- Bitcoin, Ethereum, Dogecoin Fall After CPI Data Comes Out: Analyst Foresees ‘Deeper Decline’ For King Crypto After This ‘Savage’ Move Benzinga
- First Mover Asia: Bitcoin Holds Steady Over $30K as Inflation Data, Macro Issues Leave Investors Increasingly Unmoved CoinDesk
- Trading Game Plan: Trading the CPI data, Bitcoin and Altcoin price action, and earnings season trades Kitco NEWS
- Bitcoin, Ethereum, Dogecoin Slightly Up Ahead Of Inflation Data Release: Analyst Says ‘Pretty Damn Clear’ Benzinga
- Bitcoin Nears $31K as Inflation Rose Less Than Expected; Crypto Oversight Bill Re-Launch CoinDesk
- View Full Coverage on Google News
Tag Archives: CPI
Bitcoin, Ethereum, Dogecoin Fall After CPI Data Comes Out: Analyst Foresees ‘Deeper Decline’ For King Cry – Benzinga
- Bitcoin, Ethereum, Dogecoin Fall After CPI Data Comes Out: Analyst Foresees ‘Deeper Decline’ For King Cry Benzinga
- First Mover Asia: Bitcoin Holds Steady Over $30K as Inflation Data, Macro Issues Leave Investors Increasingly Unmoved CoinDesk
- Trading Game Plan: Trading the CPI data, Bitcoin and Altcoin price action, and earnings season trades Kitco NEWS
- Bitcoin, Ethereum, Dogecoin Slightly Up Ahead Of Inflation Data Release: Analyst Says ‘Pretty Damn Clear’ Benzinga
- Crypto Update | Inflation Slows Down, but Prices Are Still Up CoinDesk
- View Full Coverage on Google News
Stock Market Today: Nasdaq, S&P 500 Close Higher After CPI Report Shows Cooling Inflation – The Wall Street Journal
- Stock Market Today: Nasdaq, S&P 500 Close Higher After CPI Report Shows Cooling Inflation The Wall Street Journal
- S&P 500, Nasdaq close at highest levels since April 2022, buoyed by cooler-than-expected inflation report: Live updates CNBC
- Stocks pop as inflation continues cooldown: Stock market news today Yahoo Finance
- Market Volatility Declines Ahead Of CPI; S&P 500 Gains – Citigroup (NYSE:C), Amazon.com (NASDAQ:AMZN) Benzinga
- Cooling inflation in the US brings slight relief to tech valuations TechCrunch
- View Full Coverage on Google News
CPI Checks Most of Powell’s Boxes. Now What?
Consider the situation from the Fed’s vantage point. Less than two months ago, Chair Jerome Powell laid out his framework for thinking about inflation in a speech at the Brookings Institution. Today, most of his hopes and dreams are already being realized. Supply chains are healing and core goods prices are cooling while forward-looking gauges of market rents signal shelter inflation is poised to come down soon as well.(1) Perhaps most important, central bankers have received encouraging evidence regarding core services excluding shelter — that all important, wage-driven component of CPI that Powell feared would be the hardest to tame.
Indeed, after stripping out rent and owners’ equivalent rent, core services prices are rising at an annualized pace of just 2.6% over the past three months. When Powell gave his Brookings speech, annualized three-month inflation in that category stood at 7.1%. Now, it’s essentially back to its pre-pandemic average.
Even before Thursday’s report, there was growing evidence that inflationary pressures were ebbing in core services outside of housing. An Institute for Supply Management report on Jan. 6 showed a measure of prices paid by service providers declined for a second month. Meanwhile, increases in average hourly earnings — which Powell has flagged as a chief potential driver of service sector prices — have moderated significantly. While wage growth is running above pre-pandemic norms in both the goods and services sectors, the latter has experienced a sharp downswing.(2)
Of course, Powell and his colleagues will continue to argue that inflation remains “too high,” but this is something of an oratorical trick. If traders sniff out lower inflation and the end of interest-rate increases, markets will rally further such that bond yields and borrowing costs will drop, and — in the Fed’s view — that could revive inflation. In a technical but misleading sense, it is true that the Fed is still missing its 2% inflation target. With the latest report, the year-over-year change in the headline consumer price index stands at 6.5%. That should leave the Fed’s preferred inflation gauge, the personal consumption expenditures deflator, at around 4.7%, according to Bloomberg Economics calculations — well above the 2% target. The Fed will probably raise interest rates by an additional 50 basis points or so to make sure it gets the job done.
But in a practical sense, the central bank isn’t actually missing its target by much, and a shift in policy is very much in play toward the end of the year. Changes in the CPI measured year over year are highly subject to base effects, meaning they say as much about where prices were in December 2021 as December 2022. Prices are not going up much right now. Based on the past three months of core CPI data, the annualized rate of inflation is running at just 3.1%. Using headline inflation, prices are up just 1.8%.
Clearly, there are some blemishes in the report — that cooling in shelter CPI still hasn’t truly materialized despite the leading indicators — but there can be no question that the overall inflation picture looks bright. Not only that, but it’s the third report in as many months that supported that conclusion, which means it’s probably not a fluke. Bond markets have taken note, with the yield on the two-year Treasury note declining six basis points to 4.16%, headed for its lowest close since Oct. 5. The S&P 500 Index dipped slightly, understandably, because lower inflation doesn’t preclude a recession and a concomitant drop in earnings. Higher interest rates take a while to bite and often with harsh and unintended consequences.
Another spike in prices is certainly possible, like the one that occurred toward the end of the 1970s after Fed Chair Arthur Burns famously thought he’d beaten inflation in 1976. We can’t rule out the notion that there are bigger structural issues at play here that call for a long-running war on inflation. But using Powell’s own criteria, there can be little doubt that this particular battle is almost over — no matter what the Fed chair and his colleagues ultimately say in public.
More From Bloomberg Opinion:
• A Soft Landing Won’t Mean the Economy Is Safe: Allison Schrager
• Is 2% Inflation in View? Careful What You Wish For: John Authers
• Who Is Afraid of the Big Bad Rate Pause?: Daniel Moss
(1) Shelter inflation enters the CPI with a well-known lag to market prices, but alternative data from providers such as Zillow suggest shelter inflation should ease soon.
(2) The Bureau of Labor Statistics’ jobs report last week showed that average hourly wages at private-sector service-producing companies are increasing at a 4.1% annualized pace, based on the past three months of data. The pre-pandemic average was about 3.4%. To be sure, the data has been volatile and occasionally misleading of late. Before the latest revisions, the same data series appeared to be accelerating in November. A more definitive verdict on the state of wage pressures will come from the BLS’s more reliable Employment Cost Index, which is published quarterly and will be updated next on Jan. 31, the day before the Fed’s next interest-rate decision.
This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.
Jonathan Levin has worked as a Bloomberg journalist in Latin America and the U.S., covering finance, markets and M&A. Most recently, he has served as the company’s Miami bureau chief. He is a CFA charterholder.
More stories like this are available on bloomberg.com/opinion
CPI Inflation Rate Slides, But Service Still Rising; S&P 500 Rally Pauses
The CPI inflation rate fell faster than expected in December. However, core inflation, which strips out food and energy, only slowed in line with forecasts amid stubborn services inflation. The S&P 500 inched higher in late Thursday morning stock market action, oscillating between mild losses and gains after release of the consumer price index.
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The CPI inflation rate eased to 6.5% from 7.1% the prior month vs. Wall Street expectations of 6.6%. The consumer price index was fell 0.1% on the month vs. the expected flat reading.
The core CPI rose 0.3% vs. November levels, as expected. The annual core inflation rate eased to 5.7% from 6%. The core CPI inflation rate peaked at a 40-year-high 6.6% in September.
Also on Thursday, the Labor Department also reported new claims for jobless benefits dipped 1,000 to 205,000 in the week through Jan. 7, suggesting that layoffs have yet to pick up in a broad way.
The Fed is likely to continue stepping down the pace of rate hikes to just a quarter-point with its next policy move on Feb. 1. Odds of just a 25-basis-point Fed rate hike jumped to 93% after the CPI, up from 77%.
The extent to which the Fed keeps hiking after that will depend less on the CPI than wage growth, which is key to the outlook for service-sector inflation. The good news for markets that sparked the latest S&P 500 rally attempt is that wage growth showed a surprising deceleration in December.
Goods Vs. Services Spending
Inflation in goods prices, excluding food and energy, has decelerated from double-digit increases earlier in the year. That progress continued in December. Core goods prices fell 0.3% on the month. That brought year-over-year inflation to 2.1% from 3.7% in November.
Inflation in nonenergy services prices, which affects 56% of consumer budgets, still hasn’t begun to subside. Core services prices rose 0.5% on the month and 7% from a year ago vs. 6.8% in November. However, that’s partly due to the way the Labor Department calculates housing inflation. While new rates for rental housing have been falling for months, it takes about a year for that to be fully reflected in renewed leases and the CPI.
Still, services prices excluding shelter rose 7.4% from a year ago. That includes energy services prices, which are up 15.6% from a year ago. Excluding energy and shelter, service prices are up about 6.2% from a year ago.
S&P 500 Reaction To CPI Report
The S&P 500 rose less than 0.1% around 10:55 a.m. ET, showing little direction. The Dow Jones Industrial Average gained 0.4%, while the Nasdaq composite dipped 0.1%.
Meanwhile, the 10-year Treasury yield slipped 2 basis points to 3.53%.
The latest S&P 500 rally off mid-October lows got another jolt of energy on Jan. 6, when unexpectedly tame wage inflation data raised hope that the Fed could wind down rate hikes before they crashed the economy.
The rally sparked by the jobs report has lifted the S&P 500 within 0.4% of its 200-day moving average. The past couple of rally attempts have faltered around that level, but this one might have some legs.
The S&P 500 finished 13.7% above its Oct. 13 bear-market intraday low on Wednesday, but remained 17.6% below its all-time closing high.
Be sure to read IBD’s The Big Picture every day to stay in sync with the market direction and what it means for your trading decisions.
CPI Inflation Report Details
Prices for used cars and trucks fell 2.5% on the month and are now 8.8% below year-ago levels. New vehicle prices were dipped 0.1% from November, while the annual price increase moderated to 5.9% from 7.2% the prior month.
Energy prices fell 4.5% on the month, while the annual increase moderated to 7.3% from 13.1% in November.
Prices for food climbed 0.3% on the month, as the annual increase slowed to 10.4% from 10.6%.
Rent of one’s primary resident and owner’s equivalent rent rose 8.3% and 7.5% from a year ago, respectively. Both rose 0.8% on the month.
Prices for transportation services rose 0.2% on the month and 14.6% from a year ago.
Medical services prices rose 0.1% on the month, after falling 0.7% and 0.6% the prior two months. That left the annual increase at 4.1%.
Fed’s Powell Shifts Focus From CPI To Wages
A further decline in the CPI inflation rate could allow the S&P 500 to keep moving higher, but it won’t be the catalyst.
Wage growth has become key to the Fed policy outlook, so investors celebrated after the December jobs report showed a sudden downshift in Q4. The average hourly wage rose 4.6% from a year ago, below 5% forecasts, kick-starting the current S&P 500 rally. Wage growth has now fallen to the lowest level since August 2021, sliding a full percentage point from the March peak.
With wages growing at an annualized 4% rate in Q4, wage growth appears to be receding to close to Fed Chair Jerome Powell’s target of 3.5%. Factoring in productivity growth of about 1.5%, wage growth of 3.5% could bring inflation close to in line with the Fed’s 2% goal.
The most important inflation rate going forward is personal consumption expenditures (PCE) services minus energy and housing, Powell says. Core goods-price inflation is waning and the same is likely for housing inflation in 2023, given the stalling of market rents. But inflation in nonenergy services, excluding housing, is likely to stay elevated as long as wage growth remains hot.
Housing accounts for over 30% of the CPI and 40% of the core CPI, but it only makes up 15% of the broader PCE basket.
Health care spending in the CPI excludes the bulk of outlays: spending covered by employers and government programs. Further, the recent declines in medical services prices in the CPI reflects stale data on insurer profits. By contrast, PCE health care services inflation is on the rise amid higher labor costs. Also, food consumed at restaurants, which continues to see high inflation, is excluded from the core CPI but is grouped among core PCE services.
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Dow Jones Futures: Stock Market Rallies Into CPI Inflation Report; Amazon Leads Megacaps
Dow Jones futures were little changed early Thursday, along with S&P 500 futures and Nasdaq futures, ahead of Thursday’s CPI inflation report.
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The stock market rally on Wednesday extended recent gains. Investors are betting on tame inflation data, raising the stakes for the Fed-critical report.
Amazon.com (AMZN) and Tesla stock led a megacap rally Wednesday, with Apple (AAPL), Microsoft (MSFT) and Google parent Alphabet (GOOGL) having solid sessions. Tesla (TSLA) and AMZN stock also reflected strong performance in auto/EV names and e-commerce plays, respectively.
Celsius Holdings (CELH) heated up Wednesday, offering a buy signal.
CELH stock was added to SwingTrader on Wednesday and the IBD Leaderboard watchlist. Celsius was also Wednesday’s IBD Stock Of The Day.
Key Earnings
KB Home (KBH) reported earnings after the close, kicking off housing reports. KBH stock declined modestly as KB Home earnings fell well short of fiscal Q1 views, with revenue also missing. KB Home stock had rallied 3.2% on Wednesday to its best level since March 2022, up nearly 13% so far this year.
Homebuilder stocks, and housing-related names generally, have been rallying in recent weeks.
Taiwan Semiconductor (TSM) earnings topped views early Thursday, but revenue fell short. Taiwan Semi, which makes chips for Apple, Nvidia (NVDA) and many others, said Q1 sales could fall vs. a year earlier. TSMC also cut 2023 capital spending plans. Shares still rose modestly early Thursday, signaling a test of the 200-day moving average. TSM stock rose 0.6% on Wednesday.
Disney Taps Nike Veteran
Walt Disney (DIS) named Nike (NKE) Chairman Mike Parker as its new chair, replacing Susan Arnold. Parker has been on Disney’s board for seven years.
Disney also recommended that shareholders vote for its board slate and not support activist investor Nelson Peltz, who is seeking to join the Dow Jones entertainment giant’s board.
DIS stock rose modestly. Nike, a fellow Dow stock like Disney, Apple and Microsoft, was little changed after hours.
CPI Inflation Report
The December consumer price index will be released at 8:30 a.m. ET.
Economists expect flat consumer prices after November’s 0.1% gain. Core CPI is seen rising 0.3% after November’s 0.2% advance. The overall CPI inflation rate should continue to cool, to 6.6% from November’s 7.1%. Core inflation is expected to slow to 5.7% from November’s 6%.
The CPI inflation rate peaked at 9.1% last June, while the core CPI inflation rate hit 6.6% in September, both 40-year highs.
Other data this week, including New York Fed inflation expectations and small businesses with job opening and plans to hire, are pointing to cooling inflation and labor markets.
A tame inflation report should lock in a quarter-point Fed rate hike at the Feb. 1 policy meeting, slowing from 50 basis points and 75 basis points in the prior two meetings. More importantly, cooling inflation could raise expectations that the Fed will pause rate hikes, perhaps after the March meeting.
Dow Jones Futures Today
Dow Jones futures rose 0.1% vs. fair value. S&P 500 futures were little changed and Nasdaq 100 futures lost 0.1%.
The 10-year Treasury yield dipped 2 basis points to 3.53%.
Crude oil futures rose 1%.
The CPI inflation report is sure to swing Dow Jones futures and Treasury yields.
Remember that overnight action in Dow futures and elsewhere doesn’t necessarily translate into actual trading in the next regular stock market session.
Join IBD experts as they analyze actionable stocks in the stock market rally on IBD Live
Stock Market Rally
The stock market rally added to recent gains, with the major indexes closing near session highs for a second straight session. The Nasdaq led the advance thanks to Amazon and big-cap growth names.
The Dow Jones Industrial Average rose 0.8% in Wednesday’s stock market trading. The S&P 500 index climbed 1.3%. The Nasdaq composite jumped 1.8%. The small-cap Russell 2000 gained 1.2%.
U.S. crude oil prices rose 3.1% to $77.41 a barrel, as China optimism outweighs a huge jump in U.S. crude stockpiles.
The 10-year Treasury yield fell 6 basis points to 3.55%.
ETFs
Among growth ETFs, the Innovator IBD 50 ETF (FFTY) climbed 1.3%. The iShares Expanded Tech-Software Sector ETF (IGV) advanced 1.6%, reclaiming its 50-day line, with MSFT stock a major IGV holding. The VanEck Vectors Semiconductor ETF (SMH) rose 1.2%, moving above its 200-day line. TSM stock is a top SMH component.
Reflecting more-speculative story stocks, ARK Innovation ETF (ARKK) popped 3.4% and ARK Genomics ETF (ARKG) 3.7%. Tesla stock remains a top holding across Ark Invest’s ETFs. Cathie Wood’s Ark has been loading up on TSLA shares in recent days and weeks.
SPDR S&P Metals & Mining ETF (XME) edged up 0.5% and the Global X U.S. Infrastructure Development ETF (PAVE) rose 1.3%. U.S. Global Jets ETF (JETS) ascended 0.4%. SPDR S&P Homebuilders ETF (XHB) popped 2.6%. The Energy Select SPDR ETF (XLE) nudged 0.3% higher and the Financial Select SPDR ETF (XLF) climbed 0.9%. The Health Care Select Sector SPDR Fund (XLV) added 0.6%.
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Megacap Stocks
Tesla stock rose 3.7% to 123.22, extending a bounce from Friday morning’s bear market low of 101.81. Shares are still below their long-falling 21-day line. Tesla is planning a big Austin plant expansion and reportedly is near a preliminary deal for a new factory in Indonesia. The latter could complicate Tesla Shanghai demand issues.
China’s government on Thursday delayed yet-another Tesla Shanghai expansion, which would lift annual production capacity to two million from a recently enlarged 1.2 million. Officials reported are concerned Elon Musk’s Starlink.
TSLA stock fell slightly before the open.
Amazon stock jumped 5.8% to 95.09, closing above its 50-day moving average for the first time in four months. AMZN stock also set a bear market low last Friday.
Apple stock popped 2.1%, back above its 21-day line. That came despite Barclays cutting its AAPL price target, citing weakening Apple demand across many product categories.
Google stock gained 3.5%, also retaking the 21-day line. Microsoft stock advanced 3%, just below its 21-day line after plunging last week.
Celsius Stock
CELH stock jumped 5.3% to 106.57 on Wednesday in heavy volume, after Tuesday’s upside reversal. Shares rose from the 50-day line, broke a trendline and closed above the 21-day moving average. All that offered a buy signal. CELH stock did finish off intraday highs of 108.80, but had a strong close.
Market Rally Analysis
The stock market rally showed more strength Wednesday heading into the CPI inflation report.
The S&P 500 index moved further from the 50-day line and topped Tuesday’s intraday high. While still below the 200-day line, the benchmark index did top its 10-week and 40-week lines. The Russell 2000 cleared its 200-day line after topping its 50-day Wednesday.
The Nasdaq, which has been a laggard in recent months, cleared its 50-day line for the first time in nearly a month.
Meanwhile, leading stocks showed positive action overall. CELH stock flashed a buy signal. Stocks that recently broke out generally held ground or kept climbing.
Apple, Tesla, Amazon and other megacaps are a long way from being actionable, but at least are not weighing on the major indexes.
Just looking at the major indexes and leading stocks, the stock market rally is showing healthy action, albeit with more resistance levels ahead.
But rallying into Fed-critical economic data or events has been dicey, at best, over the past several months. Yes, a tame CPI inflation report could send the market rally flying. But a hotter-than-expected reading could trigger a big sell-off. And the market is pricing in “good news.”
Of course, it’s not the news that matters, but the reaction to the news. The November CPI inflation report was cooler than expected on Dec. 13, pushing the major indexes to their best intraday levels in months. But that was the top for the October-December market rally. The indexes closed well off highs that day and skidded lower until almost year-end.
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What To Do Now
Investors may have added some exposure in recent days with the indexes moving higher and many stocks flashing buy signals.
Those recent buys could look great Thursday, but they could also all blow up, depending on the December CPI inflation report.
So investors shouldn’t have been too exposed heading into the inflation reading.
But be ready to act if the major indexes show strong action beyond the opening bell. A lot of quality stocks are flashing buy signals or setting up.
Don’t forget about earnings season. JPMorgan Chase (JPM) and several other banking giants report Friday morning, along with Delta Air Lines (DAL) and UnitedHealth (UNH).
Microsoft and Tesla stock are due in two weeks, with Apple, Amazon and Google soon following.
Earnings results and guidance will be critical amid uncertain economic times.
Read The Big Picture every day to stay in sync with the market direction and leading stocks and sectors.
Please follow Ed Carson on Twitter at @IBD_ECarson for stock market updates and more.
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Dow Jones Futures Rise Ahead Of CPI Inflation Report; U.S. Airline Flights Grounded
Dow Jones futures rose slightly early Wednesday, along with S&P 500 futures and Nasdaq futures. U.S. domestic flights were grounded due to an FAA glitch. WWE, Wells Fargo, Axcelis Technologies and Impinj also were in focus before the open.
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The stock market rally was indecisive for much of Tuesday, but the major indexes gained steam, with the S&P 500 moving its 50-day moving average. Investors await the December CPI inflation report on Thursday morning.
Medpace (MEDP) rose solidly Tuesday, flashing a new buy signal after a similar move fizzled at the end of 2022. First Solar (FSLR) rebounded from its 50-day line, also providing an early entry. But ELF Beauty (ELF) and Super Micro Computer (SMCI) tumbled after Monday’s reversals.
MEDP stock and ELF Beauty are on IBD Leaderboard. SMCI stock is on the IBD 50. Medpace was Tuesday’s IBD Stock Of The Day.
Tesla (TSLA) and UnitedHealth (UNH) edged lower, as many big caps continue to struggle.
Investors should remain cautious, especially with the CPI inflation report looming.
Business News
The FAA halted all domestic flights until 9 a.m.-9:30 a.m. ET due to a significant systems outage. Flights had been disrupted since early Wednesday morning. The FAA expects to “repopulate” the system soon, but airlines will have to scramble to get back on schedule. Airline stocks including Delta Air Lines (DAL) and United Airlines (UAL) were slightly lower.
Vince McMahon is once again chairman at World Wrestling Entertainment (WWE), after his daughter Stephanie stepped down as chairwoman and co-CEO Tuesday evening. Mr. McMahon, a major shareholder, resigned last year over payments related to sexual misconduct claims. WWE stock rose solidly in premarket trading, after soaring in recent days on reports of his expected return to lead a sale of the company.
Meanwhile, Wells Fargo (WFC) will largely exit the mortgage business amid regulatory pressure, CNBC reported late Tuesday. It’ll only offer home loans to existing bank and wealth management customers and borrowers in minority communities. WFC stock was little changed in extended trade.
Axcelis Technologies (ACLS), which made a strong move over the last several sessions, said revenue for the December-ending fourth quarter topped $250 million vs. the chip-equipment maker’s prior guidance of $232 million to $240 million. ACLS stock edged higher after hours.
Impinj (PI) says Q4 sales exceeded $76 million vs. the RFID-chip maker’s prior guidance of $71.5 million-$73.5 million. PI stock, already slightly above the 50-day line, rose solidly overnight. That could offer an early entry or come close to Impinj stock’s flat base buy point. PI stock also is on Leaderboard.
Earnings season also begins to pick up late in the week. Taiwan Semiconductor (TSM) reports on Thursday morning. On Friday, JPMorgan Chase (JPM), Bank of America (BAC), Citigroup (C) and Wells Fargo all report before the open, along with Delta Air and UnitedHealth.
Dow Jones Futures Today
Dow Jones futures rose 0.25% vs. fair value. S&P 500 futures climbed 0.3% and Nasdaq 100 futures advanced 0.3%.
The 10-year Treasury yield fell 3 basis points to 3.59%.
Crude oil futures edged higher despite the American Petroleum Institute estimating a huge weekly jump in U.S. inventories. The Energy Information Administration will release U.S. crude and petroleum products data at 10:30 a.m. ET.
Remember that overnight action in Dow futures and elsewhere doesn’t necessarily translate into actual trading in the next regular stock market session.
Join IBD experts as they analyze actionable stocks in the stock market rally on IBD Live
Stock Market Rally
After Monday’s disappointing fade, the stock market rally strengthened Tuesday afternoon, closing near session highs.
The Dow Jones Industrial Average rose 0.6% in Tuesday’s stock market trading. The S&P 500 index climbed 0.7%. The Nasdaq composite climbed 1%. The small-cap Russell 2000 popped 1.5%
Tesla stock edged down 0.8% Tuesday after bouncing 5.9% on Monday. Shares reversed higher Friday after setting a bear market low of 101.06 after the EV giant announced big price cuts in China and other key Asian markets. TSLA stock needs a lot of repair.
Shares rose 2% before Wednesday’s open. Tesla has applied to Texas for a big expansion of its Austin assembly plant, the Austin Business Journal reported late Tuesday. Tesla Austin is still ramping up to its existing capacity.
UNH stock dipped 0.8%, hitting its worst levels since last June. The Dow Jones health insurer has tumbled 8.3% already in 2023, after ending 2022 in reasonably good shape. UnitedHealth earnings and guidance Friday will be important for the suddenly embattled sector.
U.S. crude oil prices rose 0.7% to $75.12 a barrel. Natural gas prices tumbled 6.9%.
The 10-year Treasury yield jumped 10 basis points to 3.62% after skidding 20 basis points in the prior two sessions.
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ETFs
Among growth ETFs, the Innovator IBD 50 ETF (FFTY) rose 1.1%, while the Innovator IBD Breakout Opportunities ETF (BOUT) edged up 0.15%. The iShares Expanded Tech-Software Sector ETF (IGV) eked out a 0.1% gain. The VanEck Vectors Semiconductor ETF (SMH) advanced 1.3%, just topping the 200-day line after clearing the 50-day on Friday. TSM stock is a big SMH holding.
Reflecting more-speculative story stocks, ARK Innovation ETF (ARKK) jumped 2.5% and ARK Genomics ETF (ARKG) 3.6%. Tesla stock is still a major holding at Ark Invest, with Cathie Wood bolstering her position in recent weeks.
SPDR S&P Metals & Mining ETF (XME) ran up 2.5% and the Global X U.S. Infrastructure Development ETF (PAVE) climbed 1.6%. U.S. Global Jets ETF (JETS) ascended 2.4%, with DAL stock among the notable holdings. SPDR S&P Homebuilders ETF (XHB) rose 1%. The Energy Select SPDR ETF (XLE) advanced 0.7% and the Financial Select SPDR ETF (XLF) gained 0.6%. The Health Care Select Sector SPDR Fund (XLV) closed up 0.8%, with UNH stock a top XLV holding.
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Market Rally Analysis
The stock market rally spent much of the morning around break-even, but finished Tuesday with a relatively strong performance.
The S&P 500 rose above the 50-day line. The 200-day average is modestly above that.
The Dow Jones rebounded from a test of its 50-day line after moving above that key level on Friday. The Nasdaq rose from its 21-day line with the 50-day line not far away.
The Russell 2000 is back above its 50-day line, just below its 200-day.
The S&P MidCap 400 rose on Tuesday after finding support at the 50-day. That’s after jumping above its 21-day, 50-day and 200-day lines on Friday. Invesco S&P 500 Equal Weight ETF (RSP) looks quite similar.
RSP and the MidCap 400 highlight how big caps such as Apple (AAPL), Tesla and UNH stock have weighed on the market.
A sustained stock market rally may not take hold until there is clarity on when the Federal Reserve will stop hiking rates. Markets strongly expect just a quarter-point hike at the Feb. 1 policy meeting and again in late March.
Thursday’s CPI inflation report could lock in expectations for a quarter-point hike. Inflation should continue to trend lower in the coming months, if only because the year-over-year comparisons are so steep.
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Leading Stocks Mixed
A number of leading stocks have flashed buy signals in recent days and weeks. But most have quickly faltered. In some cases, such as MEDP stock, they bounce back a few days later.
Medpace jumped 5.9% to 223.29 in heavy volume, rebounding from the 50-day line and clearing its Dec. 29 high, when MEDP tried to move out.
First Solar soared 7.4% to 171.01, continuing a mini-win streak. The move from the 50-day line offered an early entry within a new base, but is now looking a little extended. But the 173.78 official buy point isn’t far away.
Other names keep tumbling.
ELF stock had a promising breakout Friday, but gave up most of those gains Monday and plunged 8.3% on Tuesday to 51.15, knifing below the 50-day line and undercutting the low of its flat base.
SMCI stock soared Monday morning, offering an early entry, but closed only fractionally higher. On Tuesday, shares gapped down 7.55%, below the 50-day line, after a short-seller report.
Many other stocks are hovering right around potential buy points.
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What To Do Now
The stock market rally is still in force, but the major indexes, sectors and especially leading stocks are prone to reversals. Thursday’s CPI inflation report could trigger big gains, with the major indexes pushing decisively above some key levels. But it could also go the other way.
Investors should be cautious about their exposure and be wary of new buys, especially before the CPI report.
If you do make new buys, know your exit strategy before going in. Consider taking partial profits quickly to lock in some gains.
This is still a window-shopping market. But there are a lot of intriguing stocks to watch from a variety of sectors. Get those watchlists ready.
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Wall St rises after CPI data but Fed concerns persist
NEW YORK, Dec 13 (Reuters) – U.S. stocks rose on Tuesday after a unexpectedly small consumer price increase buoyed optimism that the Federal Reserve could soon dial back its inflation-taming interest rate hikes, but concerns remained the central back could stay aggressive.
The benchmark S&P 500 (.SPX) jumped as much as 2.76% to a three-month high early in the trading session on news that November U.S. consumer prices barely rose as gasoline and used cars cost less, leading to the smallest annual inflation increase in nearly a year at 7.1%.
Rising expectations for smaller and slower Fed rate hikes sent U.S. Treasury yields sharply lower and helped lift rate-sensitive gauges like the S&P 500 growth index (.IGX), up 1.18%, and the S&P 500 real estate index (.SPLRCR) up 2.04% to their highest intraday levels in nearly three months. The real estate sector notched its biggest daily percentage gain in two weeks as the best performing of the 11 major sectors.
Fed funds futures prices implied a better-than-even chance that the Fed will follow an expected half-point rate hike this week, with smaller 25-basis point hikes at its first two meetings of 2023, and stopping shy of 5% by March.
Morgan Stanley’s chief U.S. economist Ellen Zentner now sees even smaller Fed rate hikes, of 25 basis points at the central bank’s February meeting, and no further increases in March, leaving the peak fed funds rate at 4.625%.
Still, equities pared gains ahead of the Fed’s policy statement on Wednesday, in which the central bank is widely expected to announce a 50 basis point rate hike.
“There was some excitement early on that the CPI number was once again below expectations – it shows some sequential cooling – but once we saw that initial pop, stock investors kind of reassessed,” said Jason Ware, chief investment officer at Albion Financial Group in Salt Lake City, Utah.
“That probably took some of the steam out of the markets once investors realized tomorrow very well may be (Fed Chair) Jerome Powell throwing cold water on the rally today.”
The Dow Jones Industrial Average (.DJI) rose 103.6 points, or 0.3%, to 34,108.64, the S&P 500 (.SPX) gained 29.09 points, or 0.73%, to 4,019.65 and the Nasdaq Composite (.IXIC) added 113.08 points, or 1.01%, to 11,256.81.
[1/3] Screens display the trading information for ExxonMobil on the floor of the New York Stock Exchange (NYSE) in New York City, U.S., December 9, 2022. REUTERS/Brendan McDermid
Energy (.SPNY), up 1.77%, was among the best performing S&P sectors on the day as the softer-than-anticipated inflation data sent the dollar lower and boosted crude oil prices.
The consumer inflation numbers follow November’s producer prices report last week, which was slightly higher than expected but pointed to a moderation in the trend.
Still, some questioned whether the trend in prices could continue.
“Today’s CPI print is incrementally good, but it needs to be sustained,” said Venu Krishna, head of U.S. equity strategy at Barclays in New York.
“There is a big question mark whether we can really come to the 2% inflation (Fed target). Perhaps we live in a world in which it will be higher and that means rates will be higher and then multiples will certainly be lower.”
Moderna Inc (MRNA.O) surged 19.63% after the biotechnology firm’s experimental vaccine in combination with Merck & Co Inc’s (MRK.N) blockbuster drug Keytruda showed promising results in a skin cancer study. Merck shares advanced 1.78%.
Pinterest Inc (PINS.N) jumped 11.90% after Piper Sandler upgraded the social media platform’s stock to “overweight” from “neutral.”
Advancing issues outnumbered declining ones on the NYSE by a 2.83-to-1 ratio; on Nasdaq, a 1.49-to-1 ratio favored advancers.
The S&P 500 posted 18 new 52-week highs and 1 new lows; the Nasdaq Composite recorded 92 new highs and 212 new lows.
Reporting by Chuck Mikolajczak, additional reporting by Carolina Mandl; Editing by Richard Chang
Our Standards: The Thomson Reuters Trust Principles.
Mortgage rates drop after CPI inflation report
A prospective home buyer, left, is shown a home by a real estate agent in Coral Gables, Florida.
Getty Images
The average rate on the 30-year fixed mortgage dropped to 6.28% Tuesday, according to Mortgage News Daily. It is now at the lowest level since mid-September.
The decline came after a lower-than-expected reading of the November’s consumer price index, a widely watched measure of inflation. The report sent investors rushing into U.S. Treasury bonds, causing yields to drop. Mortgage rates follow loosely the yield on the 10-year Treasury.
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“The second consecutive month of reassuring CPI data continues to build a case that inflation has turned a corner, but rates will be careful about reading too much into that potential shift given the volatility of the data in recent months,” said Matthew Graham, chief operating officer at Mortgage News Daily. “The bond market will also want to see what the Fed does with this info in tomorrow’s updated Fed rate forecasts in the dot plot.”
Mortgage rates began rising at the start of this year and accelerated in the spring and summer, with the 30-year fixed going from around 3% to well over 7% by the end of October. That sent the housing market into an early deep freeze. Sales of existing homes have fallen for nine straight months and were down 24% in October year-over-year, according to the latest read from the National Association of Realtors.
But rates then fell sharply in November, after the CPI report for October indicated that inflation was cooling. The rate ended November at 6.63%. Some suggested, albeit cautiously, that the drop in rates might be bringing buyers back to the market.
“There are some very very modest green shoots over the last few weeks, as rates have come down, but I am not ready to get sucked back into the conversation we had in August when we felt better,” Doug Yearley, CEO of luxury homebuilder Toll Brothers, said on the company’s quarterly earnings call with analysts last week. Yearly was referring to a very brief rate drop in August.
Redfin reported homebuyer demand “has started ticking up” in November. It’s demand index, which measures requests for home tours and other homebuying services from Redfin agents, was up 1.5% from a month earlier but down 20% from a year earlier during the four weeks ending Nov. 27.
“There have been a handful of pieces of relatively good news for the housing market lately, but we’re far from out of the woods,” said Redfin deputy chief economist Taylor Marr. “Key indicators of homebuying demand will likely be teetering on a knife’s edge with every data release that comes out related to the Fed’s path to eventually bringing rates down.”
All that optimism, however, did not translate into higher mortgage rate locks for homebuyers, which are generally an indicator of future home sales. Those rate locks fell 22% in November, compared with October, and were down 48% year-over-year, according to mortgage tech and data firm Black Knight.
“It’s still extremely unaffordable even with rates coming down, even with prices coming down in each of the last four months. We’re still less affordable than we were at the peak of the market in 2006, and you’re seeing that play out in the rate lock numbers,” said Andrew Walden, vice president of enterprise research strategy at Black Knight.
Walden points to inventory still being about 40% shy of where it should be, while the homebuilders continue to pull back and potential sellers stay on the sidelines. Even as prices weaken and rates come down, he said both are still substantially higher than they should be compared with incomes to make housing affordable by historical standards. And none of those are going to move that much any time in the near future.
“As we move throughout 2023 you’re going to see prices continue to soften, you’re going to see incomes hopefully continue to grow and eat up some of that gap, and I think likely we are going to see rates come down from where they are today, but it’s going to take an extended period of time to get there,” said Walden.
Asia-Pacific shares, U.S. CPI, inflation
Pedestrians cross a road in front of the Tokyo Stock Exchange (TSE), operated by Japan Exchange Group Inc. (JPX), in Tokyo, Japan, on Thursday, Oct. 29, 2020.
Kiyoshi Ota | Bloomberg via Getty Images
Asia-Pacific shares opened in positive territory as investors look ahead to a highly anticipated Federal Reserve meeting and U.S. CPI data reading.
Hong Kong’s Hang Seng index was up 0.67% after Chief Executive John Lee announced further easing of Covid restrictions.
Australia’s S&P/ASX 200 was up 0.17%. The Nikkei 225 in Japan added 0.29%, while the Topix inched up 0.40%.
Korean benchmark Kospi dropped fractionally and the Kosdaq shed 0.22%. The MSCI’s broadest index of Asia-Pacific shares outside Japan climbed 0.42%.
In mainland China, the Shenzhen Component shed 0.174%, while the Shanghai Composite climbed 0.07%.
Hong Kong will post its industrial production data for the third quarter, and the Bank of Korea will also post minutes from its November meeting.
Australian business sentiment fell into negative territory for the first time since December last year.
Traders are bracing for the release of the U.S. consumer price index report for November and hoping for signs of easing inflation. Economists surveyed by Dow Jones expect a 0.3% increase on a monthly basis, which would mark a step down from October’s 0.4%
Overnight in the U.S., the blue-chip Dow gained 528.58 points, or 1.58%, to 34,005.04, marking its first close over 34,000 since Dec. 2. The S&P 500 climbed 1.43% to close at 3,990.56, and the Nasdaq Composite added 1.26% to stand at 11,143.74.