Stocks were mostly higher on Monday, with the major equity averages looking to recover some losses after five straight sessions of declines.
The Dow added more than 200 points, or 0.6%, shortly after the opening bell before paring some gains. Shares of Apple (AAPL) led the way higher as the stock shook off losses from Friday, which came after a California judge issued a permanent injunction against the iPhone-maker's App Store policies amid an antitrust lawsuit with Epic Games. Investors also awaited a highly anticipated Apple event on Tuesday, which is expected to serve as the forum for the unveiling of a new iPhone and other hardware.
The S&P 500 also rose, while the Nasdaq turned lower during intraday trading. Equity investors shook off concerns over heightened regulatory scrutiny in China after the Financial Times reported that Beijing was aiming to break up financial technology company Alipay and separate its lucrative lending business. Shares of Chinese technology giants including Alibaba (BABA) — which owns a stake in Ant Group — and Tencent (TCEHY) dropped in early trading.
Traders this week are set to closely eye new data on U.S. inflation and consumer spending. The former will be monitored to signal whether upward price pressures during the recovery have extended further, and whether the Federal Reserve may need to step in sooner rather than later to stave off a lasting jump in inflation. Consensus economists expect Tuesday's consumer price index (CPI) to rise by 5.3% in August over last year, pulling back from July's more than decade-high annual rise of 5.4%.
"Global supply problems could put some further upward pressure on inflation in the near term, but the increase in inflation experienced in the immediate wake of the COVID crisis is close to peaking and we expect headline inflation to fall back in every major advanced economy in 2022," Capital Economics economist Jack Allen-Reynolds wrote in a note Monday morning.
"However, a combination of large amounts of fiscal and monetary support, and a longer-lasting drop in the labor force, means that core inflation in the U.S. will remain well above target in 2022," he added.
The new data on August retail sales out from the Commerce Department later this week will also offer a look at how consumer spending has held up amid concerns over the Delta variant and rising prices. Overall retail sales are expected to drop by 0.8% in August in Thursday's report, extending July's 1.1% decline.
"This is such an unusual economy right now: Highly policy-driven [between] fiscal policy, monetary policy, social policy," Robert Dye, Comerica Bank Chief Economist, told Yahoo Finance. "And at the same time, we're trying to reflate this economy. We're hobbled and throttled back by the global supply chain constraints— so a very, very unusual set of circumstances right now."
"It looks like we're going to get yet another shot of long-term fiscal coming from the spending program that's going to be voted on here in a couple of weeks. But in the meantime, we've got to get through COVID," he added. "We've got to get the consumer back on its feet. We've got to give them some product to buy to get those consumption numbers up ... The global supply chain needs to be freed up so we can get the inventory cycle going again— so highly unusual conditions right now."
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12:15 p.m. ET: Consumer inflation expectations reached record high: NY Fed
Consumers' inflation expectations raced higher in August as more Americans took note of broad-based price and wage increases during the economic recovery, according to a new survey from the New York Federal Reserve.
One-year inflation expectations rose for a 10th straight month to reach a record high of 5.2% in August, according to the NY Fed's monthly Survey of Consumer Expectations. Over the next three years, the median respondent expected inflation to reach 4.0%, with this level rising by 0.3 percentage points from the July survey and also reaching a record high.
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11:35 a.m. ET: Demand for income 'is going to be the hallmark of this investment decade': Strategist
Demand for investment returns has helped keep traders piling into stocks even after the S&P 500's rapid run-up so far this year. That outsized demand is likely to remain a driving force for risk assets, according to at least one strategist.
"The markets are in good shape," Rick Rieder, BlackRock global fixed income chief investment officer, told Yahoo Finance Live. "The demand for income, the demand for return — I've been doing this for 35 years, I've never seen the extraordinary amount of demand there is."
"I do think the Fed is over-enhancing the amount of liquidity in the system. But it's so much bigger than that," he added. "We're going through a demographic evolution, and a need for income ... the demand for income is going to be something that is going to be the hallmark of this investment decade without question."
Rieder also suggested stocks are not overvalued — even as they hover near record levels — especially when compared to Treasury bonds.
"You look at what revenue growth is, you look at these companies [that] are building book equity at 20%, 25%, 30% per annum," he added. "And you think about that and think, 'Gosh, the intrinsic value of my stock is going up 20%, 25% per annum, whereas the 10-year note yields 1% with real rates at negative 1%.' It just puts into perspective the paradox between value in the fixed income market and the equity market today where I don't think equities are high by any measure."
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10:15 a.m. ET: BofA thinks stocks are heading lower by year-end
A number of strategists have begun to temper their expectations for U.S. equity appreciation for the rest of the year, given the confluence of risks around COVID and monetary and fiscal policy facing markets.
"For year-end 2021, we are still expecting the market to end the year lower than current levels," Jill Carey Hall, Bank of America U.S. equity strategist, told Yahoo Finance Live on Monday.
The firm has a 4,250 price target on the S&P 500 for year-end 2021, implying downside of nearly 5% from Friday's closing level. However, BofA expects the index to rise to 4,600 by the end of 2022.
"Obviously earnings have come in very strongly for the first half – much better than expected. And we're still bullish on U.S. economic growth," she added. "But we think a lot of the good news has been reflected in valuations at this point, which are very stretched, particularly for the large and mega-cap stocks in the market. And sentiment has been close to euphoric."
"Over the course of the coming weeks and months there are a number of risks. COVID is one of them, but interest rates, the Fed — all of this is something that we're watching closely," she added. "The interest rate sensitivity of the S&P 500 is extremely elevated right now."
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9:32 a.m. ET: Stocks open higher, Dow adds 200+ points
Here were the main moves in markets as of 9:32 a.m. ET:
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S&P 500 (^GSPC): 4,490.20, +31.62 points (+0.71%)
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Dow (^DJI): 34,847.74, +240.02 points (+0.69%)
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Nasdaq (^IXIC): 15,208.60, +93.11 points (+0.6%)
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Crude (CL=F): $70.50 per barrel, +$0.78 (+1.12%)
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Gold (GC=F): $1,791.80 per ounce, -$0.30 (-0.02%)
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10-year Treasury (^TNX): -1.5 bps to yield 1.326%
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7:46 a.m. ET Monday: Stock futures rise to shake off last week's losses
Here were the main moves in markets as of Monday morning:
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S&P 500 futures (ES=F): +23 points (+0.52%) at 4,481.25
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Dow futures (YM=F): +181 points (+0.52%) to 34,788.00
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Nasdaq futures (NQ=F): +73.75 points (+0.48%) to 15,515.25
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Crude (CL=F): +$0.34 (+0.49%) to $70.06 a barrel
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Gold (GC=F): -$1.20 (-0.07%) to $1,790.90 per ounce
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10-year Treasury (^TNX):-1.5 bps, yielding 1.326%
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Emily McCormick is a reporter for Yahoo Finance. Follow her on Twitter: @emily_mcck
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