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Tag: Dow Jones Industrial Average

  • Stock market news today: Dow lags as new jobs data shows slowing labor market demand

    Stock market news today: Dow lags as new jobs data shows slowing labor market demand

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    Bank execs ‘cautious’ heading into 2024

    Bank executives had a cautious tone while speaking at the Goldman Sachs US Financial Services Conference in Manhattan on Tuesday.

    As Yahoo Finance’s David Hollerith reports:

    Executives from some of the country’s biggest banks noted the resilience of the US economy, but warned loan losses are likely to continue and urged restraint regarding 2024 outlooks.

    “2023 has been an interesting year,” Goldman Sachs (GS) CEO David Solomon said. Solomon rattled off the concerns financial institutions faced this year, including a regional bank crisis in the spring, a rapid rise in interest rates, and geopolitical risks.

    For the US economy, Solomon said “the chance of a soft landing is much higher,” referring to the idea the Federal Reserve could bring inflation back to its 2% target without causing a recession. Still, Solomon said it made to remain “cautious” as the firm approaches 2024.

    Bank of America (BAC) CEO Brian Moynihan was firmer in his assessment of the economy, saying, “The economy has entered a soft landing. It’s set up.”

    Moynihan noted the firm’s data showed consumer spending is growing at a pace of about 4%, less than half the 9% growth seen from 2021 to 2022.

    “The way customers are spending their money is leveled out,” Moynihan said. “It’s not a credit risk question. It’s just their appetite [for] credit is down.”

    Bank of America anticipates the Fed will cut interest rates two or three times next year and four times in 2025.

    “This will be higher for longer, but higher in the context that we sort of won the war on inflation,” Moynihan said. “We’ve got to be careful not to win it by too much right now.”

    Read more here.

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  • Why the U.S. economy isn't out of the woods as stock market soars

    Why the U.S. economy isn't out of the woods as stock market soars

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    A rally in the U.S. stock and bond markets in the past week defied the bears and fueled hopes for more gains to come by year-end and in 2024 as Wall Street bought into the idea that the economy will pull off a “soft landing” after a run of interest-rate hikes by the Federal Reserve.

    But market skeptics are putting investors on alert that the “soft-landing” scenario is still at risk with consumer spending and job growth slowing, along with corporate earnings.  

    “The equity market is misguided,” said Josh Schachter, senior portfolio manager at Easterly Investment Partners, in a phone interview with MarketWatch. “The markets are behaving in almost a bipolar fashion — some asset classes such as bonds
    BX:TMUBMUSD10Y,
    oil
    BRN00,
    -0.29%    ,
    and dollar
    DXY,
    are being priced for a recession, while other assets such as equities and bitcoin
    BTCUSD,
    +2.16%    ,
    are priced risk-on.” 

    U.S. stocks built on their November gains in the past week, with the S&P 500 index
    SPX
    ending at new 2023 high on Friday and the Dow Jones Industrial Average
    DJIA
    logging its fifth week in the green. The rebound in stocks was due in part to bond investors starting to believe the Fed is done raising interest rates and is likely to begin cutting them by the first quarter of 2024. 

    Meanwhile, the narrative that a resilient labor market and steadier-than-expected economic growth should keep a recession at bay has gained traction, bolstering the “goldilocks” scenario for the financial markets. 

    See: These two leading indicators suggest a U.S. recession has already begun, according to Wall Street’s favorite permabear

    However, signs are emerging that consumer spending, which accounts for about 70% of the U.S. economic output and has boosted the economy this year, has likely run its course following the post-pandemic recovery. Credit card and car loan delinquency rates are rising, student loan payments have resumed, consumer spending is cooling, and there are warnings from top retailers.

    Joseph Quinlan, head of CIO market strategy for Merrill and Bank of America Private Bank, said the “softness” in the U.S. consumer sector is visible but not huge, referring to that as “a canary in a coal mine,” he told MarketWatch via phone on Thursday. 

    The pullback in consumer spending is welcome news for Fed officials, who have increased interest rates 11 times since March 2022 to get inflation back to its preferred target of 2%. However, some analysts are worried that high interest rates and a decline in pandemic savings could eventually translate to weaker consumers in 2024, potentially another sign of a long-predicted slowdown in the U.S. economy.

    “One of the things I’m most concerned about is consumers’ ability to continue to pace the economy — you’ve got several headwinds that haven’t really borne completely out yet,” said Jason Heller, senior executive vice president at Coastal Wealth. “Does the consumer continue to behave the way they behaved the last 36 months? I think you will eventually see a slowdown in consumer spending which is going to mandate a slowdown in the labor market.” 

    Lauren Goodwin, economist and portfolio strategist at New York Life Investments, acknowledged that a modest slowdown in inflation and employment growth means that a “Fed relief rally” in stocks can be sustained, but her concern is this late-cycle limbo is no different than those of the past, which is a moment of “goldilocks” before the very reason that inflation is moderating — slowing economic growth and employment — becomes clear in the data.

    See: ‘We Are Still Headed for a Pretty Hard Landing,’ Ex-Treasury Secretary Larry Summers Says

    That’s why the November employment report, which will be released by the Bureau of Labor Statistics next Friday at 8:30 a.m. Eastern, will be key for investors to watch. The U.S is expected to add 172,500 jobs in November after a 150,000 increase in the prior month, according to economists polled by Dow Jones. The percentage of jobless Americans seeking work is forecast to stay the same at 3.9%, leaving it at the highest level since the beginning of 2022.

    See: U.S. job growth pick up on the radar this coming week

    In fact, nonfarm payroll report publication days have been among the most volatile for stocks in 2023, compared with the release of monthly consumer-price index readings, which sparked some of the biggest daily up and down moves for the S&P 500 and other major indexes in 2022. 

    See also: Do CPI days still rock the stock market? How 2023 stacks up to 2022

    This year, the S&P 500 saw an absolute average percentage change of 1.12% on employment situation release dates, compared with an average percentage move of 0.64% on CPI days, according to figures compiled by Dow Jones Market Data. 

    That said, analysts are skeptical if the employment data is able to tell “a radically different story” but suggest the labor market will remain relatively tight into 2024, said Quinlan and Lauren Sanfilippo at Merrill and Bank of America Private Bank, in a phone interview. 

    See: What 2024 S&P 500 forecasts really say about the stock market

    Too much optimism in 2024 earnings growth

    Corporate America and their shares are telling investors a different story about next year. 

    With an estimated average S&P 500 earnings growth of 11.7% next year, the U.S. stock market is nowhere near recessionary concerns, said Heller. “We’ve [the stocks] priced in pretty significant growth in 2024.” 

    Strategists at Merrill and Bank of America Private Bank are in the camp of expecting a “mid-single digit” earnings growth for the S&P 500 in 2024, as earnings have troughed and the economy will fall back to the 2%-level of real growth after high rates confine consumer spending and corporate profits, cooling a red-hot economy. 

    To be sure, Wall Street analysts tend to overestimate the earnings-per-share (EPS) for the S&P 500, said John Butters, senior earnings analyst at FactSet. 

    The current bottom-up EPS estimate for the S&P 500 in 2024 is $246.30. If that holds true, that would be the highest EPS number reported by the large-cap index since FactSet began tracking this metric in 1996. 

    However, over the past 25 years, the average difference between the EPS estimate at the beginning of the year and the actual EPS number has been 6.9%, meaning analysts on average have overestimated the earnings one year in advance, said Butters in a Friday note (see chart below).

    SOURCE: FACTSET

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  • CNBC Daily Open: 'Premature' to talk about cutting rates?

    CNBC Daily Open: 'Premature' to talk about cutting rates?

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    U.S. Federal Reserve Board Chairman Jerome Powell participates in a panel discussion at the 24th Jacques Polak Annual Research Conference on November 8, 2023 in Washington, DC.

    Alex Wong | Getty Images News | Getty Images

    This report is from today’s CNBC Daily Open, our new, international markets newsletter. CNBC Daily Open brings investors up to speed on everything they need to know, no matter where they are. Like what you see? You can subscribe here.

    What you need to know today

    Fed Chair Powell says too ‘premature’ to cut rates
    Federal Reserve Chairman     Jerome Powell said Friday it was too early to declare victory over inflation and beat back on market views for interest rate cuts next year. “It would be premature to conclude with confidence that we have achieved a sufficiently restrictive stance, or to speculate on when policy might ease,” Powell said in prepared remarks. Markets perceived his comments as dovish, sending stocks higher and Treasury yields sharply lower.

    S&P 500 soars to 2023 high  
    The S&P 500 rose 0.59% Friday and closed at a new high for 2023, extending a strong rally from November. The Nasdaq Composite ended 0.55% higher, while the Dow Jones Industrial Average added 0.82%. The benchmark index closed at its highest level since March 2022 as investors were hopeful that that the Fed might be done with raising interest rates. Europe’s Stoxx 600 closed 1% higher Friday after finishing its best month since January.

    A $1.9 billion regional airlines deal
    Alaska Airlines has agreed to buy rival Hawaiian Airlines in a $1.9 billion deal as the carriers make a push to expand along the West Coast. Alaska would pay $18 a share for Hawaiian and would take on $900 million of its debt, the companies said Sunday. The deal could also draw another potential regulatory battle in the second proposed airline merger in less than two years.

    Uber gets a spot in the S&P 500
    Uber will be added to the S&P 500 Index, replacing Sealed Air Corp. The change will take place prior to the open of trading on Dec. 18. The ride-hailing company made its delivery business profitable faster than expected, while growth in advertising revenue has also contributed to Uber’s profitability.

    [PRO] China’s version of Spotify is ‘underappreciated,’ Morgan Stanley says

    Tencent Music Entertainment “music value [is] still underappreciated,” Morgan Stanley says even as the company is convincing more people in China to pay for music. The company’s online music subscribers topped 100 million in the July-to-September period, for the first time since it listed in the U.S. in late 2018.

    The bottom line

    Wall Street is off to a solid start this December, with the major averages recording their fifth straight week of gains on Friday.

    This comes on the back of November's spectacular rally which saw markets snapping a three-month losing streak, driven by bets that the Fed may just be done with raising rates and could even start cutting them as soon as the first half of next year.

    There was, however, pushback from Fed Chair Jerome Powell, calling the talks of cuts "premature". But stock markets took heart from what traders perceived as a clearly dovish message from the central bank chief.

    "There's a trifecta of drivers here. The first is the inflation. Second is the Fed seeming like it may be stepping to the sidelines, and the third is this cooling in the economy that is starting to unfold, but at a very gradual pace," said Mona Mahajan, senior investment strategist at Edward Jones.

    "It's almost like a Goldilocks cooling. It's not too hot. It's not too cold. And that's exactly what markets are embracing."

    Powell's remarks cemented views that the Fed is at least done raising rates. Powell also noted that inflation was "moving in the right direction."

    Fed's meeting on Dec. 13 will help clear the air on its interest-rate plans.

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  • Case for gold fever: NewEdge Wealth sees record rush intensifying

    Case for gold fever: NewEdge Wealth sees record rush intensifying

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    The record gold rush may intensify into year-end.

    According to NewEdge Wealth’s Ben Emons, the final month of the year typically creates a bigger appetite for the yellow metal.

    “It’s been very consistent every December. It’s been a pretty strong performance for gold — especially when there is a rally in the stock market in November,” the firm’s head of fixed income told CNBC’s “Fast Money” on Tuesday.

    Gold settled at a new record high Friday. It closed the day up almost 2%, at $2,089.70 an ounce.

    Emons listed the economic backdrop and geopolitical backdrop as additional positive catalysts for gold.

    “There’s uncertainty next year. We have an election. We don’t know what’s going to happen. We get a recession maybe, maybe not,” said Emons. “At the same time, gold rallies when there’s this risk-on feel in the markets, and that’s really when real rates and interest rates are declining. This gives the gold a really good push for the breakout.”

    In a note to clients this week, Emons wrote that months for both gold and stocks are a “rare combo.” Gold gained 3% while the Dow and S&P 500 were both up almost 9% in November.

    “[It] tends to occur when markets price in major easing cycles,” he wrote. “Currently, that is going on in a mild manner, which puts the spotlight on the seasonals of gold.”

    Emons suggests the strength will continue into next year.

    “Central banks are again outbidding gold against dwindling supply, likely setting up the metal for a major breakthrough towards 2100 … lifting boats for laggards like utilities have a shot to claim market leadership by early 2024,” Emons also wrote.

    “Fast Money” trader Guy Adami also sees gold shining due to the dollar‘s recent performance.

    “If rates continue to go lower, the dollar will go lower. That will be a tailwind for gold,” he said. “Gold is within a whisper of having a huge breakout to the upside.”

    As of Friday’s close, gold is up more than 14% so far this year.

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  • Signs of a sector rotation — plus 2 more themes to watch in the stock market

    Signs of a sector rotation — plus 2 more themes to watch in the stock market

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    People walk by the New York Stock Exchange (NYSE) on November 02, 2023 in New York City. 

    Spencer Platt | Getty Images News | Getty Images

    It was another win for the bulls this week. Wall Street started the month of December higher Friday — building on November’s rally, which broke a three-month losing streak. November really lived up to its stellar reputation, with monthly gains of nearly 8.8% for the Dow, about 8.9% for the S&P 500 and 10.7% for the Nasdaq. Historically, November is the best month of the year for the stock market, and December is third, according to the Stock Trader’s Almanac.

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  • Dow posts highest close in nearly 2 years, equities extend rally to five straight weeks

    Dow posts highest close in nearly 2 years, equities extend rally to five straight weeks

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    U.S. stocks powered higher on Friday, shrugging off tough talk from Federal Reserve Chairman Jerome Powell about it being too early to talk about rate cuts. The Dow Jones Industrial Average
    DJIA,
    +0.82%
    gained about 294 points, or 0.8%, ending near 36,245, according to preliminary FactSet data. The S&P 500 index
    SPX,
    +0.59%
    rose 0.6%, while the Nasdaq Composite Index
    COMP,
    +0.55%
    gained 0.6%. All three indexes also ended the week higher for five straight weeks. The gains allowed the Dow to clinch its highest close since since January 2022, while the S&P 500 finished at its highest level since March 2022, according to Dow Jones Market Data. The powerful rally in equities since early November has been attributed to easing inflation, falling long-term Treasury yields and expectations for rate cuts next year The 10-year Treasury yield
    TMUBMUSD10Y,
    4.200%
    fell to 4.225% on Friday, after hitting 5% in October, ending the week at its lowest yield since early September, according to DJMD.

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  • Dow Jones ends about 80 points higher as U.S. bond yields keep falling

    Dow Jones ends about 80 points higher as U.S. bond yields keep falling

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    U.S. stocks posted modest gains on Tuesday, resuming a strong rally in November that has been propelled by tumbling U.S. bond yields. The Dow Jones Industrial Average DJIA closed up about 83 points, or 0.2%, ending near 35,416, according to preliminary FactSet data. The S&P 500 index SPX was 0.1% higher, while the Nasdaq Composite Index COMP closed up 0.3%. Equity investors were emboldened after Fed Governor Christopher Waller said on Tuesday that a cooling economy could help bring inflation down to the central bank’s 2% yearly target, even though he also said it’s unclear if more interest rate hikes were warranted. The…

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  • Stock market is gaining momentum. What that means for December and beyond.

    Stock market is gaining momentum. What that means for December and beyond.

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    Barring a sudden bout of post-Thanksgiving indigestion, the U.S. stock market looks poised to log a healthy November rally. And while there are certainly no guarantees, history says momentum is likely to beget momentum into year-end.

    “I think the market is set up for a strong final six weeks of 2023 and I would expect the market to build on that momentum into year-end,” said Michael Arone, chief investment strategist at State Street, in a phone interview.

    Drivers…

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  • Stocks score 4th straight weekly gain in holiday-shortened trading

    Stocks score 4th straight weekly gain in holiday-shortened trading

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    Stocks ended mostly higher in a subdued, abbreviated trading session Friday, with major indexes scoring a fourth straight weekly rise. Trading closed at 1 p.m. Eastern time after U.S. markets were closed Thursday for Thanksgiving Day. The Dow Jones Industrial Average DJIA rose around 117 points, or 0.3%, to close near 35,390, according to preliminary figures, while the S&P 500 SPX rose 0.1% to end near 4,559 and the Nasdaq Composite COMP edged down 0.1%. The Dow rose 1.3% for the week, while the S&P 500 gained 1% and the Nasdaq added 0.9%.

    …

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  • Here’s how the stock market has performed on Black Friday going back to 1990

    Here’s how the stock market has performed on Black Friday going back to 1990

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    Major U.S. stock indexes were struggling to make any big moves on Friday as traders returned from the Thanksgiving Day holiday, in line with holiday-shortened Black Friday trading sessions over more than three decades.

    U.S. stock exchanges are due to close at 1 p.m. Eastern time Friday, three hours earlier than usual. As the table below from Dow Jones Market Data shows, trading on the day after Thanksgiving has not tended to produce big moves.

    Not…

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  • Why stocks’ Thanksgiving-week performance is important to watch

    Why stocks’ Thanksgiving-week performance is important to watch

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    While the U.S. trading week is shortened by the Thanksgiving holiday, it’s important to watch the stock market’s performance to see if the rally of the past month can be sustained through the year-end. 

    Stocks have rallied in November so far, with the S&P 500 index SPX logging a 8.6% gain month-to-date, while it’s up 18.6% so far this year, according to FactSet data. 

    “If…

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  • How a second set of Trump tax cuts could jack up the national debt

    How a second set of Trump tax cuts could jack up the national debt

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    If Donald Trump were to be elected president in 2024, what would it mean for U.S. tax policy and the national debt?

    There are growing expectations that he could deliver another round of big tax cuts, with the reductions coming right as those enacted in 2017’s Tax Cut and Jobs Act are due to expire in 2025.

    “If Republicans hold their House…

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  • CNBC Daily Open: Rate cuts might not be in the cards despite cooling inflation

    CNBC Daily Open: Rate cuts might not be in the cards despite cooling inflation

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    The Marriner S. Eccles Federal Reserve building during a renovation in Washington, DC, US, on Tuesday, Oct. 24, 2023.

    Valerie Plesch | Bloomberg | Getty Images

    This report is from today’s CNBC Daily Open, our new, international markets newsletter. CNBC Daily Open brings investors up to speed on everything they need to know, no matter where they are. Like what you see? You can subscribe here.

    What you need to know today

    Downbeat Asian markets
    U.S. stocks ticked up Wednesday as another report showed inflation’s cooling. Despite that, Treasury yields rose. Asia-Pacific markets, however, fell Thursday. Hong Kong’s Hang Seng Index dropped 1.26%, dragged down by Xpeng’s 3.83% decline after the Chinese electric vehicle company reported disappointing earnings results.

    ‘Planet Earth is big enough’
    U.S. President Joe Biden met Chinese President Xi Jinping yesterday on the sidelines of the Asia-Pacific Economic Cooperation conference. Both leaders agreed to resume high-level military communications. As part of the agreement, senior U.S. military commanders will engage with their Chinese counterparts. As Xi said in his opening remarks, “Planet Earth is big enough for the two countries to succeed.”

    Emptying Citi
    Citigroup will start laying off workers as part of CEO Jane Fraser’s corporate overall, CNBC has learned. Citi employees who will be let go will be informed starting Wednesday U.S. time, and the process will continue until early next week, according to people with knowledge of the situation. It seems no one will be spared: chiefs of staff, managing directors and lower-level employees will all be affected.

    Microsoft’s own AI chip
    At its Ignite conference in Seattle, Microsoft announced two custom chips. The first, its Maia 100 artificial intelligence chip, could compete with Nvidia’s AI chips. The second, a Cobalt 100 Arm chip, is designed to tackle general computing tasks and could supplant Intel processors. But Microsoft is planning to use its chips internally, and doesn’t intend to let other companies buy those chips.

    [PRO] Magnificent One
    Shares of the Magnificent Seven stocks — Alphabet, Amazon, Apple, Meta, Microsoft, Nvidia and Tesla — have surged this year, propelling the S&P 500 higher. They’ve also drawn criticism that their prices are too high, based on their price-to-earnings ratio. But there’s an exception: Morgan Stanley thinks one of them is “pretty inexpensive relative to free cash flow growth or earnings growth.”

    The bottom line

    After a very encouraging consumer price index reading on Tuesday, we have more evidence that inflation’s truly cooling.

    Wholesale prices in October, as measured by the producer price index, fell 0.5% for the month against the expected 0.1% increase. That’s the biggest decline in more than three years. When producer prices fall, it takes a while for those lower prices to seep into the general consumer economy, so it’s plausible we’ll see CPI continue dropping in the months ahead.

    Major U.S. indexes rose — slightly — on that encouraging news. The S&P 500 increased 0.16% and the Nasdaq Composite edged up 0.07%. The Dow Jones Industrial Average gained 0.47% for its fourth consecutive winning session.

    The stock market rally over the past two days, it seems, was fueled by investors’ expectations that lower inflation readings will prompt the Federal Reserve to cut rates sooner rather than later. Investors think there’s a 29.6% chance the Fed will slash rates by a full percentage point by the end of next year, according to the CME FedWatch tool.

    But that flurry of cuts is two times as aggressive as the timeline the Fed itself penciled in two months ago, noted CNBC’s Jeff Cox. And that, to put it mildly, “may be at least a tad optimistic,” Cox wrote.

    Investor optimism, ironically, may be counterproductive as well. Expectations of a rate cut forced down Treasury yields Tuesday (though they rose again yesterday). Treasury yields tend to serve as the benchmark for loans and other assets, so when they drop, financial conditions loosen — exactly what the Fed doesn’t want to see.

    “Financial conditions have eased considerably as markets project the end of Fed rate hikes, perhaps not the perfect underpinning for a Fed that professes to keeping rates higher for longer,” said Quincy Krosby, chief global strategist at LPL Financial.

    Indeed, “this is at least the 7th time in this cycle that markets [anticipate] … a potential dovish pivot,” wrote Deutsche Bank macro strategist Henry Allen. (Spoiler alert: Investors have, without exception, been disappointed the previous times as the Fed refused to budge.)

    In short: While it’s undeniable inflation’s dropping, there’s no guarantee rates will fall in tandem. It might be better to be pleasantly surprised than to be disappointed.

    — CNBC’s Jeff Cox contributed to this report.

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  • CNBC Daily Open: Despite cool inflation, don’t expect rate cuts

    CNBC Daily Open: Despite cool inflation, don’t expect rate cuts

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    The Marriner S. Eccles Federal Reserve building during a renovation in Washington, DC, US, on Tuesday, Oct. 24, 2023.

    Valerie Plesch| Bloomberg | Getty Images

    This report is from today’s CNBC Daily Open, our new, international markets newsletter. CNBC Daily Open brings investors up to speed on everything they need to know, no matter where they are. Like what you see? You can subscribe here.

    What you need to know today

    Back in the green
    U.S. stocks ticked up Wednesday as another report showed inflation’s cooling. Despite that, Treasury yields rose. The pan-European Stoxx 600 index added 0.42%. Britain’s FTSE 100 climbed 0.62%, on encouraging inflation news in the U.K., to turn positive for the year. Separately, Siemens Energy jumped 8.78% after securing guarantees from the German government.

    More good news on inflation
    U.K.’s consumer price index plunged from 6.7% in September to 4.6% in October on an annual basis, though it remained the same month on month. Both figures were below economists’ estimates. Core CPI, which excludes food, energy, alcohol and tobacco prices, rose 5.7% for the year. With those numbers, it’s likely the Bank of England will continue leaving interest rates unchanged.

    ‘Planet Earth is big enough’
    U.S. President Joe Biden met Chinese President Xi Jinping yesterday on the sidelines of the Asia-Pacific Economic Cooperation conference. The two leaders struck a conciliatory tone at the start of the summit. “We have to ensure that competition does not veer into conflict,” Biden said. And Xi, in his opening remarks, said, “Planet Earth is big enough for the two countries to succeed.”

    AT1 bond demand ‘a signal’
    UBS began selling additional tier one bonds last week. AT1 bonds were wiped out when UBS was forced to take over Credit Suisse earlier this year, causing controversy among bondholders. Still, there was “incredible” market demand for them, said CEO Sergio Ermotti, which “is a signal to the Swiss financial system” that confidence is being restored.

    [PRO] Where will cash go?
    With the high interest rates and bond yields in recent months, money market funds and Treasurys have attracted investors’ cash, sucking them away from stocks. But with October’s CPI coming in so cool that analysts are comfortable declaring a soft landing, stocks have begun rallying again. What, then, happens to all the cash parked in those funds?

    The bottom line

    After a very encouraging consumer price index reading on Tuesday, we have more evidence that inflation’s truly cooling.

    Wholesale prices in October, as measured by the producer price index, fell 0.5% for the month against the expected 0.1% increase. That’s the biggest decline in more than three years. When producer prices fall, it takes a while for those lower prices to seep into the general consumer economy, so it’s plausible we’ll see CPI continue dropping in the months ahead.

    Major U.S. indexes rose — slightly — on that encouraging news. The S&P 500 increased 0.16% and the Nasdaq Composite edged up 0.07%. The Dow Jones Industrial Average gained 0.47% for its fourth consecutive winning session.

    The stock market rally over the past two days, it seems, was fueled by investors’ expectations that lower inflation readings will prompt the Federal Reserve to cut rates sooner rather than later. Investors think there’s a 31% chance the Fed will slash rates by a full percentage point by the end of next year, according to the CME FedWatch tool.

    But that flurry of cuts is two times as aggressive as the timeline the Fed itself penciled in two months ago, noted CNBC’s Jeff Cox. And that, to put it mildly, “may be at least a tad optimistic,” Cox wrote.

    Investor optimism, ironically, may be counterproductive as well. Expectations of a rate cut forced down Treasury yields Tuesday (though they rose again yesterday). Treasury yields tend to serve as the benchmark for loans and other assets, so when they drop, financial conditions loosen — exactly what the Fed doesn’t want to see.

    “Financial conditions have eased considerably as markets project the end of Fed rate hikes, perhaps not the perfect underpinning for a Fed that professes to keeping rates higher for longer,” said Quincy Krosby, chief global strategist at LPL Financial.

    Indeed, “this is at least the 7th time in this cycle that markets [anticipate] … a potential dovish pivot,” wrote Deutsche Bank macro strategist Henry Allen. (Spoiler alert: Investors have, without exception, been disappointed the previous times as the Fed refused to budge.)

    In short: While it’s undeniable inflation’s dropping, there’s no guarantee rates will fall in tandem. It might be better to be pleasantly surprised than to be disappointed.

    — CNBC’s Jeff Cox contributed to this report.

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  • How financial conditions might play into Fed’s thinking after October’s CPI

    How financial conditions might play into Fed’s thinking after October’s CPI

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    Financial markets were jubilant over Tuesday’s data showing that U.S. consumer prices eased by more than expected in October, with Treasury yields plummeting on expectations the Federal Reserve will refrain from raising interest rates further and might even lower borrowing costs.

    In a nutshell, financial conditions suddenly became looser, with the benchmark 10-year yield
    BX:TMUBMUSD10Y
    at 4.46% in New York afternoon trading or down by more than half a percentage point from its October peak. Right now, conditions are “much more accommodative” than when Fed officials first suggested higher long-term yields could do the work of tighter monetary policy and take the place of a rate hike, according to Will Compernolle, a macro strategist for FHN Financial in New York.

    The jury is out on how much a continuation of looser financial conditions will matter to central bankers. At one point in Tuesday’s session, both the 10-year yield and the policy-sensitive 2-year yield
    BX:TMUBMUSD02Y
    were heading for their biggest one-day declines in more than six months as traders revved up expectations for at least four Fed rate cuts in 2024.

    Tuesday’s October CPI inflation report “will be very welcome to the Fed, though it will inevitably make the Fed’s challenge of restraining market optimism and financial conditions more difficult too,” according to New York-based advisory firm Evercore ISI.

    In a note, Evercore’s Vice Chairman Krishna Guha and others wrote that “the Fed’s challenge is that the market sees this and is trying to jump to the endgame, risking a larger/sooner easing in financial conditions than the Fed itself would like to see under prudent upside inflation risk management principles. So expect Fed officials to maintain a very cautious and relatively hawkish tone.”

    Indeed, there’s plenty of reasons to remain careful about reading too much into one report.

    After Tuesday’s data, Federal Reserve Bank of Richmond President Thomas Barkin said he’s not convinced inflation is on a clear path toward 2% despite recent progress in curbing price pressures.

    Some economists also said October’s CPI report isn’t the game changer that markets think it is. And FHN’s Compernolle said that if the Fed’s favorite inflation gauge, the personal consumption expenditures index (PCE), shows “horizontal momentum” when the October data is released later this month, there could be some on the Federal Open Market Committee “who feel the lower bond yields necessitate a higher fed funds rate.”

    Read: Economists in hawkish camp don’t surrender in wake of October consumer-inflation print

    At Hirtle Callaghan & Co., a West Conshohocken, Pa.-based firm which manages $18.5 billion in assets, Brad Conger, deputy chief investment officer, said that October’s CPI readings validate the Fed’s “wait-and-see” approach and that “it will take a rather long series of this order of magnitude to give them confidence to ease policy.”

    Meanwhile, “we worry that the recent easing of financial conditions and energy prices could easily start to counter the restraint,” Conger wrote in an email on Tuesday.

    In addition to a broad-based decline in Treasury yields, all three major U.S. stock indexes
    DJIA

    SPX

    COMP
    were higher as of Tuesday afternoon. The Dow Jones Industrial Average surged almost 500 points on a buying frenzy as investors also cheered Tuesday’s low “supercore” inflation figure that acts as a proxy for labor costs.

    Just last week, Fed Chairman Jerome Powell said that the Fed is wary of “head fakes” from inflation, or temporary improvements that only reverse over time.

    If Tuesday’s CPI data for October isn’t a “head fake,” “the Fed may be able to accept a loosening of financial conditions in order to prevent a recession,” said Lawrence Gillum, a Charlotte, North Carolina-based fixed-income strategist for broker-dealer for LPL Financial. “If it is a head fake, then the Fed will talk up the need for higher long-end yields. It will probably take a couple more months of this type of report or better to see whether that plays out.”

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  • Dow Jones slips after strong run as inflation data looms

    Dow Jones slips after strong run as inflation data looms

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    U.S. edged lower early Monday ahead of important inflation data in coming days, while gauging the possibility of a shutdown of the federal government at the end of the week.

    What’s happening

    • The Dow Jones Industrial Average
      DJIA
      was down 42 points, or 0.1%, at 34,242.

    • The S&P 500
      SPX
      fell 19 points, or 0.4%, to 4,396.

    • The Nasdaq Composite
      COMP
      shed 93 points, or 0.7%, to 13,705.

    The Dow, S&P 500 and Nasdaq Composite rose Friday to score back-to-back weekly gains.

    What’s driving markets

    The S&P 500 has jumped 7.2% over the past two weeks, helped by benchmark borrowing costs
    BX:TMUBMUSD10Y
    falling swiftly from 16-year highs on hopes that recent softer jobs data means inflation can ease further and the Federal Reserve has thus finished its campaign of interest rate rises.

    However, after that strong rally a more cautious tone prevails at the start of the new week as the market awaits a U.S. consumer-price index report for October, due Tuesday, that thus has the heft to underpin the latest bull run or bring it to a halt.

    Read: Stock-market rally faces make-or-break moment. How to play U.S. October inflation data.

    Core CPI growth — which strips out volatile items such as food and energy — is expected to remain steady at 0.3% month-on-month. The producer prices report for October will be published on Wednesday.

    See: This week’s October inflation data looms large on Washington’s economic radar

    October retail sales data is also on the docket this week, offering further clues to the health of the consumer on Wednesday.

    “Most eyes will be focused on the latest inflation numbers, but retail sales and retail earnings will also help set the tone,” Chris Larkin, managing director of trading and investing at E-Trade from Morgan Stanley, said in emailed comments.

    He warned that the market “may be a little more jittery than usual,” following a downgrade of the U.S. credit outlook by Moody’s Investors Service and the possibility of a shutdown of the federal government at the end of the week.

    Also see: House Republicans look to pass two-step package to avoid partial government shutdown

    Worries over a dysfunctional government contributed to Moody’s Investors Service late Friday cutting its outlook on the U.S. sovereign credit rating to negative from stable.

    “This week, we will plunge back into the U.S. political saga, as the government short-term funding deadline is due 17th of November and not much progress has been made to seal a fresh deal,” said Ipek Ozkardeskaya, senior analyst at Swissquote Bank.

    “Depending on the new funding resolution – or the lack thereof – we could see the U.S. 10-year yield return above 4.80%,” Ozkardeskaya added.

    Investors will also be keeping an eye out for a slew of earnings reports from retailers, including Home Depot Inc.
    HD,
    -1.24%
    on Tuesday, Target Corp.
    TGT,
    -0.50%
    on Wednesday and Walmart Inc.
    WMT,
    +0.15%
    on Thursday. Their comments on the health of the consumer may also play into thinking on the Fed.

    Indeed, the earnings season in general should have provided fundamental support to investor sentiment, according to analysts. “For Q3 2023, with 92% of S&P 500 companies reporting actual results, 81%…have reported a positive earnings per share surprise and 61%…have reported a positive revenue surprise,” said John Butters, senior earnings analyst at FactSet.

    The U.S. federal budget update for October will be published at 2 p.m. Eastern. Fed Governor Lisa Cook was due to deliver opening remarks at a Fed conference Monday morning.

    Companies in focus

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  • Dow ends nearly 400 points higher as tech rally leads stocks to highest close since September

    Dow ends nearly 400 points higher as tech rally leads stocks to highest close since September

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    U.S. stocks ended sharply higher Friday, more than shaking off weakness seen the previous session in the aftermath of a poor Treasury bond auction and fresh signs that interest rates may stay higher for longer.

    Technology stocks drove the bounce, with the Nasdaq Composite leading major indexes to the upside as it and the S&P 500 logged their highest finishes since September.

    What happened

    • The Dow Jones Industrial Average
      DJIA
      rose 391.16 points, or 1.2%, to close at 34,283.10.

    • The S&P 500
      SPX
      ended with a gain of 67.89 points, or 1.6%, at 4,415.24.

    • The Nasdaq Composite
      COMP
      advanced 276.66 points, or 2%, to finish at 13,798.10.

    The rally left the Dow with a weekly gain of 0.7%, while the S&P 500 advanced 1.3% and the Nasdaq booked a rise of 2.4%. The Dow saw its highest close since Sept. 20, while the S&P 500 ended at its highest since Sept. 19 and the Nasdaq at its highest since Sept. 14.

    Market drivers

    Tech was in the driver’s seat. Shares of Microsoft Corp.
    MSFT,
    +2.49%
    jumped 2.5%, with the Dow component scoring its third record close in four sessions. Intel Corp. shares
    INTC,
    +2.80%
    rose 2.8% to lead Dow gainers.

    Meanwhile, the S&P 500 tested important chart resistance at the 4,400 to 4,415 level, which marks the confluence of previous resistance and the 61.8% Fibonacci retracement of the July-October drop, according to Matthew Weller, global head of research at Forex.com, in a note (see chart below).


    Forex.com

    “From a bigger picture perspective, bulls will need to see the index conclusively break above 4415 before declaring that the post-July streak of lower lows and lower highs is over,” Weller wrote.

    The S&P 500 and Nasdaq Composite ended their longest winning streaks since November 2021 on Thursday, after a poorly-received $24 billion sale of 30-year Treasury bonds.

    A calmer bond market may have helped set the tone for stocks. The yield on the 30-year Treasury bond
    BX:TMUBMUSD30Y
    fell 3.2 basis points to 4.733%, after it nearly notched its biggest one-day jump since June 2022. The yield still saw a weekly decline, its third straight.

    It was unclear whether the Treasury auction had been affected by a reported ransomware attack against the U.S. unit of the Industrial & Commercial Bank of China that apparently disrupted the U.S. Treasury market.

    See: How ransomware attack on ICBC rattled the Treasury market and shook up a 30-year bond auction

    Thursday’s setback was also tied to comments from Federal Reserve Chairman Jerome Powell, who told an International Monetary Fund panel on Thursday that the central bank was wary of “head fakes” from inflation, and the “2% goal was not assured.”

    Much of Powell’s language was nearly identical to remarks he made on Nov. 1, when investors rallied stocks and bonds after the Fed chair didn’t explicitly commit to a further interest rate hike. But the subsequent rally for stocks after the Nov. 1 Fed meeting, with the S&P 500 jumping more than 6% over eight days, and a 50 basis point drop in the 10-year Treasury yield were “overdone and not governed by facts,” said Tom Essaye, founder of Sevens Report Research, in a note.

    “Meanwhile, if we think about what the Fed said last week, namely that the rise in the 10-year yield was doing the Fed’s work for it and as a result they may not have to hike rates, then the short/sharp decline in the 10-year yield we’ve seen could essentially remove the reason for the Fed not having to hike rates — and that could put a rate hike back on the table!” he wrote. “That’s essentially what Powell reminded us of yesterday and that, along with the poor Treasury auction, pushed yields higher,” setting up pressure on stocks.

    U.S. consumer sentiment fell in November for the fourth month in a row due to worries about higher interest rates as well as war in the Middle East. The preliminary reading of the sentiment survey declined to 60.4 from 63.8 in October, the University of Michigan said Friday. It’s the weakest reading since May.

    Investors were also tuning into more comments by Fed officials Friday, including San Francisco Fed President Mary Daly, who said she didn’t know if rates were high enough to bring inflation back down to the central bank’s 2% target.

    Companies in focus

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  • CNBC Daily Open: Slowing demand means fewer revenue beats

    CNBC Daily Open: Slowing demand means fewer revenue beats

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    Signage for the “Disneyland City Hall”, in Disneyland Paris, in Marne-la-Vallee, east of Paris, on October 16, 2023.

    Ian Langsdon | Afp | Getty Images

    This report is from today’s CNBC Daily Open, our new, international markets newsletter. CNBC Daily Open brings investors up to speed on everything they need to know, no matter where they are. Like what you see? You can subscribe here.

    What you need to know today

    Streak continues, sans Dow
    Major U.S. indexes continued their blistering winning streak Wednesday — except for the Dow Jones Industrial Average, which snapped a seven-day streak. Asia-Pacific markets mostly rose Thursday. Japan’s Nikkei 225 climbed around 1.5% and South Korea’s Kospi added 0.5% after dropping 3.24% in the last two sessions, wiping out more than half of its gains earlier in the week.

    Prices slump in China
    Fresh data from China’s National Bureau of Statistics showed the country continuing to struggle with deflationary pressures. China’s consumer price index for October declined 0.2% year on year, more than the 0.1% drop predicted. Producer prices also fell 2.6% — though it’s smaller than the expected 2.7% decline.

    Disney pluses subscribers
    Disney’s shares jumped around 3% in extended trading after the company reported quarterly earnings. Earnings per share came in at 82 cents, higher than the expected 70 cents. Total Disney+ subscribers, at 150.2 million, also beat forecast by more than 2 million. But the firm’s revenue fell short of estimates — its second consecutive miss — even as quarterly revenue increased 5% to $21.24 billion year on year.

    Weakness in Arm
    Arm reported earnings for the first time after its initial public offering. The semiconductor licensing company had a net loss of $110 million, but that’s because of a one-time share-based compensation of more than $500 million. Revenue, on the other hand, was up 28% year on year, as licensing sales jumped 106%. Still, shares sank 6.8% after the bell on weak guidance for the current quarter.

    [PRO] ‘Fallen angels’
    The bond market’s in its worst state in 200 years, according to BNP Paribas’ global chief investment officer. But one corner of the market — known as “fallen angels” — presents an opportunity for 8% yield at a relatively low risk-reward ratio, the analyst said. CNBC Pro screened for top-rated funds under that criteria and came up with a list of ‘fallen angels’ that might provide soaring returns.

    The bottom line

    Earning season’s winding down, and it’s been mostly a good one so far.

    Out of the approximately 88% of companies in the S&P 500 have reported results, more than 88% have surpassed earnings estimates. However, only 62% have beaten revenue expectations. This suggests slowing demand is catching up with companies — but they’ve so far managed to expand their margins by cutting costs.

    With hard-hitting reports from Disney and Arm coming in after the bell and no major economic data released, major indexes had a tepid day. Trading volume was lower than the 30-day average.

    Nonetheless, the S&P 500 managed to inch up 0.1%, its eighth straight day of gains, and the Nasdaq Composite ticked up 0.08% for its ninth positive session. The last time both indexes enjoyed such uninterrupted gains was in November 2021. But the Dow Jones Industrial Average snapped its best winning streak since July with a 0.12% drop yesterday.

    This lull in news’ only temporary. Federal Reserve Chair Jerome Powell will speak about monetary policy Thursday and October’s consumer price index reading comes out next Tuesday. Those events will serve as the next major catalysts for stocks, said AXS Investments CEO Greg Bassuk. And though it’s admittedly a very long shot, we’ll see, then, if (the surviving) major indexes manage to extend their winning streak — or precipitate a new fall.

    But for investors hoping to time markets and reap quick gains on those events, CNBC’s Bob Pisani has a warning. “The idea that you can predict the future direction of stock prices, and act accordingly — is not a successful investing strategy,” Pisani writes. “The key to investing is not market timing” — it’s giving yourself time in the market.

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  • CNBC Daily Open: Earning’s better than revenue this season

    CNBC Daily Open: Earning’s better than revenue this season

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    Visitors wearing emblematic Mickey and Minnie Mouse ears look on, in front of the Sleeping Beauty-inspired castle at Disneyland Paris, in Marne-la-Vallee, east of Paris, on October 16, 2023. characters.

    Ian Langsdon | Afp | Getty Images

    This report is from today’s CNBC Daily Open, our new, international markets newsletter. CNBC Daily Open brings investors up to speed on everything they need to know, no matter where they are. Like what you see? You can subscribe here.

    What you need to know today

    Streak continues, sans Dow
    Major U.S. indexes continued their blistering winning streak Wednesday — except for the Dow Jones Industrial Average, which snapped a seven-day streak. Europe’s regional Stoxx 600 rose 0.28%, lifted by strong earnings reports. Marks and Spencer shares popped 8.39% on the back of a solid first half of the year, while Dutch wind turbine manufacturer Vestas surged 9.8% after beating profit expectations.

    Disney pluses subscribers
    Disney’s shares jumped around 3% in extended trading after the company reported quarterly earnings. Earnings per share came in at 82 cents, higher than the expected 70 cents. Total Disney+ subscribers, at 150.2 million, also beat forecast by more than 2 million. But Disney’s revenue fell short of estimates, even as it increased 5% to $21.24 billion compared with the same period a year earlier.

    Weakness in Arm
    Arm reported earnings for the first time after its initial public offering. The semiconductor licensing company had a net loss of $110 million, but that’s because of a one-time share-based compensation of more than $500 million. Revenue, on the other hand, was up 28% year on year, as licensing sales jumped 106%. Still, shares sank about 8% after the bell on Arm’s weak guidance for the current quarter.

    Fresh AT1s from UBS
    UBS started selling U.S. dollar Additional Tier 1 bonds Wednesday, with a five-year bond offering around 10% yield and a 10-year around 10.125%, according to LSEG news service IFR. Why’s this newsworthy? Because $17 billion worth of AT1 bonds were wiped out when UBS took over Credit Suisse in March, causing an uproar among bondholders — and continuing to pose legal challenges.

    [PRO] A short-cover rally?
    Stock markets are enjoying their longest winning streak in two years. But some analysts are worried that November’s blistering start isn’t a true and sustainable rally. Instead, it’s more to do with hedge funds buying up stocks to cover their short positions. (When investors bet that stock prices will move down, they have to buy shares if prices move up, which pushes up prices even further.)

    The bottom line

    Earning season’s winding down, and it’s been mostly a good one so far.

    Out of the approximately 88% of companies in the S&P 500 have reported results, more than 88% have surpassed earnings estimates. However, only 62% have beaten revenue expectations, suggesting that slowing demand is catching up with companies. The silver lining is that this phenomenon suggests margins have grown.

    With hard-hitting reports from Disney and Arm coming in after the bell and no major economic data released, major indexes had a tepid day. Trading volume was lower than the 30-day average.

    Nonetheless, the S&P 500 managed to inch up 0.1%, its eighth straight day of gains, and the Nasdaq Composite ticked up 0.08% for its ninth positive session. The last time both indexes enjoyed such uninterrupted gains was in November 2021. But the Dow Jones Industrial Average snapped its best winning streak since July with a 0.12% drop yesterday.

    This lull in news’ only temporary. Federal Reserve Chair Jerome Powell will speak about monetary policy Thursday and October’s consumer price index reading comes out next Tuesday. Those events will serve as the next major catalysts for stocks, said AXS Investments CEO Greg Bassuk. And though it’s admittedly a very long shot, we’ll see, then, if (the surviving) major indexes manage to extend their winning streak — or precipitate a new fall.

    But for investors hoping to time markets and reap quick gains on those events, CNBC’s Bob Pisani has a warning. “The idea that you can predict the future direction of stock prices, and act accordingly — is not a successful investing strategy,” Pisani writes. “The key to investing is not market timing” — it’s giving yourself time in the market.

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  • CNBC Daily Open: Strange, but good, things are happening in markets and the economy

    CNBC Daily Open: Strange, but good, things are happening in markets and the economy

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    People walk by the New York Stock Exchange (NYSE) on November 02, 2023 in New York City. 

    Spencer Platt | Getty Images News | Getty Images

    This report is from today’s CNBC Daily Open, our new, international markets newsletter. CNBC Daily Open brings investors up to speed on everything they need to know, no matter where they are. Like what you see? You can subscribe here.

    What you need to know today

    A fierce winning streak
    U.S. stocks rose Tuesday to hit fresh winning streaks, their longest in three years. But Asia-Pacific markets were mixed Wednesday. Japan’s Nikkei 225 ticked down 0.1% despite rising confidence among large Japanese manufacturers, according to a Reuters Tankan survey. Meanwhile, Australia’s S&P/ASX 200 climbed 0.2% a day after the country’s central bank raised rates by 25 basis points.

    Microsoft closes at a high
    Microsoft shares climbed 1.12% to hit $360.53, a record high. It’s the eighth consecutive day in which the technology giant’s shares rose, a streak unseen since January 2021. Investors cheered Microsoft CEO Satya Nadella’s surprise appearance at OpenAI’s event, where he encouraged developers to build with Microsoft’s Azure cloud infrastructure.

    ‘Absolutely booming’ Chinese sector
    China’s economy hasn’t recovered from its pandemic blues. But in the sectors of “electric vehicles and everything around sustainability and renewable power technology,” China is “absolutely booming,” Standard Chartered CEO Bill Winters told CNBC. Relatedly, China’s truck industry is increasingly using vehicles with assisted-driving technology, a critical step toward monetizing the nascent business.

    Peak, not pause?
    The U.S. Federal Reserve, European Central Bank and the Bank of England all paused interest rate hikes in recent weeks. This breather comes after dramatic hikes over the last 18 months as central banks grappled with unruly inflation. Some market watchers, in fact, think this lull in hikes isn’t so much a pause but the peak in rates — and are turning their attention to when central banks will start cutting.

    [PRO] Buy BYD
    Over the past 18 months, Warren Buffett’s Berkshire Hathaway has sold more than half its stake in Chinese electric vehicle maker BYD, according to stock filings. Despite that, analysts still think BYD’s a stock worth buying — and some even raised their price targets for the firm.

    The bottom line

    Last month’s sudden surge in Treasury yields and oil prices — both of which tend to suppress investors’ appetite for stocks — looks to be ending. No, scratch that — the increases aren’t just ending, they’re ebbing.  

    Look at oil: Contracts for both West Texas Intermediate and Brent futures fell around $3. WTI’s now at $77.01 a barrel while Brent’s $81.44, their lowest since July. That’s almost $10 per barrel less compared with a month ago, when prices jumped on fears triggered by the Israel-Hamas conflict.

    Meanwhile, the 10-year Treasury yield fell around 10 basis points to 4.569% and the 2-year yield slipped 3 basis points to 4.915%. As Treasury yields serve as the benchmark for interest rates on loans and cash investments, sinking yields generally benefit rate-sensitive companies more. In other words: the Magnificent Seven Big Tech. Amazon led the pack, shooting up 2.13% yesterday.

    That explains why the Nasdaq Composite jumped 0.9%, more than the S&P 500’s 0.28% gain and the Dow Jones Industrial Average’s 0.17% increase. Still, that’s not downplaying the movements. The S&P and Dow are enjoying their seventh consecutive session of gains, while the Nasdaq’s basking in its eighth.

    If the U.S. Federal Reserve does indeed steer the economy to a soft landing, in which inflation is contained below 2% without the economy contracting, then there could be a further rally in stocks, said HSBC. Within periods of soft landings, the S&P has jumped, on average, 22% in the space between a pause and six months after rate cuts begin, noted HSBC’s global equity strategist Alastair Pinder.

    And that immaculate disinflation isn’t just a dream. Chicago Federal Reserve President Austan Goolsbee told CNBC, “Because of some of the strangeness of this moment, there is the possibility of the golden path … that we got inflation down without a recession.”

    Both the economy and markets have truly acted in strange, unprecedented ways ever since the pandemic. From one of the worst years for stocks and bonds in 2022, to a widely heralded bull rally in the S&P — and then a correction — in 2023. And I haven’t even started on the U.S. labor market and inflation numbers. Strange may be new and unsettling, but it isn’t necessarily bad.

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