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December 18, 2023

U.S. stocks open higher after CPI data shows inflation at lowest in more than two years

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U.S. stocks opened higher Wednesday after data showed the rate of inflation in June slowed to the lowest level since early 2021, fueling hopes that the Fed may be close to being done with its interest rate hikes.

How are stocks trading

The Dow Jones Industrial Average
DJIA,
+0.78%
gained 281 points, or 0.8% to around 34,546
The S&P 500
SPX,
+1.03%
added 40 points, or 0.9% to about 4,479
The Nasdaq Composite
COMP,
+1.36%
rose 158 points, or 1.1% to roughly 13,915

On Tuesday, the Dow Jones Industrial Average rose 317 points, or 0.93%, to 34261, the S&P 500 increased 30 points, or 0.67%, to 4439, and the Nasdaq Composite gained 75 points, or 0.55%, to 13761.

What’s driving markets

Stocks opened higher, while Treasury yields and the dollar were lower after data on Wednesday showed U.S. inflation at its slowest pace in more than two years.

U.S. consumer prices rose a modest 0.2% in June. Economists polled by the Wall Street Journal forecasted an increased of 0.3%. The yearly rate of inflation decelerated to 3% from 4% in the prior month, marking the lowest level since March 2021.

The so-called core rate of inflation that omits food and energy rose a mild 0.2% last month. That’s the smallest increase in almost two years. Wall Street had forecast a 0.3% gain. The annual rate of core inflation decreased to 5% from 5.3% in the prior month.

See: U.S. inflation slows again, CPI shows, as Fed weighs another rate hike

The markets have been receiving the CPI print “pretty well,” said Brian Katz, chief investment officer at the Colony Group.

The lower-than-expected CPI data is likely to “prolong the uptrend [in stocks] that we’ve been experiencing this year,” Katz in a call. “As long as we are in this environment where disinflation continues and we have reasonable growth, it is a good environment for risk assets,” Katz said.

Inflation in June fell in a majority of the important categories, most notably housing prices, which had been elevated, according to George Mateyo, chief investment officer at Key Private Bank.

“The Fed will embrace this report as validation that their policies are having the desired effect – inflation has fallen while growth has not yet stalled. But it most likely won’t change their mind to raise interest rates later this month,” Mateyo wrote in emailed comment Wednesday.

Fed fund futures traders are still pricing in an over 90% chance that the Fed will raise its benchmark interest rate by 25 basis points in its meeting later this month.

Still, some analysts are optimistic that the Fed may cease its interest rate hikes.

The inflation print in June “is enough on a standalone basis for the market to put in question the Fed’s dot projections of two additional hikes left this year and consequently pull interest rate volatility down,” according to Alexandra Wilson-Elizondo, deputy chief investment officer of multi asset solutions at Goldman Sachs Asset Management.

“Yet despite the disinflationary trends, the level of Fed funds rate has only risen to levels comparable to inflation. This contrasts with previous hiking cycles when the Fed hiked rates well above inflation. Therefore, we continue to expect that US monetary policy will stay restrictive for longer, but after this print the Fed very well may be done,” Wilson-Elizondo wrote in emailed comment.

There will also be a batch of commentary from Fed officials for the market to contend with on Wednesday. Minneapolis Fed President Kashkari will speak at 9:45 a.m.; and Atlanta Fed President Bostic will make comments at 1 p.m.. Also, the Fed Beige Book will be released at 2 p.m.. All times Eastern.

Companies in focus

Shares of ShiftPixy Inc.
PIXY,
-15.90%
plunged almost 22% Wednesday, after the workforce management software company’s public equity offering valued the stock at a deep discount.
Lucid Group Inc.
LCID,
-11.02%
shares dropped 5.5% after the company said Wednesday that it delivered 1,404 vehicles during the second quarter, while producing 2,173 vehicles at its Arizona facility.
SunPower Corp.
SPWR,
+7.82%
shares jumped 6.4% Wednesday after Raymond James analyst Pavel Molchanov upgraded the stock to strong buy from outperform.

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July 12, 2023

California cuts payments to homeowners for solar panels feeding energy back to the grid

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Save A Lot Solar contractors install LG Electronics solar panels on a home in Hayward, California, U.S., on Tuesday, Feb. 8, 2022.

David Paul Morris | Bloomberg | Getty Images

The California Public Utilities Commission on Thursday passed a proposal that will reduce compensation provided to households for the surplus electricity their rooftop solar panels contribute to the electric grid.

Utilities and consumer groups have argued the incentive payments have unfairly favored wealthier consumers and harmed poor and low-income households. But solar companies and renewable advocates have said that lowering the compensation would slow solar installations and hinder the state’s goals to address climate change.

related investing news

The proposal, which California utility regulators unveiled last month, will change a net metering policy by paying solar owners for extra power at a lower rate, which is determined by the cost the utility would need to spend to purchase clean power from an alternative source. The solar industry has said the plan would amount to a 75% cut in average payment rates to customers.

Today’s unanimous vote by the five-member commission was monitored across the country, since California is widely viewed as a leader in the renewable energy buildout. The impact of today’s decision will likely extend beyond the state and have implications for the solar industry nationwide, particularly companies in the residential solar space like Sunrun, SunPower, Sunnova, and Tesla.

More than 1.5 million homes, businesses and other utility customers in California have rooftop solar panels. The utilities commission estimates that these installations can collectively produce 12 gigawatts of electricity.

The proposal would have no impact on existing rooftop solar customers and would maintain their current compensation rates, and would also encourage consumers to install batteries with their solar panels, the commission said.

Affordable Clean Energy For All, a nonprofit funded by California’s utilities, has argued that the rooftop solar program is outdated and that utilities have to pass along the costs of subsidies, creating higher bills for millions of customers who don’t install solar, including those least able to pay for electricity costs.

However, solar companies have argued that the existing net metering system is necessary to spur people to choose rooftop solar.

The changes to the state’s solar incentive program could cut California’s solar market in half by 2024, according to a report released earlier this year from energy research firm Wood Mackenzie.

“This misguided decision, which undervalues solar’s numerous benefits for all Californians, will dim the lights on the growth of solar in the Golden State,” said Laura Deehan, state director for Environment California, following the vote.

Roger Lin, an attorney at the Center for Biological Diversity’s energy justice program, said in a statement that the commission “has taken a step backward by widening the divide between those who can afford solar and those who can’t.”

“It’s an affront to low-income communities who are hit by the climate crisis first and worst, and we’ll do everything we can to convince the commission to fix the deep flaws in its proposal,” Lin said.

California, which is grappling with wildfires and drought fueled by climate change, has a goal to transition to 100% renewable energy by 2045.