A whole batch of things coming this way…..
As they have all year, companies are reporting mostly good financial results for the third quarter. But this time around, executives have been talking about the challenges they face with rising production and materials costs and relatively new tariffs. Some of these executives say their profit margins risk getting squeezed by these factors, adding they might have to pass rising costs on to customers, if they haven’t already.
Seven out of 11 sectors of the S&P 500 are in correction territory, meaning they have lost 10 percent or more since their most recent highs. Hardest hit are materials stocks, financials, energy and industrials. Consumer staples are a bright spot, on pace for their fifth straight month of gains fueled by Procter & Gamble and others.
Wall Street’s so-called fear gauge, the CBOE Volatility Index, is at 25, the highest it’s been since the market swoon earlier this year. It’s an index that tries to measure what direction traders think the S&P will take in the near term.
Fearing higher rates
That brings us to the Federal Reserve, which has raised its benchmark rate three times this year and is expected to hike one more time in December. The Fed has been determined to stay ahead of inflation and has signaled a willingness to keep raising rates to keep it in check, despite criticism from President Donald Trump.
Rising rates affect consumer willingness to borrow, however. Bank stocks have taken a hit this year on worries about lending. New home sales in September dropped 5.5 percent to a two-year low, and auto dealers report sales are down.
China’s economy slowing
Then, there are worries about what’s happening abroad. China, the world’s second biggest economy, is showing slower growth. Last week, it reported economic growth of 6.5 percent in the third quarter, falling short of expectations. And it has been drawn into a trade dispute with the U.S., with each side digging in on tariffs on billions of dollars of each other’s imports. There isn’t any set timetable for resolving these differences, though President Trump is expected to meet with China’s Xi Jinping in Argentina at the G-20 summit next month.