By Lewis Krauskopf

NEW YORK (Reuters] – The corporate results of major U.S. industries and material sectors can provide a picture of how these companies are dealing with surging inflation and supply chain bottlenecks as well as higher commodity prices.

Strong third quarter results are expected for companies in these sectors, including logistics and transportation, chemical manufacturers, and major suppliers to the aerospace, automobile, and construction industries.

They are however able to see the effects of increasing input costs, supply chain issues and other problems that plague the United States, and many other countries.

There are signs that businesses continue to increase costs, or that they expect inflation to continue. This could support the belief that recent consumer price increases will be more durable than anticipated.

Companies in many sectors have been affected by supply chain and inflation problems, including technology companies as well as consumer products firms.

Many materials and industrial companies already have shared the difficulties they are facing. 3M, a diversified manufacturer, spoke out at an investor conference last week, warning that inflation will rise faster than predicted, due to rising costs in resins and wood pulp as well as labor. Eaton Corp warned last month that its third quarter revenue would be “a little below” its low forecast due to “inability to service the demand we are getting.”

Last month also saw Sherwin-Williams, a paint-and-coatings company (NYSE:), reduce its earnings and sales estimates for 2021 citing “escalating material availability challenges” and inflation headwinds.

Joshua Aguilar (U.S. Multi-Industry Analyst at Morningstar) stated that “everyone will feel the pain at a different rate.” Your short-cycle business will feel the pain first but everyone is affected. It is important to have someone with the ability to adjust pricing.

Investors will find out more as the corporate reports of corporations arrive. These include Dow Inc. on Thursday and 3M. General Electric (NYSE:) Caterpillar Next week (NYSE:

Industries and materials were some of the most sensitive stocks in the economy that had benefited broadly from last November’s breakthrough vaccine data. This optimism reflected confidence about the economy’s potential recovery from the coronavirus outbreak.

However, energy and financials continue to be a strong economic sector for these groups. Investors expressed concern that industrial and material share has been affected by concerns about how higher prices or supply chain issues could impact their bottom lines.

While the overall S&P 500 has gained 14% since the first quarter ended, the S&P 500 industrials sector has increased about 6%, and the materials sector has climbed roughly 8%.

“We are aware that the margin problems in this quarter were a problem, but will we see it continue into the next quarter, or just one quarter?” Walter Todd is the chief investment officer at Greenwood Capital, South Carolina. “That’s the real unknown at this point, and that will drive … how these stocks react.”

Industries make up 8.5% of the total, while materials account 2.5%.

Some investors believe that the sector’s companies will have more upside if they can weather increasing costs and maintain strong pricing power.

Portfolio manager Ryan Cope at American Century Investments holds shares in Timken Co, bearings manufacturer, within the portfolio of small-cap values he oversees.

Cope explained that businesses that are able to price their products in their business models will have better results than the ones that don’t.