Roblox, Sweetgreen crop losses
The broad market rally is helping to stem losses for two stocks with disappointing quarterly reports.
Shares of Roblox and Sweetgreen were down 5% and 4.6%, respectively, in midday trading. Both stocks were down more than 10% in extended trading Tuesday evening.
—Jesse Pound
The volatility index falls below 20
The Cboe Volatility Index fell below 20 on Wednesday and is now trading at its lowest levels since April.
The index is based on the expected volatility implied by the options market. It’s sometimes called Wall Street’s “fear gauge” and tends to rise when investors are more uncertain about the future.
– Jesse Pound
The CPI data is promising, but “one month is not a trend,” says Zaccarelli of the Alliance of Independent Advisors.
While a month of slowing price increases indicates inflation is moving in the right direction, more data is needed to show a continuing trend, said Chris Zaccarelli, chief investment officer at the Alliance of Independent Advisors.
“A month doesn’t make a trend, but at least the headline is going down and the core stopped going up,” he wrote. “If we see the data in the coming months showing a decline in inflation, then it will help markets see the end of the tunnel in terms of rate hikes.”
— Samantha Subin
The market takes comfort from the latest CPI reading, says Commonwealth’s Brian Price
Brian Price of the Commonwealth Financial Network said the market is taking this latest CPI report as a welcome sign that inflation may be peaking.
“The market seems to be taking comfort in the fact that we are apparently past the inflation peak and should continue to see declines in the second half of the year,” said the firm’s head of investment management. “The odds of another 75 basis point hike from the Fed appear to have been significantly reduced following this report and we could only see a 50 basis point hike at the next meeting. If Fed prices energy continue to fall, I expect that we will see that the inflationary data will come down in the coming months.”
“This dynamic should support risk assets and we are likely to see longer-term interest rates fall as well,” he added.
—Fred Imbert
The S&P 500 rises to its highest level since May
The S&P 500’s gain on Wednesday took it to levels not seen since early May as the recovery reaches new highs. The benchmark is now up 15% from its mid-June low as investors bet that inflation is peaking and that the Federal Reserve will eventually slow its intensity of rate hikes.
After falling into a bear market, the S&P 500 has now cut its losses for 2022 to 12%. The index is 13% from its historical high reached in January.
Stocks open strongly higher
The Dow opened up more than 400 points, while the Nasdaq Composite rose more than 2%.
The demonstration is broad, with only energy problems.
-Jesse Pound
Treasury yields fall after CPI report
Treasury yields edged lower on Wednesday as a much-anticipated inflation figure was flat from a month earlier.
The yield on the benchmark 10-year Treasury fell 9 basis points to 2.67%, hitting a one-week low. The yield on the 30-year Treasury note fell 6 basis points to 2.96%.
The inflation report suggested to some that price pressures may have peaked, which could lead to speculation that the Federal Reserve could pursue a smaller interest rate hike next month.
“Overall, incremental confirmation that the Fed’s efforts to combat rising consumer prices have been successful,” Ian Lyngen, BMO’s head of U.S. rates, said in a note. “The combination of NFP and CPI for July keeps the debate alive and well about the 75 bp rise versus September’s 50 bp.”
— Yun Li
Cramer says we’ve reached peak inflation
According to Jim Cramer, Wednesday’s July CPI report, which showed sluggish price increases, is a sign that the economy has peaked inflation.
“Obviously we had peak inflation,” he said on CNBC’s “Squawk Box” Wednesday, noting that energy, travel and prices at the pump have continued to fall.
Cramer added that the recent hike by the Federal Reserve is probably the central bank’s best attempt to control rising prices.
Going forward, Cramer expects the central bank to raise rates again in September, but likely by 50 basis points compared to the much-anticipated 75 basis point move.
“I think what matters here is that these are the numbers that Powell wanted,” he said.
— Samantha Subin
Risk in motion in premarket technology
The CPI report showing slowing inflation gave investors the green light to buy tech stocks, which have outperformed this year on worries about the impact of rising interest rates on companies in growth
Tesla rose 4% in premarket trading. Amazon and Meta both gained 3%.
Even chip stocks, beset by negative earnings warnings in the sector this week, were recovering in early trade. Nvidia and AMD rose more than 3% each.
— John Melloy
Another big Fed hike is not off the table, Swonk says
The good news in the CPI report appears to have reduced the market’s odds of a three-quarters of a percentage point hike by the Fed in September, but some still believe the central bank will remain hawkish.
“I still think the Fed is on by 75 basis points … They need to see a lot more improvement than this sustained, especially in the core. We could be looking at slower moves later in the year,” Diane Swonk said. chief economist at KPMG.
Core CPI, which the Fed traditionally focuses on, is still well above the central bank’s 2% target.
—Jesse Pound, Patti Domm
CPI is flat for the month and stocks like it
Stock futures rose and bond yields fell after the much-anticipated July consumer price report was much better than feared.
Prices rose 8.5% in July year-on-year, a slower pace than in June. Month-on-month, inflation was flat as energy prices fell overall by 4.6% and gasoline fell by 7.7%. This offset a 1.1% monthly increase in food prices and a 0.5% increase in housing costs. Economists polled by Dow Jones expected the headline CPI to rise 8.7% annually and 0.2% monthly.
Excluding volatile food and energy prices, so-called core CPI rose 5.9% year-on-year and 0.3% month-on-month, compared with estimates of 6.1% and 0.5% respectively .
—John Melloy, Jeff Cox
Futures jump after CPI report
Investors cheered a cooler-than-expected inflation report, with Dow futures jumping 400 points. Nasdaq 100 futures gained more than 2%, meaning the tech-heavy Nasdaq Composite could erase its losses from Tuesday when options market.
In the bond market, Treasury yields fell after the report.
-Jesse Pound
Futures higher ahead of CPI report
Shortly before the CPI report, futures have been based on their morning gains.
Dow Jones Industrial Average futures rose 101 points, or 0.3%. S&P 500 futures gained 0.4% and Nasdaq 100 futures rose 0.5%.
-Jesse Pound
The inverted yield curve “will collapse,” says Novogratz
Galaxy Digital CEO Michael Novogratz told “Squawk Box” that he was watching the Treasury yield curve as a key indicator of what could happen next for the markets.
“The most fascinating thing is the tilt from 2 to 10 seconds,” Novogratz said. “The curve has flattened to negative 50 basis points between 2 and 10 seconds. Go back. [50] years, only once in the 1970s did it surpass it. At some point, that’s going to tip, and I think that’s going to be the big tipping point.”
One basis point is equal to 0.01 percentage point.
When the 2-year Treasury yield trades above the 10-year yield, many on Wall Street see that as a strong indicator of a recession. On Wednesday, the 2-year yield was trading at 3.278%, while the 10-year yield was at 2.803%.
Novogratz said he believes investors are overconfident in a future Federal Reserve pivot, which could be one reason long-term rates are trading below short-term rates.
—Jesse Pound
Goldman Sachs cuts gold forecast
Goldman Sachs has cut its gold forecast, saying it overestimated how much recession fear would drive prices.
The company now sees gold averaging $1,850/toz over the next three months, before rising slightly to $1,950/toz for the rest of the year.
The new forecasts are lower than previous 12-month forecasts of $2,500/toz. The firm said it arrived at this target after looking at how gold has traded over the past 20 years, noting that recessionary risks around tightening cycles were previously a bigger driver than the real types.
“While we expected nominal rates to rise on the back of the Fed’s hikes, we did not expect inflation expectations to fall as much following the failure of the transitory narrative and persistent inflation surprises,” Goldman wrote in a note to customers.
“The main takeaway is that in the current environment of policy tightening and lingering recession concerns, gold’s tactical direction will be determined by shifts in the Fed’s priority role between fighting inflation and support for growth,” the firm added.
US gold futures were trading at $1,811.40/oz on Wednesday.
– Pippa Stevens
The market may be overbought ahead of the CPI
According to BTIG technical strategist Jonathan Krinsky, the recent market rally could put stocks at risk of pulling back from Wednesday’s CPI reading.
The strategist said in a note to clients on Tuesday evening that stocks have made some counterintuitive moves following this year’s CPI reports, and positioning ahead of the report appears to be a factor key in how the market reacts.
“At the end of the day nobody knows what the number will be or how the market will react to that number, but from our perspective things are coming in overbought, which leaves room for the market to move lower after the number ” Krinsky wrote. .
– Jesse Pound
Elon Musk sells Tesla shares
Musk’s plan to buy Twitter has worried policymakers around the world.
Joe Skipper | Reuters
Elon Musk sold roughly $6.88 billion worth of Tesla stock, although he said earlier this year that he has “no further sales of TSLA planned.”
Tesla’s CEO sold 7.92 million shares of the electric vehicle company, according to a succession of financial filings late Tuesday. SEC filings showed that the transactions occurred between…