Stocks Mixed in Choppy Action as Inflation Data Eyed

U.S. stocks are mixed and subdued as the markets digest another hot inflation report in the form of the September Producer Price Index. More inflation data is due out this week, headlined by tomorrow's release of the Consumer Price Index. Treasury yields are little changed, the U.S. dollar is moving higher, but gains for the greenback is being limited by strength in the British pound as the markets grapple with the Bank of England's recent actions to try to stabilize its financial markets. Crude oil prices are lower, and gold is trading to the downside. In other economic news, mortgage applications fell for a third-straight week. Q3 earnings season is getting started, and PepsiCo topped estimates and raised its guidance. In other equity news, Moderna is rising after Dow member Merck & Co. announced that it will exercise an option for a partnership with the company to work on a cancer vaccine. In the afternoon, the release of the minutes from the Fed's September monetary policy meeting are due out and will likely garner scrutiny. Asia finished mixed, and Europe is trading to the downside.

At 10:50 a.m. ET, the Dow Jones Industrial Average is up 0.3%, while the S&P 500 Index is little changed, and the Nasdaq Composite is declining 0.3%. WTI crude oil is dropping $1.91 to $87.44 per barrel, and Brent crude oil is falling $1.60 at $92.69 per barrel. The gold spot price is trading $8.90 lower to $1,677.10 per ounce, and the Dollar Index is advancing 0.3% to 113.51.

PepsiCo Inc. (PEP $170) reported adjusted Q3 earnings-per-share (EPS) of $1.97, above the $1.84 FactSet estimate, as revenues grew 8.8% year-over-year (y/y) to $22.0 billion, topping the Street's forecast of $20.8 billion. The company noted that the strong U.S. dollar negatively impacted its earnings and revenue growth, but its global business momentum remains strong. Organic revenue—excluding acquisitions, divestitures, and foreign exchange—was 16.0% higher y/y. PEP raised its full-year EPS and organic sales outlooks. Shares are moving to the upside.

Moderna Inc. (MRNA $131) is rising after Dow member Merck & Co. Inc. (MRK $91) announced that it will exercise an option for the partnership with the company that gained prominence from its COVID-19 vaccine to develop and commercialize a cancer vaccine. MRK is trading higher.

The S&P 500 has been volatile as inflation pressures have persisted, forcing the Fed to aggressively tighten monetary policy and boosting concerns about the economy as discussed in the article, Stock Market Volatility: Jobs Report Kills Rally. Meanwhile, as the markets gear up for the start of Q3 earnings season next week, Schwab's Chief Investment Strategist Liz Ann Sonders discusses in her article, Earnings: Trampled Under Foot? how the bear market has been driven by multiple compression, making valuations look relatively compelling, but expected weakness in earnings may limit the upside potential for stocks.

Additionally, Schwab's Chief Global Investment Strategist Jeffrey Kleintop, CFA, notes in his latest article, The End of Earnings Growth?, how the earnings outlook is dimming as the economy slows, which could result in cuts to earnings forecasts and downside for stocks. However, Jeff points out that U.K. earnings have been a surprising outperformer.