ACTIVE MARKETS Low-income people dismiss high inflation expectations


  • S&P, Dow down; Nasdaq green; small cap rally
  • Weakest S&P sector of finance; biggest winner in real estate
  • Euro STOXX 600 index drops around 0.5%
  • Dollar, rising gold; crude, bitcoin decline
  • 10-year U.S. Treasury yield drops to ~ 1.40%

December 17 – Welcome home for real-time market coverage presented by Reuters reporters. You can share your thoughts with us at [email protected]

LOW-INCOME EMPLOYEES RAISE HIGH INFLATION EXPECTATIONS AS WAGES GROW (1130 EST / 1530 GMT)

Low-income households expect to spend more even as they anticipate higher inflation, supported by wage growth as strong demand for labor continues to attract people to the labor market. work at higher wages.

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Short-term annual inflation expectations hit a record 6% in November 2021, while spending intentions also jumped to a record 5.7% year-on-year, largely on the back of a jump 9.2% among the lowest. employees, according to the New York Fed’s survey of consumer expectations.

The recent increase in wages in this income group may support these spending targets. When Morgan Stanley economists looked at the COVID-CPI for low-income households, it was operating at an annual rate of 5.0% (August-October 2021 average) compared to average hourly earnings in low-wage industries 7.4% year-on-year, bringing the annual growth in real wages for low-paid workers to 2.4%.

“The holiday shopping season looks set to break records, and low-income cohorts seem to operate with relatively better purchasing power,” they write.

In 2022, Morgan Stanley expects energy prices to fall after peaking in November and supply chain disruptions to reduce their grip on inflationary pressures.

This, coupled with continued employment and wage growth supported by strong demand for labor, should in turn boost consumer confidence.

That is, unless Omicron throws a wrench into those blueprints.

(Bansari Mayur Kamdar)

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BULLS DISPERSION (1043 EST / 1543 GMT)

The percentage of investors with a near-term bullish outlook for the US stock market slipped to its lowest level in three months in the latest American Association of Individual Investors Sentiment Survey (AAII). With this, the number of investors describing their outlook for stocks as bearish has moved to the higher end of its historical range.

AAII reported that bullish sentiment, or expectations of a rise in stock prices over the next six months, fell 4.5 percentage points to 25.2%. This is the fourth week in a row that bullish sentiment has remained below the historical average of 38.0%. Bullish sentiment was on the downside on September 16, 2021 (22.4%).

Bearish sentiment, or expectations of a drop in stock prices over the next six months, gained 8.8 percentage points to 39.3%. This is the fourth consecutive week of bearish sentiment above the historic average of 30.5%.

Neutral sentiment, or expectations that stock prices will remain essentially unchanged over the next six months, declined 4.3 percentage points to 35.4%. This is the second week in a row that neutral sentiment is above the historic average of 31.5%.

AAII noted that bullish sentiment is at an unusually low level. Historically, unusually low levels of optimism have been followed by above-average and above-median returns for the S&P 500 Index over the following six- and 12-month periods.

Additionally, AAII said bearish sentiment is near the upper end of its typical range, as shown above. The breaking point between typical and unusually high levels of pessimism is currently 40.1%.

With these changes, the bullish-bear spread fell to -14.1 from -0.8 last week.

AAII12172021

(Terence Gabriel)

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WALL STREET IS STILL WEARING RED (0955 EST / 1455 GMT)

Wall Street slipped into the red early on Friday as investors, with little to no catalyst to chew on, continued to acclimate to the new normal of pending rate hikes and dwindling asset purchases from the Federal Reserve.

The three major US stock indices are down sharply, with energy (.SPNY), financials (.SPSY) and materials (.SPLRCM) vying for the title of biggest loser.

Indeed, unlike the previous trading day, value stocks (.IVX) are doing less well than growth (.IGX).

The S&P 500 and Nasdaq are on track for their third weekly decline in the last four, and the Dow Jones has headed for its fourth losing week in the last five.

New York Federal Reserve Chairman John Williams in an interview with CNBC on Wednesday reiterated Fed Chairman Jerome Powell’s remarks that inflation and other economic data will be closely watched over the course of the year. the next few months for clues about the Fed’s cut schedule and rate hikes. Read more

The word “Omicron” remains on everyone’s lips as the nature and extent of this latest variant of COVID is causing scientists to reconsider their expectations in 2022 for the pandemic. Read more

Today, it is “Triple Witching” (born “Quadruple Witching” until OneChicago stops offering single stock futures in September 2020), which corresponds to the simultaneous expiration of stock options , stock index futures and stock index options contracts that take place quarterly.

Triple witchcraft can lead to increased trading volume and / or volatility.

Here’s your opening snapshot:

Instantaneous opening

(Stephen Culp)

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S&P 500: ON THIN ICE? (9:00 am EST / 1400 GMT)

The S&P 500 Index (.SPX) closed at a record high 4,712.02 on December 10. It has since fallen from that level by only around 1%.

Meanwhile, however, the percentage of S&P 500 stocks trading above their 50-day moving average (DMA) remains severely depressed from the start of the year, when the SPX was much lower:

SPX12172021

The divergence of this metric from the S&P 500 has been a problem for some time. In April, it peaked at 92%. More recently, in mid-November, it could only reach 74%. Currently, only around 54% of SPX shares are trading above this closely followed medium-term moving average.

That said, recent lows of less than 30% in this measure offer the possibility that a sufficient number of stocks within the benchmark are sufficiently washed out, that there may be potential for turnover away from the few. tech titans leading the index, and a bigger lead to get hold of it. Read more

There were a number of late spring to early fall 2019 troughs in the 27% to 31% area. In September and October 2020, there were troughs at 25% and 28%. More recently, in September and November, this measure stabilized at 24% and 29%. Read more

A surge above the December high of 63% could lead to increasing momentum and see this metric rise above 75%.

Conversely, a drop below this week’s low of 50% could see the downward pressure intensify, which could become increasingly difficult for the SPX to bear, especially if recent lower give way.

It should be noted that during the S&P 500’s severe declines in late 2018 and early 2020, this metric hit a low very close to zero.

(Terence Gabriel)

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Terence Gabriel is a market analyst at Reuters. The opinions expressed are his

Our standards: Thomson Reuters Trust Principles.

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