Stocks pulled a pessimistic 180 for the second consecutive session, with the major indexes opening Friday trade in the green only to swoon into the close.
The day began with inflation news: The Bureau of Labor Statistics reported that the U.S. producer price index jumped by a record 8.3% year-over-year in August; on a month-over-month basis, wholesale costs were up 0.7% – worse than expected, but perhaps indicating a crest in producer inflation.
“While the annual number rose sharply … the monthly number dropped sharply. This means that looking back we see higher inflation, but looking around we see inflation starting to decline,” says Brad McMillan, chief investment officer for Commonwealth Financial Network. “The real takeaway from this report is not that inflation is high – which we already knew – but that the trend is showing signs of turning.”
Jennifer Lee, senior economist for BMO Capital Markets, notes that “core” PPI was up 0.6% – “still heated” – but up just 0.3% if you excluded trade services, which marks the smallest such increase in about nine months.
Nonetheless, Charlie Ripley, senior investment strategist for Allianz Investment Management, says Americans are likely to feel the pinch.
“While higher wholesale prices don’t necessarily translate into higher consumer prices, it’s hard to imagine today’s 8.3% annual increase in PPI won’t put pressure on companies to pass along further price increases on consumers,” he says.
The clearest drag on Wall Street was the stock market’s largest company: Apple (AAPL, -3.3%). Shares turned tail less than an hour before noon after a federal judge ruled that Apple must allow app developers to use payment options other than the App Store’s. Apple scored a partial victory, however, as the judge did not rule that the company was a monopoly.
The Dow Jones Industrial Average, up 225 points (0.6%) at its morning peak, slid to its fifth consecutive decline – a 271-point, 0.8% drop to 34,607. The S&P 500 (-0.8% to 4,458) remained mired in a five-day slide of its own, while the Nasdaq Composite (-0.9% to 15,115) suffered its third straight loss.
Other news in the stock market today:
- The small-cap Russell 2000 fell 1.0% to 2,227.
- Kroger (KR, -7.5%) slumped on Friday despite a Street-beating quarterly earnings report. Kroger announced Q2 adjusted profits of 80 cents per share to top expectations by 16 cents, while revenues of $31.7 billion also beat estimates for $30.6 billion. Kroger also upgraded its full-year earnings guidance, to $3.25-$3.35 from $2.95-$3.05. However, the company reported a drop in gross margins, to 21.4% in Q2 vs. 22.6% in Q1. Other headwinds loom, too. “While today’s results were encouraging, we think there is downside risk to guidance, especially given several labor union contract negotiations are set to take place this year and the Democrats are pushing for a $15 starting wage,” writes CFRA analyst Arun Sundaram, who rates shares at Sell. “Digital profitability, sales deleverage, negative sales mix and lingering COVID-19 costs are also expected to be headwinds.”
- U.S. crude oil futures improved by 2.3% to $69.72 per barrel.
- Gold futures settled at $1,792.10 – a 0.4% decline.
- The CBOE Volatility Index (VIX) jumped 11.1% to a roughly three-week high of 20.89.
- Bitcoin dropped 2% to $45,647.49 as the Securities and Exchange Commission punted on a decision about fund provider Van Eck’s application for a Bitcoin exchange-traded fund. The SEC’s decision day has been moved back to Nov. 14 from Sept. 15. (Bitcoin trades 24 hours a day; prices reported here are as of 4 p.m. each trading day.)
H20: A Mega-Trend in the Making
ESG (environmental, social and governance) investing covers a wide spectrum of issues. But a select few industries tend to hog the spotlight.
Electric vehicles, for instance, are a wildly popular corner of the market, thanks in large part to the consumer-facing nature of the business. Most traditional car companies offer EVs now, and Tesla (TSLA) has demonstrated the technology’s potential by becoming one of the largest companies on earth.
In a similar vein, green energy stocks attract plenty of research and media attention thanks to the visible, worldwide shift toward solar, wind and other alternative sources of energy.
However, many investors might do well to pay attention to a decidedly unsexy (but equally critical) issue: water scarcity.
Around the globe, water shortages aren’t just a future threat – they’re a clear and present danger. The World Health Organization and UNICEF say that as recently as last year, “around 1 in 4 people lacked safely managed drinking water in their homes and nearly half the world’s population lacked safely managed sanitation.”
That makes a powerful argument for water stocks and funds, which range from sanitization to distribution to even dispensing water in your home. Read on as we explore a handful of water-themed mutual funds and ETFs that offer expose to the world’s emerging water crisis.