LIVE MARKETS-Individual investors focus on the inflation factor


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    * Dow posts modest rise, S&P 500 edges lower, Nasdaq down
    * Comm svcs weakest S&P 500 sector; financials up most
    * Dollar ~flat; gold, oil rise; bitcoin declines
    * U.S. 10-Year Treasury yield ~1.66%

    Oct 22 - Welcome to the home for real-time coverage of
markets brought to you by Reuters reporters. You can share your
thoughts with us at
EDT/1745 GMT)
    As part of the most recent American Association of
Individual Investors (AAII) Sentiment Survey*:nL1N2RI1UQ, the
group polled its members on which factors were currently
influencing their six-month outlook on stocks the most.
    Respondents could list more than one factor.
    AAII noted that 28% considered inflation a factor.
Furthermore, 22% of responses cited government and consumer
spending. This compares to 13% of responses that chose supply
chain issues, and another 10% that mentioned the coronavirus
    About 6% of responses cited taxes. Four percent of responses
were for other shortages not specifically pertaining to supply
chains, while around 2% of responses factored in infrastructure.
    Moreover, international factors were mentioned in 2% of
responses. About 12% of responses fell into other catagories.
    Here are a couple of investor quotes on the matter:
    “There are short-term factors such as inflation, debt
situation, government spending, Federal Reserve chairman. These
will be offset by continued growth. I expect much volatility
with the market moving in a narrow range overall.”
    “Inflation will drive investors into equities; supply chain
issues and lower-than-expected growth will slow the
economy—hence my neutral view of the six months ahead.”
    (Terence Gabriel)
    BULLS ON A RUN (1238 EDT/1638 GMT)
    The percentage of investors who have a bullish outlook on
the U.S. stock market increased in the latest American
Association of Individual Investors (AAII) Sentiment Survey.
With this, the number of investors who described their outlook
for stocks as neutral and bearish decreased significantly.
    AAII reported that bullish sentiment, or expectations that
stock prices will rise over the next six months, surged 9.0
percentage points to 46.9%. This is the first time in six weeks
that bullish sentiment is above the historical average of 38.0%.
    Bearish sentiment, or expectations that stock prices will
fall over the next six months, fell by 4.0 percentage points to
27.8%. This is the first time in six weeks and the second time
out of the last 12 weeks that bearish sentiment is below the
historical average of 30.5%.
    Neutral sentiment, or expectations that stock prices will
stay essentially unchanged over the next six months, declined by
5.0 percentage points to 25.4%. This is the second consecutive
week that neutral sentiment is below the historical average of
    With these changes, the bull-bear spread jumped to +19.1
from +6.1 last week.*:nL1N2RB1LJ
    (Terence Gabriel)
    A recovered appetite for risk by investors led to a rebound
in the corporate junk bond market, where spreads have narrowed
and fund inflows were the strongest in six months. 
    The option-adjusted spread on the ICE BofA U.S. High Yield
Index  .MERH0A0 , a commonly used benchmark for the junk bond
market, ended Thursday at 303 basis points, the lowest since
Sept. 23. The spread, which refers to the interest rate premium
investors demand to hold corporate debt over safer U.S. Treasury
bonds, had been steadily falling after reaching 328 basis points
on Oct. 12.
    Flows into corporate high-yield funds soared to nearly $2.3
billion in the week ended Oct. 20, the most since early April,
according to data from Refinitiv's Lipper. In the prior week,
the funds reported net outflows of $1.8 billion. 
    In a BofA Global Research report on Friday, analysts said
risk appetite recovered this week as the energy crisis in Europe
and China showed tentative signs of stabilizing and the Chinese
government reinforced its commitment to restructure the
country's troubled real estate sector. Meanwhile, BofA this week
slashed its GDP estimates for China with next year's best case
now at 4%.
    "These developments reaffirm our views on credit, in that
the global growth is going to be slower than the market
anticipated up until recently, and this effectively neutralizes
another important risk catalyst: materially higher rates," the
report said.
    As a result, "global capital is again being forced to find
positive yield, a supporting factor for credit in general and
(high yield) in particular," it added.
    (Karen Pierog)
    While both the UK and the euro zone economies are screaming
inflation and supply bottlenecks issues, the service sector,
which is key for both, faired better in Britain this month. 
    IHS Markit's Flash Composite Purchasing Managers' Index
(PMI) for October, a good gauge of overall economic health,
showed growth in euro zone business activity slowed, but in the
UK, the economy unexpectedly regained momentum in October.*:nL1N2RI0KN*:nZRN0030U9
    The UK expansion is looking dependent on the service sector
even if cost pressures rose by the most in more than 25 years. 
    In the euro zone, where firms also faced soaring costs due
to supply-chain constraints, the bloc's dominant service
industry struggled amid ongoing COVID-19 concerns. 
    According to analysts, the key difference in the performance
was on the level of COVID restrictions. 
    “Companies are seeing stronger demand at a time of fewer
pandemic restrictions," says Mike Owens, global sales trader at
Saxo Markets, commenting on the latest UK PMI. 
    The improvement in UK PMI, says Holger Schmieding, Berenberg
economist, is due to "a surge in services activity as the
pandemic seemed to affect consumer behaviour less than before".
    With data showing the epidemic is growing, it is uncertain
whether new restrictions will be introduced in Britain.*:nS8N2NF057*:nL8N2RI3RB
    (Joice Alves)
    CME e-mini S&P 500 futures  EScv1  are quoted up just
slightly in premarket trade. Although the gain is minimal, it,
nevertheless, suggests a positive open for the S&P 500 index
 .SPX .
    This can put the SPX on track for an eighth-straight up day.
The S&P 500 last gained eight days in a row in late-March, early
April 2019.
    This as supply chain worries, labor shortages, and inflation
pressures remain on the market’s mind.   .N 
    Meanwhile, even with the slight positive tilt to S&P 500,
and Dow  1YMcv1  futures, Nasdaq 100 e-minis  NQcv1  are trading
down. This after negative reactions to earnings reports from
Intel  INTC.O  and SNAP  SNAP.K  after the close on Thursday. 
    Social media giants including Facebook  FB.O , Alphabet
 GOOGL.O  and Twitter  TWTR.N  are trading down in sympathy with
SNAP. Thus, the NYSE FANG+TM Index  .NYFANG  may come under
opening downside pressure.
    That said, Nasdaq 100 futures are off their earlier lows,
and now are showing just a modest loss of around 0.2%.
    And although INTC is trading off ahead of the open given its
margin warning, Nvidia  NVDA.O  is up, which may help to counter
some initial weakness within the Philadelphia SE Semiconductor
index  .SOX .
    (Terence Gabriel)


 (Terence Gabriel is a Reuters market analyst. The views
expressed are his own)

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