The stock market closed higher Wednesday led by the tech-heavy Nasdaq on expectations of a lower consumer inflation report on Thursday. Real estate stocks led sectors as mortgage rates ease off highs and home prices begin to fall.
The Nasdaq composite closed 1.8% higher while the S&P 500 gained 1.3%. The Dow Jones Industrial Average added 0.8%. The small-cap Russell 2000 index rose 1.2%.
Volume rose on the Nasdaq but fell on the NYSE vs. the same time on Tuesday, early data showed.
The yield on the benchmark 10-year Treasury note fell 8 basis points to 3.54%. Crude oil prices rose 3.3% to $77.60 per barrel.
Shake Shack jumped 5.2% Wednesday, breaking out of a double-bottom base with a 53.36 buy point. Volume was 75% above average.
Auto chemicals and paints maker Axalta Coating Systems also broke out of a flat base, jumping 2% on Wednesday. Axalta is due to release fourth-quarter earnings results on Jan. 25.
Machinery and construction equipment maker Terex shot up 2.7% Wednesday, breaking through a 46.57 buy point from a flat base in heavy volume.
Stock Market Gains, Led By Real Estate Stocks
The S&P Real Estate Select Sector ETF led all 11 S&P sectors, closing up 3.6%.
"Although the Fed Funds Futures market still sees a high probability of a 25 basis point hike on Feb. 1, much depends on how the market interprets the release of the consumer price index (CPI) report on Thursday morning," said Quincy Krosby, chief global strategist for LPL Financial. "A continued downward trajectory of inflationary pressures could surely underpin a market rally despite the Fed's seemingly orchestrated message."
The Econoday consensus estimate is for annual inflation to drop to 6.6% in December from 7.1% in November.
Mortgage rates have come down from a peak 7.37% for a 30-year fixed rate in October to near 6.5% today, according to Bankrate. Home prices in November, the most recent measurement, were 2.5% lower than the 2022 peak, according to CoreLogic. They were still over 8% higher year over year.
Higher mortgage rates continue to test home affordability, keeping many homebuyers sidelined. But with inflationary pressure easing and mortgage rates off their highs, the market could see an uptick.
In 2023, housing demand will remain soft, especially in the first half, "but we see a favorable setup for (homebuilder) stocks with lower mortgage rates on the horizon," Bank of America analysts wrote in a note to clients today.
Solar Stocks Gain On Korean Investment
Solar stocks also gained Wednesday on an announcement that Korea-based Qcells will spend $2.5 billion on a massive expansion of its solar power manufacturing facilities in Georgia.
Solar stocks getting a lift include First Solar, SolarEdge Technologies, Shoals Technologies, JinkoSolar and Array Technologies.
A statement from President Joe Biden said the Qcells investment is the largest solar power investment ever in the U.S.
The Innovator IBD 50 ETF gained 1.2% Wednesday, led by foot apparel maker Crocs, which climbed to a one-year high.
Tesla gained 3.7% after CEO Elon Musk unveiled plans to expand the Texas gigafactory with a $1 billion investment. The global EV giant also looks to expand international operations even as it has drastically cut prices in China and other key Asian markets to drum up orders.
Tesla is nearing the completion of a preliminary deal to set up a factory in Indonesia, Bloomberg reported Wednesday.
Stock Market Movers And Shakers
In the airline industry, Delta Air Lines rose 0.2% with earnings due Friday. Shares are building the right side of a cup base with a buy point of 46.37. Strong volume has accompanied the price action this week.
And American Airlines gained 1%, adding to the 25% gain it has posted since Dec. 28.
Embattled retailer Bed Bath & Beyond soared more than 68% to 3.49, its largest single-day gain ever recorded, according to Dow Jones Market Data.
Halozyme Therapeutics plunged over 9% after the company gave a weak outlook late Tuesday. Shares of the biotech fell through their 50-day line in heavy volume, which is a sell signal.
Drugmaker AbbVie is also selling off and breaking below the 50-day moving average. It has fallen about 7% from the 167.87 buy point, although the stock spent only a short while above that entry before fading.
Shares of Apple rose 2.1% after news that the company will make its screens in-house. Until now, it relied on Samsung and LG for its high-end displays.
Medical technology stock Axonics surged 10.6% after preliminary fourth quarter results showed a 61% increase in revenue. For the year, the Irvine, Calif.-based company expects a 52% revenue increase to $273.6 million.
Follow Michael Molinski on Twitter @IMmolinski
