If you’re looking for options in the resources sector, then read on. The team at Morgans recently named some of their top picks from this side of the market.

Listed below are three of the resources shares that the broker has on its best ideas list:

BHP Group Ltd (ASX: BHP)

Morgans rates the Big Australian as one of the best options in the resources sector. The broker likes the mining giant due to its strong balance sheet and the diversity of its operations across both commodities and geographies. It explained:

We view BHP as relatively low risk given its superior diversification relative to its major global mining peers. The spread of BHP’s operations also supplies some defence against direct COVID-19 impact on earnings contributors. While there are more leveraged plays sensitive to a global recovery scenario, we see BHP as holding an attractive combination of upside sensitivity, balance sheet strength and resilient dividend profile.

Morgans has an add rating and $47.40 price target on BHP’s shares.

Santos Ltd (ASX: STO)

Another ASX resources share that Morgans has on its best ideas list is Santos. It likes the energy producer due to its solid growth outlook and diversified earnings base. Morgans commented:

The resilience of STO’s growth profile and diversified earnings base see it well placed to outperform against a backdrop of a broader sector recovery. While pre-FEED, we see Dorado as likely to provide attractive growth for STO, while its recent acquisition increasing its stake in Darwin LNG has increased our confidence in Barossa’s development. PNG growth meanwhile remains a riskier proposition, with the government adamant it will keep a larger share of economic rents while operator Exxon has significantly deferred growth plans across its global portfolio.

Morgans has an add rating and $9.30 price target on Santos’ shares.

South32 Ltd (ASX: S32)

A final ASX resources share that Morgans rates highly is South32. In fact, the mining giant is the broker’s top pick in the sector right now. It likes South32 due to the diversity of its operations and its portfolio transformation. The broker explained:

S32 has transformed its portfolio by divesting South African thermal coal and acquiring an interest in Chile copper, substantially boosting group earnings quality, as well as S32’s risk and ESG profile. Unlike its peers amongst ASX-listed large-cap miners, S32 is not exposed to iron ore. Instead offering a highly diversified portfolio of base metals and metallurgical coal (with most of these metals enjoying solid price strength). We see attractive long-term value potential in S32 from de-risking of its growth portfolio, the potential for further portfolio changes, and an earningslinked dividend policy.

Morgans has an add rating and $5.40 price target on South32’s shares.

The post Morgans names the best ASX resources shares to buy now appeared first on The Motley Fool Australia.

More reading

• 3 ASX 200 dividend shares with the highest yields in Q1
• Why is the Santos share price outperforming the ASX 200 today
• 3 reasons the BHP share price is in the buy zone: Goldman Sachs
• Why has the iron ore price taken a hit this week?
• The South32 dividend is being divvied out today. Here’s what you need to know

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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The Insurance Australia Group Ltd (ASX: IAG) share price was put on hold on Friday afternoon following a company-requested pause in trading.

The company released an announcement just after lunchtime Australian Eastern Time outlining some of the details of the decision.

It followed a High Court ruling against the company and its insurance peers today regarding business interruption claims made during COVID-19.

Before its shares were put on ice, IAG was trading at $4.81 apiece, up more than 2.5% on the day.

What did IAG announce?

The company announced the decision shortly after the High Court’s ruling today. It said the halt was requested to “consider the impact” of the ruling.

A number of test cases regarding business interruption insurance during COVID-19 – and all its subsequent drama – were put to the High Court today.

The Court refused the applications made by a group of Australian insurers, who were seeking to have the cases dismissed.

Instead, it put an end to further test cases on whether the insurance industry was liable for interruption claims caused by COVID-19.

The trading halt is requested to enable IAG to consider the impact of today’s determination by the High Court of Australia to dismiss the applications by IAG and the policyholders for special leave to appeal the judgment of the Full Federal Court of Australia in the second business interruption test case handed down on 21 February 2022, including to assess the financial impact.

Shares will remain halted until the company makes an announcement regarding the financial impact of the High Court’s determination.

This should be done on or before Tuesday, 18 October, IAG says. Shares are up 12% this year to date.

The post IAG share price halted amid High Court ruling appeared first on The Motley Fool Australia.

More reading

• Could this be a looming risk for IAG shares?
• The IAG dividend is hitting bank accounts today. What you need to know
• IAG shares ‘highest quality’ in the sector: fundie

Motley Fool contributor Zach Bristow has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has positions in and has recommended Insurance Australia Group Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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In afternoon trade, the S&P/ASX 200 Index (ASX: XJO) is on course to record a strong gain. At the time of writing, the benchmark index is up 1.8% to 6,762.8 points.

Four ASX shares that are climbing more than most today are listed below. Here’s why they are racing higher:

Jumbo Interactive Ltd (ASX: JIN)

The Jumbo share price is up almost 5% to $12.21. This morning Goldman Sachs initiated coverage on the lottery ticket seller’s shares with a buy rating and $15.30 price target. Goldman is forecasting earnings growth ahead of consensus estimates in the coming years. This is thanks partly to its Powered by Jumbo business, which it believes is well-placed to grow its market share at home and overseas.

Origin Energy Ltd (ASX: ORG)

The Origin share price is up 5% to $5.74. This could have been driven by a bullish broker note out of UBS this morning. According to the note, the broker has retained its buy rating on the energy company’s shares with an improved price target of $7.40. UBS likes Origin due to its APLNG business.

Qantas Airways Limited (ASX: QAN)

The Qantas share price is up 10% to $5.68. Investors have continued to buy this airline operator’s shares following the release of a market update on Thursday. A number of brokers have responded very positively to the update today. For example, the team at UBS has retained its buy rating and lifted its price target on the company’s shares to $7.20.

Woodside Energy Group Ltd (ASX: WDS)

The Woodside share price is up 4% to $33.96. The catalyst for this has been a solid rise in oil prices during overnight trade. It isn’t just the Woodside share price that is rising today. A number of energy shares are recording solid gains along with it. This has led to the S&P/ASX 200 Energy index rising a sizeable 3.8% on Friday.

The post Why Jumbo, Origin, Qantas, and Woodside shares are racing higher appeared first on The Motley Fool Australia.

More reading

• Brokers name 3 ASX shares to buy today
• Why is the Woodside share price smashing it on Friday?
• Is the Qantas share price fully valued following this week’s surge?
• Qantas flying; Chalmers and Biden disagree on recession. Scott Phillips on Nine’s Late News
• 5 things to watch on the ASX 200 on Friday

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Jumbo Interactive Limited. The Motley Fool Australia has recommended Jumbo Interactive Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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ASX shares are having a great day on Friday, with the S&P/ASX All Ordinaries Index (ASX: XAO) up 1.9%.

And there’s more to come, according to top broker, UBS.

The Australian reports that UBS has upgraded its outlook for the Australian technology and consumer discretionary sectors, and downgraded consumer staples.

That is the complete opposite of market sentiment all year.

Why does UBS think ASX shares are about to flip?

S&P/ASX 200 Consumer Staples (ASX: XSJ) are down 9.5% in 2022. But that’s nothing compared to S&P/ASX 200 Info Technology (ASX: XIJ), down 36%, and S&P/ASX 200 Consumer Discretionary (ASX: XDJ), down 24%. And that’s where UBS sees value today.

The broker has altered its outlook because ASX shares are now “priced for a recession” next year. And the UBS team reckons it’s not going to happen.

This is because the Reserve Bank has signalled it intends to slow down the pace of interest rate hikes.

UBS equity strategist Richard Schellbach said:

Domestic cyclicals have been notable underperformers, with sectors exposed to the local consumer or housing down about 30 per cent year to date.

Given we do not expect a recession to play out in Australia, these moves seem overly pessimistic, and present an opportunity to buy into some high-quality businesses with solid medium-term prospects.

He argues that domestic cyclical ASX shares are “no longer expensive”:

Despite gloomy press headlines, and continued challenges from supply chain constraints, input cost pressures, and more recently labour market shortages, the reality is that the end-demand which ASX businesses are seeing is firm.

Schellbach notes that Australia had an “even more abrupt” rate hiking cycle in 1994 with no recession. ASX shares rose by 16% in 1995 and returned 11% per annum for the next five years.

The Australian Financial Review (AFR) reports that UBS is also overweight on energy and mining stocks.

UBS expects the ASX 200 to be back up around the 7,000-point mark by year’s end.

At the time of writing, the S&P/ASX 200 Index (ASX: XJO) is up 1.9% to 6,769 points.

The post Top broker says opportunities abound for ‘high quality’ ASX shares appeared first on The Motley Fool Australia.

More reading

• 3 ASX 200 dividend shares with the highest yields in Q1
• Expert forecast: Here’s where UBS says the ASX 200 will finish the year
• 3 ASX All Ords shares smashing multi-year highs on Friday
• ANZ shares: Buy, hold, or fold?
• When can Suncorp shareholders expect their cash from the ANZ deal?

Motley Fool contributor Bronwyn Allen has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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The S&P/ASX 200 Index (ASX: XJO) is on fire on Friday, and the National Australia Bank Ltd (ASX: NAB) share price is no exception.

Despite inflation data from the United States coming in above expectations last night, investors are loading up today. This follows a similar reaction in the US share market overnight, with the Nasdaq composite grinding 2.2% above its previous closing point.

In afternoon trading, shares in one of Australia’s largest banks are humming along. At present, the NAB share price is firming up by 1.8% to $31.15 apiece.

The positive move is somewhat perplexing. Let’s delve into why might NAB shares — and other ASX 200 banks — be responding swimmingly to the latest economic data.

What’s the silver lining for the NAB share price?

For households, the latest US inflation data is not a pleasing sight by any measure. The stubbornness of living costs means more interest rate hikes are likely on the agenda of central banks. However, for banks, it could mean a further thickening of the bottom line.

Earlier in the week, the Bank of Queensland Limited (ASX: BOQ) surprised the market with a solid full-year result for FY22. Most notably, the bank’s exiting net interest margin (NIM) was 1.81%, tracking above its second-half average of 1.75%.

Many of us have seen this firsthand, unfortunately. Upon the Reserve Bank of Australia (RBA) announcing a cash rate increase, banks have been quick to action increases to loans, but slow to pass on higher rates to savers — the latter normally being only partially increased.

Hence, with the latest US data suggesting more rate hikes to come, Aussie investors could be anticipating improved margins across all ASX 200 bank shares, including NAB. Whether that actually plays out also depends on default rates and the level of competition between lenders.

Another feather in this ASX 200 bank’s cap

In other news, NAB has announced the launch of a new payment technology of its own today dubbed NAB Easy Tap.

According to the press release, the Australian first for a major bank will allow small businesses to accept contactless payments from customers via an eligible android mobile phone or tablet.

The capability comes after Apple Inc (NASDAQ: AAPL) announced its own ‘Apple Tap to Pay‘ earlier in the year, as payment processing becomes more mobile-centric.

Furthermore, NAB’s offering will remove the need for a small business to buy or rent a separate payment terminal.

The NAB share price is up more than 6% so far this year, while the broader benchmark has endured a near 11% blow.

The post NAB share price lifts amid ‘first for a major Australian bank’ appeared first on The Motley Fool Australia.

More reading

• Top broker says ‘we struggle to see CBA underperforming peers’. Here’s why
• Why are ASX 200 bank shares having such a top run on Thursday?
• Why is the NAB share price having such a stellar run today?
• Why investors were looking on the bright side for ASX 200 bank shares today
• What’s the outlook for ASX 200 bank shares in Q2?

Motley Fool contributor Mitchell Lawler has positions in Apple. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Apple. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has recommended the following options: long March 2023 $120 calls on Apple and short March 2023 $130 calls on Apple. The Motley Fool Australia has recommended Apple. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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S&P/ASX 200 Index (ASX: XJO) gold shares are underperforming the benchmark index on Friday. Though not all of the big gold producers are trading lower today, despite bullion prices dipping to two-week lows.

In afternoon trading, the ASX 200 is up 1.9%, following a strong day in US markets overnight.

The S&P/ASX All Ordinaries Gold Index (ASX: XGD) – which also contains some smaller gold shares outside of the ASX 200 – is heading in the other direction, down 0.7%.

As for some of the big ASX 200 gold shares:

• Northern Star Resources Ltd (ASX: NST) shares are down 1.1%
• The Newcrest Mining Ltd (ASX: NCM) share price is down 0.5%
• The Evolution Mining Ltd (ASX: EVN) mining share price is bucking the trend, up 0.5%

What’s happening with the gold price?

Though gold has edged higher over the past few hours to US$1,668 per ounce, earlier today, bullion prices dipped to two-week lows. Prices remain down 3.5% since 5 October and down 19% from the highs in early March.

Gold, and by extension ASX 200 gold shares, have come under pressure amid fast-rising interest rates intended to tame soaring inflation. And September CPI data out of the US yesterday showed little sign that inflation in the world’s top economy is close to tame just yet. This portends more rate hikes ahead from the US Federal Reserve.

Gold is a haven asset, a status that has helped support prices amid 2022’s increasing geopolitical and global economic risks.

But the headwinds of aggressive central bank tightening have proven the stronger force. At least for now. Gold pays no yield. And as rates rise, so too does the appeal of other haven assets, like government bonds and cash deposits, in turn decreasing demand for bullion.

The hawkish rate hiking path taken by the Fed has also seen the US dollar rally. That’s also impacted gold, as it’s priced in US dollars.

Though it’s worth noting the gold price in Aussie dollars has fared much better. The Aussie dollar is now down to 63.4 US cents, from 75.8 cents in early April.

How have these ASX 200 gold shares performed longer-term?

All three of the ASX 200 gold shares we looked at above are deep in the red so far in 2022.

Going back five years, only one of the gold miners has returned outsized capital gains.

Over the five years, the Newcrest Mining share price is down 19%, and the Evolution share price is down 15%.

However, if you’d invested in Northern Star five years ago, you’d be sitting on a gain of 60% today.

The post Here’s how ASX 200 gold shares are reacting as gold price hits 2-week low appeared first on The Motley Fool Australia.

More reading

• 5 things to watch on the ASX 200 on Friday
• Why did ASX 200 gold shares rise today?
• Is the Northern Star share price on the comeback trail? Check these charts out
• 5 things to watch on the ASX 200 on Thursday
• 5 things to watch on the ASX 200 on Wednesday

Motley Fool contributor Bernd Struben has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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The S&P/ASX 200 Index (ASX: XJO) has followed Wall Street’s lead and is racing higher on Friday. In afternoon trade, the benchmark index is up 1.9% to 6,770.3 points.

Four ASX shares that have failed to follow the market higher today are listed below. Here’s why they are dropping:

BrainChip Holdings Ltd (ASX: BRN)

The BrainChip share price is down 1% to 88 cents. Investors don’t appear impressed that the semiconductor is granting its former chairman 8 million restricted stock units for free after his previous options lapsed. These shares have a market value of over $7 million. The issuing of new shares is nothing new for the company. 10 years ago, BrainChip had 220.3 million shares outstanding. It now has over 1.7 billion shares outstanding plus 100 million unquoted securities.

Emeco Holdings Limited (ASX: EHL)

The Emeco share price is down 10% to 80 cents. This morning this mining equipment provider revealed that it is struggling to collect a major receivable. A customer owes Emeco $32 million, but “a potential issue regarding the full recoverability of outstanding amounts” has emerged. Emeco is currently demobilising its people and equipment.

Harvey Norman Holdings Limited (ASX: HVN)

The Harvey Norman share price is down 4% to $3.99. This retail giant’s shares are falling today after trading ex-dividend for its latest final dividend. Eligible shareholders can now look forward to receiving Harvey Norman’s fully franked 17.5 cents per share dividend in a month on 14 November.

Pilbara Minerals Ltd (ASX: PLS)

The Pilbara Minerals share price is down 5% to $4.70. Investors have been selling this lithium miner’s shares this week following a bearish broker note out of Morgan Stanley. It has warned that lithium demand and pricing could be falling in China. Investors may have concerns that the high flying Pilbara Minerals share price could come under pressure if prices start to fall and have been taking profit off the table.

The post Why BrainChip, Emeco, Harvey Norman, and Pilbara Minerals shares are dropping appeared first on The Motley Fool Australia.

More reading

• Is Pilbara Minerals the most profitable ASX lithium share?
• Could Rio Tinto be coming for your ASX lithium shares?
• Why is the BrainChip share price underperforming on Friday?
• 5 things to watch on the ASX 200 on Friday
• Why Baby Bunting, Mirvac, NIB, and Pilbara Minerals shares are dropping

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Harvey Norman Holdings Ltd. The Motley Fool Australia has positions in and has recommended Harvey Norman Holdings Ltd. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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The market is chugging along beautifully today with the S&P/ASX 200 Index (ASX: XJO) up 1.9%. But over the first quarter of FY23, the benchmark index moved lower by 1%. And it’s down 11% year to date.

During turbulent times on the market, as we’ve had this year, investors often turn their attention to ASX 200 dividend shares because capital gains are likely to be lower for now.

Below we canvas the three ASX 200 shares that offered the best dividend yields in Q1 FY23.

Magellan Financial Group Ltd (ASX: MFG)

Magellan is a fund manager that makes money by looking after other people’s money. They invest their clients’ funds and charge fees based on the amount invested and each investment’s performance.

According to S&P Capital IQ data, Magellan had the highest dividend yield in Q1 FY23 of the ASX 200. It was 15.9% as of 30 September. A 15%-plus dividend yield sounds amazing, right? But there’s a deeper story here, which is why investors must do their research before buying a dividend share (or any share, for that matter).

What’s happened here is that the Magellan share price has absolutely cratered in 2022. The company is earning less money because investors have been withdrawing funds. So, Magellan is paying less money out in dividends, but the yield still looks great because of the severely weakened share price.

Tabcorp Holdings Limited (ASX: TAH)

Tabcorp is a wagering and media and gaming service business. It used to do lotteries as well before demerging that segment in May 2022, which resulted in the formation of Lottery Corporation Ltd (ASX: TLC). Most Aussies would know Tabcorp through its TAB brand both online and in venues.

The data shows Tabcorp had a dividend yield of 13.9% in Q1 FY23. If you’re thinking of investing for dividends, something to check out here would be how the demerger might impact future dividends.

The trailing dividend would include part of the lotteries segment’s earnings, which are no longer relevant for future payouts. But the Tabcorp share price has also tanked in 2022, so maybe the yield is sustainable.

South32 Ltd (ASX: S32)

The data shows South32 had a dividend yield of 13.3% in Q1 FY23.

South32 is a mining company with assets producing aluminium, manganese, coal, zinc, silver, and nickel.

With commodity prices going off in 2022, it’s no surprise to see the dividend yield at such a strong level. However, dividend investors must be mindful that commodity prices can go up and down.

A higher commodity price means the company makes more on the stuff it digs out of the ground, while costs remain roughly the same. That means more profit to distribute to shareholders. And vice versa.

So, if you’re buying South32 shares today for the long term (long-term investing is what we advocate here at The Fool), don’t expect today’s dividends to necessarily be the same tomorrow.

The post 3 ASX 200 dividend shares with the highest yields in Q1 appeared first on The Motley Fool Australia.

More reading

• Expert forecast: Here’s where UBS says the ASX 200 will finish the year
• ANZ shares: Buy, hold, or fold?
• When can Suncorp shareholders expect their cash from the ANZ deal?
• 5 things to watch on the ASX 200 on Friday
• Here are the top 10 ASX 200 shares today

Motley Fool contributor Bronwyn Allen has positions in Magellan Financial Group. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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It has been another busy week for Australia’s top brokers. This has led to the release of a large number of broker notes.

Three broker buy ratings that you might want to know more about are summarised below. Here’s why brokers think these ASX shares are in the buy zone:

Jumbo Interactive Ltd (ASX: JIN)

According to a note out of Goldman Sachs, its analysts have initiated coverage on this lottery ticket seller’s shares with a buy rating and $15.30 price target. Goldman likes Jumbo due to its strong growth outlook driven partly by its Powered by Jumbo business. It believes this side of the business is well-placed to grow its market share at home and overseas. All in all, Goldman is forecasting earnings growth ahead of consensus estimates in the coming years. The Jumbo share price is trading at $12.18 today.

Mineral Resources Limited (ASX: MIN)

A note out of Citi reveals that its analysts have retained their buy rating and lifted their price target on this mining and mining services company’s shares to $86.00. Citi recently attended a presentation relating to Mineral Resources’ Mt Marion and Wodgina lithium operations. Following the presentation, the broker remains very bullish and is expecting these lithium operations to generate over three-quarters of its earnings in FY 2023. The Mineral Resources share price is fetching $70.48 on Friday.

Qantas Airways Limited (ASX: QAN)

Analysts at UBS have retained their buy rating and lifted their price target on this airline operator’s shares to $7.20. This follows the release of the company’s first half update, which revealed materially stronger than expected earnings. The good news is that UBS believes that FY 2024 could be even stronger, which could bode well for the company’s shares. The Qantas share price is trading at $5.83 this afternoon.

The post Brokers name 3 ASX shares to buy today appeared first on The Motley Fool Australia.

More reading

• Could Rio Tinto be coming for your ASX lithium shares?
• Is the Qantas share price fully valued following this week’s surge?
• Qantas flying; Chalmers and Biden disagree on recession. Scott Phillips on Nine’s Late News
• Here are the top 10 ASX 200 shares today
• If I’d invested $1,000 in Mineral Resources shares at the start of 2022, here’s what I’d have now

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Jumbo Interactive Limited. The Motley Fool Australia has recommended Jumbo Interactive Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

The stock market initially reacted as one might have expected after the Consumer Price Index rose more than projected in September, with market benchmarks opening sharply lower. However, investors somehow found a silver lining in the numbers, and by the end of the day, the S&P 500 (SNPINDEX: ^GSPC) and Dow Jones Industrial Average (DJINDICES: ^DJI) were up between 2.5% and 3%, while the Nasdaq Composite (NASDAQINDEX: ^IXIC) settled for a slightly smaller rise.

Index	Daily Percentage Change	Daily Point Change
Dow	+2.83%	+828
S&P 500	+2.60%	+93
Nasdaq	+2.23%	+232

Data source: Yahoo! Finance.

The turnaround came as a surprise to many investors, who figured that news that inflation was stronger and more persistent than originally believed might lead to further losses. A closer look at the inflation report seems to confirm the potential negative effects on the broader economy, but that still leaves the simple fact that one-day moves in the market are highly unpredictable. Below, you can learn more about the factors affecting the financial markets on Thursday and what they mean going forward.

Inflation stays high

The Consumer Price Index rose 0.4% in September, bringing its year-over-year rise to 8.2%. The monthly number was higher than expected, although the year-over-year figure was down slightly from where it was as of August.

Although the 0.4% rise was less than the CPI has experienced in several months earlier this year, many market participants were surprised because the number included a sizable downward effect from falling energy prices. The CPI’s energy subindex fell 2.1%, with even larger drops in gasoline prices getting offset in part by more expensive natural gas and electricity costs.

The main problem came from other key items. The food index, which is also volatile, continued its recent ascent, climbing 0.8% from August to September. That brought year-over-year food price increases to 11.2%, with food for home use seeing an even steeper 13% rise in prices.

Meanwhile, the core CPI, which excludes both food and energy, was up 0.6% for the month and 6.6% from where it was a year ago. Sizable gains in costs of transportation and medical care services were most notable, as was the 0.7% rise in shelter costs. Used car prices declined, but new vehicle prices kept rising to move up 9.4% from where they were 12 months ago.

A counterintuitive rise

Given ongoing inflationary pressures, it’d be natural to expect the stock market to keep dropping. But in evaluating a one-day move, it’s important to understand that there are always multiple factors in play that can lead to counterintuitive results.

One thing to remember is that stock markets had already seen huge declines over the past month and a half, which arguably indicates that investors were prepared for inflation not to calm down the way some had hoped. After a beginning-of-month rally that tried to regain some lost ground from a terrible September, the S&P 500 finished Wednesday slightly below where it had started the month. Coming on the heels of a more than 9% drop the previous month, a daily rise of nearly 3% still means that the large-cap index is down more than 7% from where it finished the month of August.

In addition, stocks have tracked bond market movements fairly closely, and bond investors seemed more comfortable with the high inflation report than one would have expected. After spiking above 4%, the 10-year Treasury finished the day yielding less than 3.95%, up just four-hundredths of a percentage point.

Today’s big jump doesn’t mean that the bear market is guaranteed to be over, and short-term movements could carry stocks lower in the days and weeks to come. Yet it does serve as a key reminder that markets won’t behave the way you necessarily expect in the short run, and you can often find yourself drawing the wrong conclusion even when news events work out the way you expect. 

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

The post How the US stock market shrugged off high inflation — For now appeared first on The Motley Fool Australia.

More reading

• Brokers name 3 ASX shares to buy today
• Why is the Santos share price outperforming the ASX 200 today
• Why is the AGL share price getting hammered this week?
• Is Pilbara Minerals the most profitable ASX lithium share?
• Guess which ASX All Ordinaries share is rocketing 30% this week?

Dan Caplinger has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

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