NEW YORK – New worries about rising costs and inflation haunt US stock investors awaiting next week and the next leg of the I / 2018 quarter earnings period.
In the last week, the busiest report for the I / 2018 quarter, some companies warned about the higher costs.
Caterpillar (CAT.N) says it worries about higher steel prices needed for manufacturing. Alphabet (GOOGL.O) said the margin is squeezed by increased marketing-related costs and the acquisition of streaming rights for new YouTube TV services, while Procter & Gamble (PG.N) calls higher commodity and transportation costs.
Shares of all three companies declined even though their quarterly profits were mostly strong.
Investors will be wary of the many signs of rising costs next week, which bring results from some big consumer names like Kellogg (K.N) and Apple hat-market leader (AAPL.O). Also on tap will be the Federal Reserve meeting, April jobs report and data on wages and inflation.
The first quarter of 2018 was the first reporting period since US President Donald Trump in March imposed on imports of steel and aluminum. Prices for them and other commodities have risen sharply, with US crude CLc1 up 7.5% in the first quarter of 2018.
“The wind is behind these companies for a long time. Now it’s changed. The cost of inputs is increasing for almost everyone, “said LibertyView Capital Management’s investment firm president in Jersey City Rick Meckler, as quoted by the Reuters page.
“How can a company handle it, and what can they do to compensate? Those are the things investors will see. ”
He explains higher input costs squeezing corporate profits. Adding to the concerns, the 10-year US Treasury bond yield (US10Y) = RR, which this week’s benchmark rate reached 3%, the first time in four years.
To be sure, according to Thomson Reutes, the S & P 500’s profit forecast for the first quarter of 2018 has increased since the beginning of the reporting period and is now on track to climb 24.6%, the strongest year-on-year growth since the fourth quarter of 2010. That means, largely due to changes in US tax laws that cut corporate tax rates to 21% from 35%.
Some companies have very strong results, such as Facebook (FB.O), whose shares jumped 9.1% and helped support a rally in the market Thursday after the result.
“The concern about the company’s revenue is to what extent you begin to see the cost of such inputs away,” said Head of Investment Strategy at Janney Montgomery, Scott Mark Luschini
He said so far profit growth is being produced by an above-average income level. S & P’s quarterly earnings growth is estimated at 8.1%.