Wall Street kicked off a fresh week of trading with mixed results amid a couple of worrisome economic indicators, but also some optimism about upcoming earnings reports.
U.S. industrial production declined by 1.3% month-over-month in September – its largest such swoon since February. Also weighing on stocks early was China, which reported disappointing third-quarter GDP growth of 4.9% year-over-year, easily shy of estimates for 5.2%.
"That doesn't sound like a bad GDP print," Shawn Snyder, head of investment strategy at Citi US Consumer Wealth Management, tells Kiplinger, but he adds that it's more troubling "when you put it in context with China policymakers that say, 'We are going to hit 6%.'"
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Those drivers ultimately helped keep the Dow Jones Industrial Average in negative territory, with the industrial average slipping 0.1% to 35,258.
The S&P 500 (+0.3% to 4,486) and the Nasdaq Composite (+0.8% to 15,021) fared better, however, on the back of gains in technology, communication services and consumer discretionary stocks. Tesla (TSLA, +3.2%) and Facebook (FB, +3.3%) were among notable names on the rise in anticipation of their Q3 reports, due out later this week.
Other news in the stock market today:
- The small-cap Russell 2000 inched 0.1% ahead to 2,267.
- Walt Disney (DIS, -3.0%) was the worst Dow stock today after Barclays analyst Kannan Venkateshwar downgraded the entertainment issue to Equalweight from Overweight (the equivalents of Hold and Buy, respectively). Venkateshwar believes Disney will need to double its current pace of subscriber growth in order to meet its goal of having 230 million to 260 million Disney+ subscriberes by fiscal 2024. For reference, DIS had 116 million global subscribers at the end of June. This is the first downgrade DIS stock has received so far this year, according to Reuters.
- Zillow Group (Z, -9.5%) was a notable decliner after a weekend Bloomberg report indicated the online real estate company is halting its purchases of U.S. homes to make its way through a backlog of properties it has already bought and intends to sell. CFRA analyst Kenneth Leon isn't overly concerned, keeping his Buy rating on Z stock intact. "In our opinion, Z remains steadfast in automating real estate workflows to large-scale operations," he writes. On the other hand, BofA Global Research analysts maintained their Underperform (Sell) rating on Zillow. The "latest development highlights inherent scalability and macro uncertainty risks with ibuying model," they write.
- U.S. crude futures gained 0.2% to settle at $82.44 per barrel.
- Gold futures slipped 0.1% to $1,765.70 an ounce.
- The CBOE Volatility Index (VIX) rose modestly, up 0.3% to 16.35.
- Bitcoin prices, at around $61,436.15 at this same time on Friday, has pulled past the $62,000 mark a couple of times since then amid excitement over the first Bitcoin futures ETF, but was marginally below Friday's prices as of Monday afternoon, at $61,423.10. (Bitcoin trades 24 hours a day; prices reported here are as of 4 p.m. each trading day.)
How Bad Are Wall Street's Supply-Chain Woes?
A term that will get thrown around a lot this earnings season: "supply chain."
If you've gone out to buy something just to find out that it's out of stock, you're hardly alone – frazzled supply chains are disrupting businesses not just here, but around the globe. And investors should hear more specifics about that as the Q3 earnings season unfolds.
"We have heard from a number of global companies in recent weeks that their profit margins are coming under more pressure from supply chain challenges," says Jeff Buchbinder, Equity Strategist for LPL Financial. "It will be very interesting to hear how long companies expect supply chain bottlenecks and shortages of labor and materials to last. These pressures on companies' costs may impair profit margins for the rest of 2021 – and likely into 2022."
But supply-chain pain can, in fact, be investors' gain ... at least in the short term.
If you're simply looking to avoid companies at risk, you might consider many of the social media and streaming companies in the communication services sector. You could also target industries that can make hay in the current environment. Chip stocks, for instance, have been a popular play amid red-hot demand but limited supply.
And then there's transportation. Port logjams are constraining vessel supply and sending up shipping prices – a clear boon for shipping stocks responsible for transporting goods across the world.
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