On Monday, stocks struggled to find direction amid extreme volatility in Tesla Inc. and a jump in bond yields.
Major equity indexes recovered from session lows as Tesla reduced losses after entering a bear market with a nearly 20% drop from a record. Earlier in the day, the company plummeted when CEO Elon Musk suggested selling more of his shares. Treasuries fell on concern that the Federal Reserve may have to reduce asset purchases more quickly following the fastest inflation in three decades.
Following a year marked by unrelenting stock gains and a bond selloff, analysts have begun pitching their calls for 2022, with the spectre of inflation looming big in investors' minds. Morgan Stanley's Mike Wilson anticipates the S&P 500 to fall to 4,400 in the next 12 months, a 6% decrease from Friday. While profits are expected to expand further, he warns that a slowing economy and the withdrawal of Fed assistance would likely put pressure on valuations.
It's the third week of the month when most equity options expire, and the event has regularly jolted equities this year. While history is not always a reliable indication, the S&P 500 has reported a 1% increase – in either direction – in six of the last eight expiration weeks, according to data provided by a major news wire.
According to Janus Henderson investors, worldwide dividends just had their best-ever third quarter, putting them on track to surpass their pre-pandemic peak by the end of 2021. The money manager boosted its projection for total payouts to $1.46 trillion this year, citing stronger balance sheets and optimism about the future, indicating a speedier comeback to an all-time high than projected in its previous report.
This week's attention will be on consumer strength, with retail sales expected to accelerate on Tuesday and industry titans such as Walmart Inc. and Home Depot Inc. reporting quarterly results. Strong merchandise expenditure should continue to put a strain on global supply systems, which are already struggling to keep up.
Even if hopes for a breakthrough on big issues are low, Biden and Chinese President Xi Jinping will have much to talk about during their first virtual summit, including sanctions to Taiwan. According to a Biden administration official, the virtual summit, which begins at 7:45 p.m. on Monday night in Washington, will span many hours, including translation for both leaders in their third conversation this year.