreat in oil prices and put downward pressure on the energy issues.
Not surprisingly, given the sector rotation on display last week, the tech-heavy NASDAQ Composite delivered the best performance over the five-day stretch of trading, climbing 1.2% and pushing the index above the 16,000 level on the strength of a 64-point gain on Friday. In comparison, it was not a good week for the Dow Jones Industrial Average, which fell 1.4% due to poor showings from its financial and energy components. Of note, the stock of Visa (V) was a big detractor, with its shares falling after retailing and technology giant Amazon.com (AMZN) announced that it will stop accepting Visa credit cards as a form of payment in the United Kingdom due to what it considers exorbitant fees. The banking stocks, including Goldman Sachs (GS), also contributed to the weekly decline. Meanwhile, the small-cap Russell 2000 was the biggest laggard on the week, falling 2.8%. Worries about inflation, and the impact higher prices will have on the smaller-sized businesses, were likely the primary culprits behind the weak showing in the small-cap market.
One theme that emerged from last week’s heavy slate of retailer earnings is that Wall Street appears more concerned about near-term guidance than the latest quarterly results. Indeed, although Walmart (WMT) and Target (TGT) reported strong financials for the latest quarter, the stocks of each fell some after both mass merchandisers said that their near-term margins may be hurt by their decisions not to raise prices in the face of rising costs, labor shortages, and supply-chain issues. Still, we think these companies, along with club stores like BJ’s Wholesale Club (BJ) and Costco Wholesale (COST), will outperform their smaller rivals, as they had the capacity and storage capabilities to build up their inventories in anticipation of high demand during the holiday shopping season, which heats up this week with Black Friday sales. Credit Card processor MasterCard (MA) estimates that Black Friday sales will be up 20%, year over year. Investors should also note that department store operators Macy’s (M) and Kohl’s (KSS) delivered strong quarterly results last week, which may be an indicator that U.S. consumers will be opening their wallets during this important stretch for the retailers.
Looking ahead, the focus of the investment community will be on the business beat during this holiday-abbreviated trading week, with the economic news jammed into the next three business days. At 10:00 A.M. (EST), we will get the latest data on existing home sales. Then, on Wednesday, Wall Street will have to digest several reports including the data on initial weekly unemployment claims, durable goods orders, new home sales, and personal income and spending. The latter report will be closely monitored for how the consumer is feeling heading into the holiday season. Also on Wednesday, the investment community will receive the first revision to the third-quarter GDP estimate, with the initial estimate showing that output slowed to just 2.0% as COVID-19 Delta variant fears hurt growth. Finally, at 2:00 P.M. (EST), the minutes from the latest FOMC minutes will be released. That will be closely scrutinized for clues to what the central bank is thinking about future monetary policy.
Before the opening bell, the futures are presaging a higher start for the U.S. stock market when trading commences stateside. The Dow futures were trading well off of their earlier morning highs following reports that Germany’s government may be considering lockdowns for its unvaccinated citizens as COVID-19 Delta variant cases rise in Europe’s largest economy, but the buying has since resumed after news broke that President Biden will nominate Federal Reserve Chairman Jerome Powell for another term to lead the central bank. - William G. Ferguson
At the time of this article’s writing, the author did not have positions in any of the companies mentioned.