A much-awaited inflation report and elevated bond yields offer the latest test to a US stock rally that has delivered hefty gains this year.
The benchmark S&P 500 index is up 16.6 per cent year-to-date, driven by an improving economic outlook, excitement over developments in artificial intelligence and signs that the Federal Reserve is close to ending its series of interest rate rises.
Stocks' near-term trajectory, however, may depend on whether next week's inflation report shows consumer prices remaining subdued. Investors are also closely watching the path of Treasury yields, which rattled equity markets in recent days by rising to year highs. The S&P 500 fell 2.27 per cent this week, its biggest weekly decline since March 10.
“After a massive run-up in equities … any sort of blip in terms of any of the macro data [is] probably going to be a reason for people to take profits,” said Jack Janasiewicz, lead portfolio strategist and portfolio manager at Natixis Investment Managers.
While consumer prices have not been rising as fast lately, some investors worry stubborn inflation may force the Fed to leave rates at current levels longer than expected. The US reports consumer price data on August 10.
On Friday, US employment data showed the economy maintained a moderate pace of job growth. Yet wages grew at a faster-than-expected annual clip of 4.4 per cent. Many fear that is too high to be consistent with the Fed's 2 per cent inflation target.
Mr Janasiewicz said a stronger-than-expected consumer price reading next week could spark a decline of up to 5 per cent in the S&P 500. He said such a drop would be “healthy” given the index's big run-up this year.
Other investors have been taking profits. Concerns over rising stock valuations pushed Aaron Chan, a managing partner at equity hedge fund Recurve Capital, to trim stakes in shares of companies including Amazon.com, which is up 68 per cent this year, and Norwegian Cruise Line, up 47 per cent.
The S&P 500 is trading at about 19.5 times forward 12-month earnings estimates, much pricier than its long-term average of about 15.6 times, according to Refinitiv Datastream.
Rising global prices for oil and food, which the Fed's rate increases do little to control, may have more sway on inflation in coming months, said Tim Murray, a capital markets strategist at T Rowe Price.
Prices for Brent crude were on track for their sixth week of gains in a row, up roughly 17 per cent in that period on signs of tightening global supply and rising demand.
“As long as CPI remains flat to trending down, the market will accept it thoroughly,” said Ann Miletti, Allspring's head of active equity. “If we do see upticks, it is really dependent on where the upticks are and whether or not investors believe they're temporary in nature.”
Ms Miletti is growing more bullish on corners of the market that have underperformed, including small cap stocks.
A stronger-than-expected inflation number next week could also boost Treasury yields further. Yields, which move inversely to bond prices, spiked this week following a downgrade of the US credit rating by Fitch and on the prospect of a flood of Treasury supply in the third quarter.
The benchmark 10-year yield fell sharply after Friday's jobs report but remained above 4 per cent, a level last seen in November 2022.
Our expectation is that the market takes some time to digest the strong year-to-date gains and moves into a choppy period
Keith Lerner,
co-chief investment officer at Truist Advisory Services
Rising yields on Treasuries, viewed as among the world's safest investments because they are backed by the US government, can dull the allure of stocks. Projected company cash flows are also worth less in current dollars when interest rates rise.
“The move in the 10-year US Treasury yield above the 4 per cent level will be likely to act as a headwind to further expansion in already lofty equity valuations,” Keith Lerner, co-chief investment officer at Truist Advisory Services, wrote this week.
There is still plenty of good news to keep the rally going. Earnings from Wall Street heavyweights Amazon and Google-parent Alphabet have exceeded analysts expectations, though disappointing earnings from Apple sent the stock tumbling 4.8 per cent on Friday.
More broadly, more than 79 per cent of S&P 500 companies have beaten estimates for the second quarter so far, the highest beat rate since the third quarter of 2021, data from Refinitiv showed.
In the past week, analysts from BofA Global Research and JPMorgan revised their forecasts for a US recession.
Still, some market participants believe investors may have to endure some near-term turbulence.
“Our expectation is that the market takes some time to digest the strong year-to-date gains and moves into a choppy period,” Mr Lerner said.
German intelligence warnings
- 2002: "Hezbollah supporters feared becoming a target of security services because of the effects of [9/11] ... discussions on Hezbollah policy moved from mosques into smaller circles in private homes." Supporters in Germany: 800
- 2013: "Financial and logistical support from Germany for Hezbollah in Lebanon supports the armed struggle against Israel ... Hezbollah supporters in Germany hold back from actions that would gain publicity." Supporters in Germany: 950
- 2023: "It must be reckoned with that Hezbollah will continue to plan terrorist actions outside the Middle East against Israel or Israeli interests." Supporters in Germany: 1,250
Source: Federal Office for the Protection of the Constitution
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- Promises of high, fixed or 'guaranteed' returns.
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- Overseas companies targeting investors in other jurisdictions - this can make legal recovery difficult.
- Hard-selling tactics - creating urgency, offering 'exclusive' deals.
Courtesy: Carol Glynn, founder of Conscious Finance Coaching
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How much sugar is in chocolate Easter eggs?
- The 169g Crunchie egg has 15.9g of sugar per 25g serving, working out at around 107g of sugar per egg
- The 190g Maltesers Teasers egg contains 58g of sugar per 100g for the egg and 19.6g of sugar in each of the two Teasers bars that come with it
- The 188g Smarties egg has 113g of sugar per egg and 22.8g in the tube of Smarties it contains
- The Milky Bar white chocolate Egg Hunt Pack contains eight eggs at 7.7g of sugar per egg
- The Cadbury Creme Egg contains 26g of sugar per 40g egg
Tips to stay safe during hot weather
- Stay hydrated: Drink plenty of fluids, especially water. Avoid alcohol and caffeine, which can increase dehydration.
- Seek cool environments: Use air conditioning, fans, or visit community spaces with climate control.
- Limit outdoor activities: Avoid strenuous activity during peak heat. If outside, seek shade and wear a wide-brimmed hat.
- Dress appropriately: Wear lightweight, loose and light-coloured clothing to facilitate heat loss.
- Check on vulnerable people: Regularly check in on elderly neighbours, young children and those with health conditions.
- Home adaptations: Use blinds or curtains to block sunlight, avoid using ovens or stoves, and ventilate living spaces during cooler hours.
- Recognise heat illness: Learn the signs of heat exhaustion and heat stroke (dizziness, confusion, rapid pulse, nausea), and seek medical attention if symptoms occur.
More from Neighbourhood Watch:
GULF MEN'S LEAGUE
Pool A Dubai Hurricanes, Bahrain, Dubai Exiles, Dubai Tigers 2
Pool B Abu Dhabi Harlequins, Jebel Ali Dragons, Dubai Knights Eagles, Dubai Tigers
Opening fixtures
Thursday, December 5
6.40pm, Pitch 8, Abu Dhabi Harlequins v Dubai Knights Eagles
7pm, Pitch 2, Jebel Ali Dragons v Dubai Tigers
7pm, Pitch 4, Dubai Hurricanes v Dubai Exiles
7pm, Pitch 5, Bahrain v Dubai Eagles 2
Recent winners
2018 Dubai Hurricanes
2017 Dubai Exiles
2016 Abu Dhabi Harlequins
2015 Abu Dhabi Harlequins
2014 Abu Dhabi Harlequins
What can victims do?
Always use only regulated platforms
Stop all transactions and communication on suspicion
Save all evidence (screenshots, chat logs, transaction IDs)
Report to local authorities
Warn others to prevent further harm
Courtesy: Crystal Intelligence
Sole survivors
- Cecelia Crocker was on board Northwest Airlines Flight 255 in 1987 when it crashed in Detroit, killing 154 people, including her parents and brother. The plane had hit a light pole on take off
- George Lamson Jr, from Minnesota, was on a Galaxy Airlines flight that crashed in Reno in 1985, killing 68 people. His entire seat was launched out of the plane
- Bahia Bakari, then 12, survived when a Yemenia Airways flight crashed near the Comoros in 2009, killing 152. She was found clinging to wreckage after floating in the ocean for 13 hours.
- Jim Polehinke was the co-pilot and sole survivor of a 2006 Comair flight that crashed in Lexington, Kentucky, killing 49.
THREE
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UPI facts
More than 2.2 million Indian tourists arrived in UAE in 2023
More than 3.5 million Indians reside in UAE
Indian tourists can make purchases in UAE using rupee accounts in India through QR-code-based UPI real-time payment systems
Indian residents in UAE can use their non-resident NRO and NRE accounts held in Indian banks linked to a UAE mobile number for UPI transactions
Pathaan
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LA LIGA FIXTURES
Saturday (UAE kick-off times)
Leganes v Getafe (12am)
Levante v Alaves (4pm)
Real Madrid v Sevilla (7pm)
Osasuna v Valladolid (9.30pm)
Sunday
Eibar v Atletico Madrid (12am)
Mallorca v Valencia (3pm)
Real Betis v Real Sociedad (5pm)
Villarreal v Espanyol (7pm)
Athletic Bilbao v Celta Vigo (9.30pm)
Monday
Barcelona v Granada (12am)
CHATGPT%20ENTERPRISE%20FEATURES
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