Value smacks growth as broad market slips on Fed comments



* Dow posts modest gain, S&P 500, close lower

* Comm svcs weakest S&P 500 sector; financials gain most

* Dollar ~flat; gold, oil rise; bitcoin declines

* U.S. 10-Year Treasury yield ~1.64%

Oct 22 - Welcome to the home for real-time coverage of markets brought to you by Reuters reporters. You can share your thoughts with us at markets.research@thomsonreuters.com

VALUE SMACKS GROWTH AS BROAD MARKET SLIPS ON FED COMMENTS (1615 EDT/2015 GMT) Big tech took it on the chin on Friday, but financials outperformed as the fight for leadership between growth and value stocks heats up.

The Dow rose but both the S&P 500 and Nasdaq closed lower after Federal Reserve Chair Jerome Powell said it was time for the U.S. central bank to start to taper its bond purchases but not time to begin to hike interest rates.

Yet Powell recognized in his comments that inflation is well above the Fed's target, which has led the bond market to anticipate higher rates sooner than policymakers have indicated.

Higher rates boost credit costs for growth companies, but can be beneficial for value companies as the economy grows along with rising inflation, which may be giving value an edge.

The Dow Jones Industrial Average .DJI rose 0.21%, the S&P 500 .SPX fell -0.11% and the Nasdaq Composite .IXIC lost -0.82%.

But the S&P 500 Value Index .IVX advanced 0.27%, while the S&P 500 Growth index .IGX slipped 0.43%. For the week, value rose 1.46% and growth added 1.80%, while for the month value has advanced 5.23% and growth a bit more at 5.75%.

While growth stocks have delivered faster revenue growth in the third quarter, value stocks are providing stronger earnings per share (EPS) growth, according to Credit Suisse research earlier in the week.

Value is surpassing third-quarter expectations by 17.3% versus 4.1% for growth, Credit Suisse said, and value EPS at 28.1% is expected to outpace 12.6% for growth in the fourth quarter, it said.

(Herbert Lash)

*****

INDIVIDUAL INVESTORS FOCUS ON THE INFLATION FACTOR (1345 EDT/1745 GMT)

As part of the most recent American Association of Individual Investors (AAII) Sentiment Survey , the group polled its members on which factors were currently influencing their six-month outlook on stocks the most.

Respondents could list more than one factor.

AAII noted that 28% considered inflation a factor. Furthermore, 22% of responses cited government and consumer spending. This compares to 13% of responses that chose supply chain issues, and another 10% that mentioned the coronavirus pandemic.

About 6% of responses cited taxes. Four percent of responses were for other shortages not specifically pertaining to supply chains, while around 2% of responses factored in infrastructure.

Moreover, international factors were mentioned in 2% of responses. About 12% of responses fell into other categories.

Here are a couple of investor quotes on the matter:

“There are short-term factors such as inflation, debt situation, government spending, Federal Reserve chairman. These will be offset by continued growth. I expect much volatility with the market moving in a narrow range overall.”

“Inflation will drive investors into equities; supply chain issues and lower-than-expected growth will slow the economy—hence my neutral view of the six months ahead.”

(Terence Gabriel)

*****

BULLS ON A RUN (1238 EDT/1638 GMT)

The percentage of investors who have a bullish outlook on the U.S. stock market increased in the latest American Association of Individual Investors (AAII) Sentiment Survey. With this, the number of investors who described their outlook for stocks as neutral and bearish decreased significantly.

AAII reported that bullish sentiment, or expectations that stock prices will rise over the next six months, surged 9.0 percentage points to 46.9%. This is the first time in six weeks that bullish sentiment is above the historical average of 38.0%.

Bearish sentiment, or expectations that stock prices will fall over the next six months, fell by 4.0 percentage points to 27.8%. This is the first time in six weeks and the second time out of the last 12 weeks that bearish sentiment is below the historical average of 30.5%.

Neutral sentiment, or expectations that stock prices will stay essentially unchanged over the next six months, declined by 5.0 percentage points to 25.4%. This is the second consecutive week that neutral sentiment is below the historical average of 31.5%.

With these changes, the bull-bear spread jumped to +19.1 from +6.1 last week.

(Terence Gabriel)

*****

HIGH YIELD PERKS UP (1120 EDT/1520 GMT)

A recovered appetite for risk by investors led to a rebound in the corporate junk bond market, where spreads have narrowed and fund inflows were the strongest in six months.

The option-adjusted spread on the ICE BofA U.S. High Yield Index .MERH0A0 , a commonly used benchmark for the junk bond market, ended Thursday at 303 basis points, the lowest since Sept. 23. The spread, which refers to the interest rate premium investors demand to hold corporate debt over safer U.S. Treasury bonds, had been steadily falling after reaching 328 basis points on Oct. 12.

Flows into corporate high-yield funds soared to nearly $2.3 billion in the week ended Oct. 20, the most since early April, according to data from Refinitiv's Lipper. In the prior week, the funds reported net outflows of $1.8 billion.

In a BofA Global Research report on Friday, analysts said risk appetite recovered this week as the energy crisis in Europe and China showed tentative signs of stabilizing and the Chinese government reinforced its commitment to restructure the country's troubled real estate sector. Meanwhile, BofA this week slashed its GDP estimates for China with next year's best case now at 4%.

"These developments reaffirm our views on credit, in that the global growth is going to be slower than the market anticipated up until recently, and this effectively neutralizes another important risk catalyst: materially higher rates," the report said.

As a result, "global capital is again being forced to find positive yield, a supporting factor for credit in general and (high yield) in particular," it added.

(Karen Pierog)

*****

THE SURPRISING UK BUSINESS ACTIVITY RISE (1000 EDT/1400 GMT)

While both the UK and the euro zone economies are screaming inflation and supply bottlenecks issues, the service sector, which is key for both, faired better in Britain this month.

IHS Markit's Flash Composite Purchasing Managers' Index (PMI) for October, a good gauge of overall economic health, showed growth in euro zone business activity slowed, but in the UK, the economy unexpectedly regained momentum in October.

The UK expansion is looking dependent on the service sector even if cost pressures rose by the most in more than 25 years.

In the euro zone, where firms also faced soaring costs due to supply-chain constraints, the bloc's dominant service industry struggled amid ongoing COVID-19 concerns.

According to analysts, the key difference in the performance was on the level of COVID restrictions.

“Companies are seeing stronger demand at a time of fewer pandemic restrictions," says Mike Owens, global sales trader at Saxo Markets, commenting on the latest UK PMI.

The improvement in UK PMI, says Holger Schmieding, Berenberg economist, is due to "a surge in services activity as the pandemic seemed to affect consumer behaviour less than before".

With data showing the epidemic is growing, it is uncertain whether new restrictions will be introduced in Britain.

(Joice Alves)

*****

S&P 500 CAN ATTEMPT AN 8th-STRAIGHT UP DAY (0900 EDT/1300 GMT)

CME e-mini S&P 500 futures EScv1 are quoted up just slightly in premarket trade. Although the gain is minimal, it, nevertheless, suggests a positive open for the S&P 500 index .SPX .

This can put the SPX on track for an eighth-straight up day. The S&P 500 last gained eight days in a row in late-March, early April 2019.

This as supply chain worries, labor shortages, and inflation pressures remain on the market’s mind.

Meanwhile, even with the slight positive tilt to S&P 500, and Dow 1YMcv1 futures, Nasdaq 100 e-minis NQcv1 are trading down. This after negative reactions to earnings reports from Intel INTC.O and SNAP SNAP.K after the close on Thursday.

Social media giants including Facebook FB.O , Alphabet GOOGL.O and Twitter TWTR.N are trading down in sympathy with SNAP. Thus, the NYSE FANG+TM Index .NYFANG may come under opening downside pressure.

That said, Nasdaq 100 futures are off their earlier lows, and now are showing just a modest loss of around 0.2%.

And although INTC is trading off ahead of the open given its margin warning, Nvidia NVDA.O is up, which may help to counter some initial weakness within the Philadelphia SE Semiconductor index .SOX .

(Terence Gabriel)

*****

FOR FRIDAY'S LIVE MARKETS' POSTS PRIOR TO 0900 EDT/1300 GMT - CLICK HERE:



U.S. Market Close Link


(Terence Gabriel is a Reuters market analyst. The views
expressed are his own)

Felelősségkizáró nyilatkozat: Az XM Group entitásai csak végrehajtási szolgáltatást és online kereskedési platformunkhoz való hozzáférést biztosítanak, ami lehetővé teszi, hogy a felhasználók megtekinthessék és/vagy felhasználhassák a honlapon vagy azon keresztül elérhető tartalmakat, amelyek nem módosíthatók és nem egészíthetők ki. A hozzáférés és felhasználás mindig a következők függvénye: (i) Felhasználási feltételek; (ii) Kockázati figyelmeztetés; valamint (iii) Teljes felelősségkizáró nyilatkozat. Az ilyen tartalmakat ezért csupán általános információként biztosítjuk. Külön felhívjuk figyelmét arra, hogy az online kereskedési platformunkon található tartalmak nem felhívások vagy ajánlatok tranzakciókba történő belépésre a pénzügyi piacokon. A pénzügyi piacokon folytatott kereskedés jelentős kockázattal jár a tőkéjére nézve.

Az online kereskedési platformunkon közzétett anyagok kizárólag oktatási / tájékoztatási célt szolgálnak, és nem tartalmaznak (nem tekinthető úgy, hogy tartalmaznak) pénzügyi, befektetési adóügyi vagy kereskedési tanácsokat vagy ajánlásokat, illetve kereskedési áraink jegyzékét, vagy bármilyen pénzügyi instrumentummal végrehajtott tranzakcióra vonatkozó ajánlatot vagy felhívást, vagy Önnek szóló kéretlen pénzügyi promóciókat.

Az ezen a honlapon szereplő, külső felektől származó, valamint az XM által készített tartalmak, például vélemények, hírek, kutatások, elemzések, árak és egyéb információk vagy külső felek oldalaira utaló hivatkozások „jelenlegi állapotukban”, általános piaci magyarázatként jelennek meg, és nem minősülnek befektetési tanácsnak. Amennyiben bármely tartalom befektetéssel kapcsolatos kutatásként értelmezhető, meg kell értenie és el kell fogadnia, hogy a tartalom nem a befektetéssel kapcsolatos kutatás függetlenségének előmozdítására szolgáló jogi követelmények szerint készült, következésképpen a vonatkozó törvények és jogszabályok szerint marketingkommunikációnak minősül. Kérjük, feltétlenül olvassa el és értse meg a fenti információkkal kapcsolatos „nem független befektetéskutatással kalcsolatos tájékoztatónkat” és a kockázati figyelmeztetésünket, amelyek itt érhetők el.

Honlapunkon a legjobb felhasználói élmény biztosítása érdekében sütiket használunk. Tájékozódjon a részletekről, vagy módosítsa süti beállításait.

Kockázati figyelmeztetés: a tőkeáttételes termékekkel folytatott kereskedés jelentős kockázatnak teszi ki befektetett tőkéjét, és nem feltétlenül megfelelő minden befektető számára. Kérjük, olvassa el a kockázati figyelmeztetés erre vonatkozó részleteit.