Stocks closed higher on Tuesday as investors moved past a lackluster housing update to focus on a strong run of corporate earnings instead.
The Census Bureau revealed this morning 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 on an annualized basis, the least since August 2020.
But Jennifer Lee, a senior economist at BMO, is not concerned about the shortfalls. âA number of home builders recently cited ‘unprecedented supply chain challenges’, shortages of building materials and tensions in the job market,â she said. “All the things that are needed to build a good, solid roof over your head.”
On the profit front, supply chain issues prompted Procter & Gamble (PG, -1.2%) to announce price increases on a number of household items, including razors, which it will use to offset rising transportation costs. The consumer goods giant, however, reported better than expected earnings and earnings, as did shares of Dow. Travelers (VTR, + 1.6%). And while Johnson & johnson (JNJ, + 2.3%) revenue fell just below Street’s consensus estimate, Dow component earnings exceeded expectations.
The blue-chip Dow Jones Industrial Average closed 0.6% higher at 35,457, while the broadest S&P 500 Index added 0.7% to 4,519 and the Nasdaq Composite rose 0.7% to 15,129. These last two major indices both marked their fifth consecutive day of gains.
Other stock market news today:
- Small cap Russel 2000 added 0.4% to 2,275.
- Ulta Beauty (ULTA) slipped 10.6% after the cosmetics retailer unveiled new financial targets on its annual Investor Day. ULTA has moved towards compound annual growth rates (using 2019 as the base year) of 5% to 7% for total net sales and a low double-digit rate for diluted earnings per share in fiscal 2022 in fiscal 2024. The company also said it plans to open 50 new stores per year during the same period and is seeing comparable sales grow 3-5% per year. Even with today’s pullback, ULTA stock is up 26.5% year-to-date and CFRA analyst Zachary Warring still thinks it’s a buy. âThe company has announced long-term strategic priorities and financial targets in line with our expectations,â he wrote in a note.
- Tobacco giant Philip Morris International (PM, -1.7%) was another name reporting profits today. In the third quarter, the company reported an 11.3% year-over-year increase in adjusted earnings per share to $ 1.58, while revenue rose 9.1% to $ 8.1 billion of dollars. “The PM said he is confirming his confidence in his growth targets for 2021-2023, despite device-related constraints that could persist in the first half of 2022, with temporarily lower IQOS user growth rates,” said the CFRA analyst Garrett Nelson after the results. âWe are maintaining a buy, enjoying 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 exposure to United States.”
- U.S. crude futures contracts edged up 0.6% to $ 82.96 per barrel.
- Gold futures veered 0.3% to close at $ 1,770.50 an ounce.
- The CBOE Volatility Index (VIX) was down 3.7% to 15.70.
- Bitcoin prices jumped 4.4% to $ 64,099.00 amid the excitement over the first Bitcoin futures ETF. (Bitcoin trades around the clock; prices shown here are at 4 p.m. each trading day.) Meanwhile, on its first day of trading, the Bitcoin ProShares Strategy ETF (BITO) climbed 4.9 %.
Inflation game under the radar
Inflation: It may be one of the buzzwords on Wall Street right now, but it’s also one of the most underestimated risks. At least that’s what a team of BlackRock strategists are saying.
Soaring price pressures – driven by a “major supply shock”, meaning an economic reboot following pandemic-induced closures – marks “a radical change in the environment. that many investors today know best: decades of low inflation at the expense of deepening globalization and technological advancements, âsays the BlackRock team.
And although they see higher inflation persist over the next year before finally easing, they remain “tactically risk-pro”.
For investors looking to protect their portfolios from continued price pressures, pay 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 inventory on your radar. Of course, transportation isn’t necessarily the first thing that comes to mind when browsing a rolodex of inflation blankets. But these companies will play a central role in reducing the supply chain disruptions that keep prices high, making them worthy of a closer look.