RISING COSTS, INFLATION ON RADAR
US investors will be alert for more signs this week, which brings results from some big consumer names
FRESH worries about rising costs and inflation face the United States stock investors looking towards this week and the next leg of the first-quarter earnings period.
In the latest week, the busiest for first-quarter reports, several companies warned about or cited higher costs.
Caterpillar said it was worried about higher prices for steel it needed for manufacturing. Alphabet said margins were squeezed by rising costs related to marketing and acquiring streaming rights for YouTube’s new TV service, while Procter & Gamble cited higher commodities and transportation costs.
Shares of all three companies declined even though their quarterly earnings were mostly strong.
Investors will be alert for more signs of rising costs this week, which brings results from several big consumer names like Kellogg and market-cap leader Apple.
Also on tap will be a Federal Reserve meeting, the April jobs report and data on wages and inflation.
The first quarter was the first reporting period since the US President Donald Trump in March imposed a duty on imports of steel and aluminium. Prices for those and other commodities have risen sharply, with US crude oil up 7.5 per cent in the first quarter.
“The wind was at the back of these companies for a long time. Now it’s sort of turned. Input costs are up for most people,” said Rick Meckler, president of investment firm LibertyView Capital Management in Jersey City, New Jersey.
“How are companies able to handle that, and what are they able to do to offset it? Those are the kinds of things investors will look at.”
Higher input costs squeeze profits for companies. Compounding these worries, the yield on 10-year US Treasuries, a benchmark for rates, last week hit three per cent for the first time in more than four years, requiring more cash to service company debt.
To be sure, estimated S&P 500 profit growth for the first quarter had risen since the start of the reporting period and was now on track to rise 24.6 per cent, the