Stocks drift higher, with inflation concerns lingering

Stocks gained on Tuesday to steady after the previous day’s drop, with investors eyeing elevated commodity prices and other signs of inflation heading into corporate earnings season.

The S&P 500, Dow and Nasdaq each ticked up just after the opening bell. U.S. West Texas intermediate crude oil futures hovered near a seven-year high, with supply constraints and elevated fuel demand pushing prices higher over the past seven consecutive weeks. Outside of oil, aluminum prices also edged lower after reaching their highest level since 2008 on Monday, and copper prices turned lower after a near 2% jump.

For investors, the recent, broad rise in commodity prices has threatened to exert further pressure on corporate margins. Companies have already been grappling with a host of supply-side challenges, including port congestion and labor scarcities, that are expected to drag on profit growth heading into third-quarter earnings season later this week and over the next month. The Labor Department’s August Job Openings and Labor Turnover survey — due for release Tuesday morning — showed workplace vacancies held near a record high at the end of the summer.

And rising interest rates have also raised the specter of higher borrowing costs for companies, with the 10-year yield holding above 1.61% on Monday for its highest level since June.

“We’re definitely freaked out about crude oil prices … [and] about slightly higher interest rates,” David Bailin, Citi Private Bank chief investment officer, told Yahoo Finance. “But we have to put all of this in context. First of all, interest rates have been abnormally low. Energy prices are high due to excessive demand right now and delivery shortages across Europe and now in China … These things will abate. We think it’ll take somewhere between three and nine months for energy supplies and for the shipping issues to abate.”

Other strategists also suggested that investors look through the near-term supply-related challenges facing the markets.

“We’re going to have supply issues for a little bit longer here, but I think that’ll just work its way through,” Jeremy Bryan, portfolio manager for Gradient Investments, told Yahoo Finance Live on Monday. “The nice part about the U.S. economy and markets in general is they usually follow what the U.S. consumer does, and the U.S. consumer wants to spend. And that’s why we’re still positive on the markets.”

—

10:02 a.m. ET: Job openings pulled back slightly from record in August, while quits rate jumps to all-time high

U.S. job openings fell by a greater-than-expected margin in August but were revised up to a fresh record high for July, underscoring the widespread demand for labor across the recovering economy.

Job openings fell to 10.439 million as of the last day of August, according to the Labor Department’s latest report. In July, job openings were at 11.098 million, with this sum upwardly revised from the 10.934 million previously reported. Consensus economists were looking for job openings to total 10.954 million in August, according to Bloomberg data.

Some of the biggest decreases in job openings were in healthcare and social assistance industries, which posted a combined drop of 224,000 vacancies. Accommodation and food services job openings also fell by 178,000.

The quits rate increased to a record high of 2.9% during the month, suggesting workers had growing confidence about their abilities to find new positions. Layoffs and discharges, meanwhile, took place at a 0.9% rate, which was little changed on a month-over-month basis and below a pre-pandemic average of 1.2% throughout 2019.

—

9:31 a.m. ET: Stocks open higher

Here’s where markets were trading just after the opening bell Tuesday morning:

S&P 500 (^GSPC): +10.81 points (+0.25%) to 4,372.00
Dow (^DJI): +78.98 points (+0.23%) to 34,575.05
Nasdaq (^IXIC): +29.5 points (+0.16%) to 14,508.83
Crude (CL=F): -$0.17 (-0.21%) to $80.35 a barrel
Gold (GC=F): +$6.40 (+0.36%) to $1,762.10 per ounce
10-year Treasury (^TNX): +2.5 bps to yield 1.612%

—

9:23 a.m. ET: IMF downgrades global economic growth outlook for 2021 as virus weighs on activity

The International Monetary Fund trimmed its outlook for global economic growth in new projections released Tuesday, with the institution citing an ongoing drag from the coronavirus.

The IMF’s new forecast is for global economic activity to expand at a 5.9% rate this year, down from the 6.0% pace seen in July. However, the IMF maintained its outlook for 4.9% growth next year.

Emerging markets and developing economics, excluding China, are largely still grappling with fallout from the virus, and as a result, growth will likely remain 5.5% below pre-pandemic forecasts in 2024, “resulting in a larger setback to improvements in their living standards,” the IMF wrote in its report. Advanced economics, however, are expected to return to pre-pandemic trends in growth beginning next year.

—

7:32 a.m. ET: Stock futures point to a slightly higher open

Here’s where markets were trading Tuesday morning:

S&P 500 futures (ES=F): +4.5 points (+0.1%), to 4,355.5
Dow futures (YM=F): +13 points (+0.04%), to 34,389.00
Nasdaq futures (NQ=F): +43 points (+0.29%) to 14,743.50
Crude (CL=F): +$0.45 (+0.52%) to $80.94 a barrel
Gold (GC=F): +$7.70 (+0.44%) to $1,763.40 per ounce
10-year Treasury (^TNX): +0.9 bps to yield 1.6%

—

7:30 a.m. ET Tuesday: A record share of small business owners reported job vacancies in September: NFIB

Small business optimism fell more than expected in September compared to August, with supply chain disruptions and shortages weighing on owners’ outlooks.

The National Federation of Independent Business’s Small Business Optimism Index edged down to 99.1 for September from 100.1 during the prior month. Consensus economists were looking for the index to come in at 99.5, according to Bloomberg data.

A record share of 51% of small business owners said they had job openings that could not be filled, according to the survey. This marked a third straight month with a fresh record high of this metric. Meanwhile, 42% of owners said they raised compensation during the month, which was also a record high.

“Small business owners are doing their best to meet the needs of customers, but are unable to hire workers or receive the needed supplies and inventories,” NFIB Chief Economist Bill Dunkelberg said in a press statement. “The outlook for economic policy is not encouraging to owners, as lawmakers shift to talks about tax increases and additional regulations.”

In terms of inventories, more than 35% of small business owners said supply chain disruptions were having a “significant impact” on their firms, while 32% reported a “moderate impact” and 21% said they experienced a “mild impact.”

—