U.S. stocks were wavering on Tuesday as commodity prices were still rising, and the U.S. government looked ready to raise the debt ceiling until December.
By midmorning, the Dow Jones Industrial Average was down 2 points, or less than 0.1%. The index fell 250 points Monday to close at 34,496. The S&P 500 and Nasdaq Composite were both little changed. The indexes wavered between gains and losses in the morning. Before the open, futures were down significantly.
The price of WTI crude oil rose as much as 0.5% to above $81 a barrel after having gained more than 65% year-to-date. The price of lumber increased 2.8% and is more than 60% higher than its level just before initial lockdowns in 2020.
Not only could rising commodity prices be costly for some companies, but it could prompt central banks to raise interest rates sooner than anticipated to stave off inflation.
“Another round of commodity price rises [is] making it increasingly difficult for central banks to argue that inflation is in fact proving transitory,” said Jim Reid, a strategist at Deutsche Bank.
The House of Representatives is expected to pass a bill that would temporarily raise the government debt ceiling until December.
“Optimism that the House will pass the debt ceiling bill today has helped stocks stabilize,” wrote Tom Essaye, founder of Sevens Report Research.
The next major catalyst for markets is expected to be the coming earnings season, which begins in earnest when major U.S. banks report results later this week. Investors will watch loan volumes and the financial strength of the consumer. Beyond the financial services sector, they’ll watch how rising costs and supply-chain constraints could weigh on corporate sales and profit margins.
“The quarterly earnings season, which starts this week, has equity markets on edge over whether profit forecasts will be tempered for 2022 given the rich valuations prevalent in stocks everywhere,” said Jeffrey Halley, an analyst at broker Oanda. “Add in the creeping, but relentless implications of the Fed taper and it is no surprise that equity markets remain on edge.”
Overseas, Hong Kong’s Hang Seng Index fell 1.4%.
Chinese stocks were under pressure following a report from The Wall Street Journal zeroing in on Xi’s plans to overhaul the country’s financial system. Xi wants the ruling party to do more to steer flows of money, set tighter rules for entrepreneurs and investors and their ability to make profits, and exercise even more control over the economy, the report said.
Sentiment in Hong Kong was also damped by an update in the saga over China Evergrande (3333.H.K.), the highly indebted property developer whose financial woes hang like a black cloud over the country’s real-estate sector.
Here are nine stocks on the move Tuesday
Umpqua Holdings (UMPQ) stock fell 2.1% after the company announced it is merging with Columbia Banking System (COLB) to create a combined regional banking company worth $7.7 billion.
GlaxoSmithKline (GSK) stock rose 1.5% in New York as several private-equity firms are considering buying the company’s consumer business.
MGM Resorts International (MGM) stock rose 6% after getting upgraded to Outperform from Neutral at Credit Suisse.
CureVac N.V. (CVAC) stock fell 7% after the company said it would halt the development of its Covid-19 vaccine and instead focus on its mRNA shots against Covid-19 with GlaxoSmithKline.
Broad market concerns and the Journal report have reversed a rally in Alibaba (BABA) stock, which had until Monday surged around 25% over the past five days. Shares in the internet giant were down 3.9% in Hong Kong. Peer Tencent (0700.H.K.) fell 2.6% in Hong Kong, with other tech companies including Baidu (BIDU) down 4% and JD.com (JD) declining 2.3%. Alibaba’s U.S.-listed shares were 0.1% higher.
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