The Dow Jones Industrial Average gained after better-than-expected results from Home Depot and Walmart.
The Dow, which contains the two big retailers, added 159 points, or 0.4%. The S&P 500 and Nasdaq Composite added 0.3% and 0.2%, respectively.
“With the robust retail sales read and solid start to retail earnings, it’s crystal clear that inflation isn’t standing in the way of consumers,” said E-Trade’s Mike Loewengart. “Despite some hiccups on the labor market and inflation fronts, this could serve as the vote of confidence investors needed signaling that the economy is still chugging along nicely. As we narrow in on the holiday shopping season, the question remains if better than expected numbers from retailers from Q3 can continue to close out 2021.”
Walmart reported third-quarter profit and revenue well above estimates, and U.S. same-store sales jumping 9.2%, excluding fuel. However, digital sales saw growth of just 8%, compared to Street expectations of 20.5%. The shares fell 1.9%.
During regular trading Monday, the Dow dipped about 13 points, or 0.04%, for its fourth negative session in the last five. The S&P 500 finished the day unchanged at 4,682.87 and the Nasdaq Composite dipped 0.04%. The Russell 2000 was the relative underperformer, declining 0.45%.
Inflation fears weighed on the market after last month’s consumer price index posted its largest annual increase in more than three decades. Paul Christopher, head of global market strategy at Wells Fargo Investment Institute, said he believes inflation will moderate in 2022, but that “the path to lower inflation [will] begin with higher inflation in the front half of the year.”
“The stickier drivers of inflation are likely to persist, but our base case is that they will not outweigh the improvement we expect in the transitory elements,” he wrote in a note to clients.
On Monday afternoon President Joe Biden signed the $1 trillion bipartisan infrastructure bill into law. The package includes funding for transportation, broadband and utilities.
The major averages are coming off their first negative week in six, but stocks are still trading around all-time high levels. As Wall Street strategists look to 2022, some, including Morgan Stanley’s Michael Wilson, believe the picture looks muted.
“With financial conditions tightening and earnings growth slowing, the 12-month risk/reward for the broad indices looks unattractive at current prices,” he said Monday in a note to clients. “However, strong nominal GDP growth should continue to provide plenty of good investment opportunities at the stock level for active managers,” he added.
His 12-month base target for the S&P 500 is 4,400, which is 6% below where the index closed on Monday.