- US stocks hit pause Monday, as investors got ready for Facebook to kickstart a week of Big Tech earnings.
- Inflation pressures come back into focus after Fed chief Powell and Treasury head Yellen say it will last well into 2022.
- Brent crude rose to top $86 a barrel, hitting its highest level since October 2018, as supply concerns built.
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US stocks struggled to find a catalyst as investors stuck to the sidelines ahead of earnings from the likes of Facebook, Amazon and Apple, while Brent crude futures climbed to their highest levels since 2018 as supply is likely to stay tight.
Investors are bracing for third-quarter earnings from Facebook, which on Monday kicks off quarterly reports from the megacap techs. Microsoft and Alphabet results are due Tuesday, with Apple and Amazon updates on Thursday.
Last week, Snap shares plunged after the messaging app maker warned that Apple’s changes to iPhone privacy settings would hit its digital advertising business. Investors will watch for whether other ad-reliant techs sound the same alarm.
Also on deck this week are quarterly reports from Visa, General Electric and other big names, with a total of 165 companies in the S&P 500 due to report. Strong earnings in the earnings season so far have lifted stocks.
But persistent concerns over growth and inflation have turned talk back to the Federal Reserve’s plans to taper – seen as very likely to be announced next week. That is weighing on markets, analysts said.
“Inflation will remain heavily in focus for markets over the week ahead, with recent days having seen investor expectations of future inflation rise to fresh multiyear highs,” Deutsche Bank strategist Jim Reid said in a note.
On Friday, Fed Chair Jerome Powell said the central bank should begin the process of reducing economic support by cutting back on its monthly asset purchases, but that it wasn’t yet time for a rate hike.
Powell noted that “supply constraints and elevated inflation are likely to last longer than previously expected and well into next year, and the same is true for pressure on wages.”
Treasury Secretary Janet Yellen said Sunday that inflation will remain elevated until the middle of 2022.
Positive Evergrande news helped drive some gains in Asia. The Chinese property developer said Monday that work has resumed on more than 10 real-estate projects in China. But China’s warning that its latest COVID-19 outbreak is likely to spread prompted fears of new restrictions.
Europe’s biggest lender HSBC crushed third-quarter estimates with pretax quarterly profit of $5.4 billion, compared with a $3.78 billion target.
Oil prices are likely seeing some support from comments from Saudi Arabia’s minister of energy, who said OPEC+ will continue taking a cautious approach in raising output, according to ING analysts.
In a Bloomberg interview Saturday, the minister warned against taking rising prices for granted because the pandemic could still hit oil demand.
“No further increase in supply beyond the planned level can be expected from OPEC+ in the near future, in other words,” Commerzbank analyst Carsten Fritsch said in a note.
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