Stock Market Today: S&P 500, Nasdaq Nab Fifth Straight Win

Stocks closed higher Tuesday as investors looked past a lackluster update on housing to instead focus on a solid round of corporate earnings.

The Census Bureau this morning revealed that housing starts unexpectedly fell 1.6% month-over-month in September to a seasonally adjusted annual rate of 1.555 million units – the lowest since April. Building permits plunged 7.7% to 1.589 million units annualized, the fewest since August 2020.

But Jennifer Lee, senior economist at BMO, isn't concerned with the shortfalls. "A number of homebuilders recently cited 'unprecedented supply-chain challenges,' and shortages of building materials and labor market tightness," she says. "All the things that are needed to build a good solid roof over one's head."

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On the earnings front, supply-chain woes prompted Procter & Gamble (PG, -1.2%) to announce price hikes on a number of household items, including razors, which it will use to offset higher freight costs. The consumer goods giant did however report better-than-expected revenue and income, as did fellow Dow stock Travelers (TRV, +1.6%). And while Johnson & Johnson's (JNJ, +2.3%) revenue fell just shy of the Street's consensus estimate, the Dow component's earnings beat expectations.

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The blue-chip Dow Jones Industrial Average closed up 0.6% at 35,457, while the broader S&P 500 Index added 0.7% to 4,519 and the tech-heavy Nasdaq Composite rose 0.7% to 15,129. The latter two major indexes both marked their fifth straight day of gains.

Other news in the stock market today:

• The small-cap Russell 2000 added 0.4% to 2,275.
• Ulta Beauty (ULTA) slid 10.6% after the cosmetics retailer unveiled new financial targets at its annual investor day. ULTA guided for compound annual growth rates (using 2019 as the base year) of 5% to 7% for total net sales and low double-digits for diluted earnings per share from fiscal 2022 through fiscal 2024. The company also said it expects to open 50 new stores per year over that same time frame and sees comparable sales growing 3% to 5% annually. Even with today's pullback, ULTA stock is up 26.5% for the year-to-date and CFRA analyst Zachary Warring still believes it's a Buy. "The company announced long-term strategic priorities and financial targets in line with our expectations," he wrote in a note.
• Tobacco giant Philip Morris International (PM, -1.7%) was another name reporting earnings today. In its third quarter, the company reported an 11.3% year-over-year rise in adjusted earnings per share to $1.58, while revenues increased 9.1% to $8.1 billion. "PM said it confirms its confidence in its 2021-2023 growth targets, despite device constraints that could persist into the first half of 2022, with temporarily lower IQOS user growth rates," CFRA analyst Garrett Nelson said after the results. "We maintain a Buy, liking the stock's generous cash returns to shareholders including the current 5.1% dividend yield. We also like PM's IQOS growth potential and lack of U.S. exposure."
• U.S. crude futures edged up 0.6% to settle at $82.96 per barrel.
• Gold futures tacked on 0.3% to finish at $1,770.50 an ounce.
• The CBOE Volatility Index (VIX) retreated 3.7% to 15.70.
• Bitcoin prices jumped 4.4% to $64,099.00 amid excitement over the first Bitcoin futures ETF. (Bitcoin trades 24 hours a day; prices reported here are as of 4 p.m. each trading day.) Meanwhile, on its first day of trading, the ProShares Bitcoin Strategy ETF (BITO) spiked 4.9%.

An Under-the-Radar Inflation Play

Inflation: It might be one of Wall Street's buzzwords at the moment, but it's also one of the market's most underappreciated risks. At least, that's what a team of BlackRock strategists say.

The surge in price pressures – driven by a "major supply shock," i.e. an economic restart in the wake of pandemic-induced shutdowns – marks "a sea change from the environment many of today's investors know best: decades of low inflation on the back of deepening globalization and technological advances," says the BlackRock team.

And while they see higher inflation persisting into next year before eventually subsiding, they remain "tactically pro-risk."

For investors looking to protect their portfolios against ongoing price pressures, turn your attention to real estate investment trusts (REITs) or healthcare stocks – both of which are considered to be more defensive in nature.

You’ll also want to put transportation stocks on your radar. True, transports aren't necessarily the first thing that comes to mind when flipping through a rolodex of inflation hedges. But these companies will play a pivotal role in reducing the supply-chain disruptions that are keeping prices aloft, thus making them worth a closer look.