The central theses:
- Stocks live up to their rollercoaster reputation
- Is the service sector ready to fly?
- Transportation stocks are struggling to get back on the road
Wall Street seems to live up to its reputation as a roller coaster as stock futures point to a lower opening price after yesterday’s rally. Inflation continues to be a concern for investors. European markets were rocked by European natural gas prices, which skyrocketed 13% overnight. The rising prices contributed to sell-offs in the German DAX (DAX: DBI) and the London FTSE (FTSEMIB: FTSE).
ADP Non-farm employment was better than expected but is unlikely to change analysts’ guidance for Friday’s employment report. However, the positive news helped reduce some of the pre-opening losses in the futures markets. The travel and leisure industries were among the biggest job winners.
The job news is another positive sign for the service sector. Yesterday, the ISM Non-Manufacturing PMI report reported a better than expected increase. The economy saw heightened consumer awareness in the service sector. A service focus on products should be a much needed tool for supply lines struggling with bottlenecks and failures.
Stocks rallied Tuesday, making up most of Monday’s losses. The Nasdaq Composite ($ COMP) lost about 2% before closing 1.25% higher. The index failed to break Monday’s high, which some investors see as a potential signal that the sale is not yet complete. Tech stocks rallied despite the rise in the 10-year Treasury Yield (TNX). However, financials won the day as the Financial Select Sector Index ($ IXM) rose more than 1.7% on rising returns.
Despite the congressional hearing on Facebook
Rising yields were driven in part by rising oil prices. Crude Oil (/ CL) rose another 1.88% on Tuesday to hit a new 52-week high. With so much attention being paid to oil prices, Wednesday’s crude oil stocks report could get some attention.
Rising oil and gas prices are infecting food prices. The energy crisis in China is making the autumn harvest difficult. Bloomberg reports that Beijing is working to secure energy supplies to address electricity shortages. Corn, soy, peanuts and cotton are at risk if the harvest falls short of production targets.
Airlines see more turmoil
Rising oil prices are one of the higher input costs cited by Goldman Sachs
Adobe Analytics found that July through August flight bookings decreased 24% and Thanksgiving flights decreased 18% compared to 2019. Two weeks ago, however, the US travel authorities announced that they would lift their international travel ban in November. German airline Lufthansa (DLAKY) reported that it saw an increase in bookings within a week.
Final goals: If you’ve flown to your location, what now? Briefing.com reported that many travel and leisure companies are facing labor shortages. MGM
In fact, some resorts have raised their forecasts. Caesar’s conversation
Other resorts anticipate an increased need for corporate meetings due to a dispersed workforce. Apollo Global Management
From the drinks trolley: Beer and wine maker Constellation Brands
The S&P Food and Beverage Select Industry Index ($ SPSIFB) is down 7% from its June highs, but remained relatively stable during the previous market decline. Many of these stocks are known for their stability and relatively high dividend yields, which can make them attractive to investors during bearish times.
In the street: If you prefer the cup holder in the car, you are used to seeing the big articulated trucks on the highways. The tight supply chains have increased the need for large drilling rigs, but they also have supply chain problems. PACCAR
The Dow Jones Transportation Average ($ DJT) has slowed its growth and has fallen more than 9% since its high in May. The problem, however, is not a lack of demand, but an inability to meet it. The high demand for transport services could lead this group back onto the streets.
TD Ameritrade® comments for educational purposes only. Member of SIPC.