The stock market strengthened in the last hour, and is close to highs of the day, as investors debated Thursday's mixed CPI report. The December consumer price index offered few reasons for the Fed to slow rate hikes.
The CPI fell 0.1%, in line with expectations and lower than November's 0.1% increase. Food prices rose 0.3%, lower than November's 0.5% rise.
Core CPI, excluding food and energy, hit consensus at 0.3%, a tad above November's 0.2% increase. Shelters and rents rose an unhealthy 0.8% but could get relief down the road.
Year-over-year inflation rose 6.5%, below Econoday's projected 6.6% annual rate, and a drop from 7.1% in the prior report. This marked the sixth straight month of decreases, after the figure peaked in June 2022. Core inflation rose at a 5.7% annual rate in December, also in line with forecasts.
These drops represent progress, but service inflation remains too high, analysts said.
"We think inflation will continue to remain stubbornly high for the rest of 2023, but will moderate to around 3.5% by the end of the year, above the Fed's 2% target," said Gargi Chaudhuri, head of iShares Investment Strategy, Americas.
In other news, initial weekly jobless claims for the week ended Jan. 7 came in at 205,000 vs. 215,000 consensus. The data still hasn't shown the tightening that economists were looking for to slow the labor market.
Stock Market Forges Ahead
The stock market settled into respectable gains, but sellers were still active in afternoon trading.
The S&P 500 gained 0.4% and Nasdaq rose 0.5%. The Dow Jones Industrial Average added 0.7% while the Russell 2000 outperformed, up 1.4%. Volume on the NYSE and Nasdaq was marginally higher vs. the same time on Wednesday.
The Dow held above its 50-day and 21-day exponential moving averages. The S&P 500 and Nasdaq found support at their 50-day lines.
The tech-heavy Nasdaq 100-tracking Invesco QQQ trust ETF gained 0.5%.
Crude oil rose 1.5% to $78.52 per barrel. The Energy Select Sector SPDR ETF gained 1.9%. Natural gas rallied 3.7% but is still below $4 per million British thermal units.
Bitcoin futures popped 7.3% to $18,905. The Innovator IBD 50 ETF found strength, and was in line with the major stock market indexes, adding 0.9%.
European stock markets rose, with the German DAX gaining 0.7%. The Paris CAC 40 also tacked on 0.7% while London FTSE added 0.9% to close out the trading day.
The 10-year Treasury note yield shed 10 basis points to 3.44%.
Odds for a 25-basis-point hike at the February Fed meeting rose to 92.3%. That would take the fed funds rate to the 4.5%-4.75% range, according to the CME Group FedWatch Tool.
Q4 earnings season starts Friday with big banks, including JPMorgan Chase, Bank of America and Citigroup reporting.
Stock Market Movers: Airline And Steel Stocks Jump
American Airlines gapped up and traded 9.3% higher in heavy volume, after raising Q4 revenue growth estimates to 16%-17%, from 11%-13%. The airline also adjusted EPS guidance to $1.12 to $1.17 vs. the 60-cent analyst consensus estimate. Look for Delta Air Lines Q4 earnings on Friday.
The IBD Transportation-Airlines industry group has gained over 20% so far in January. AAL stock is trading well above its 200-day moving average and is an S&P leader today.
Southwest Airlines gained 2.4% as the industry group saw strength.
Chipmaker Taiwan Semiconductor gapped up and added 7.6% after reporting better-than-expected Q4 EPS. Management lowered Q1 revenue guidance, warning its operating margin will drop to the low-40% range, from 52%. The rally pushed the stock above its 200-day moving average.
Plastics and metals manufacturer Illinois Tool Works rose 1.1% and broke out of a long cup-with-handle base, hitting the 231.79 buy point.
Steel and iron pellet producer Cleveland-Cliffs soared 8% after Morgan Stanley upgraded the stock to overweight from underweight, and raised the price target to 26.
Futures: Tesla Slashes U.S., European Prices; Earnings Ramp Up
Reinsurance And Oil Stocks Break Out
Aon rose 1.2% and broke out of a cup-with-handle base in light volume, hitting the 314.74 buy point. Shares of the risk management and reinsurance solutions provider are in the 5% buy zone extending to 330.48 on the MarketSmith chart.
Offshore drilling contractor Valaris gained 3% and broke out of a choppy base, hitting the 70.27 buy point in above average volume. The relative strength line hit a new high, as indicated by the blue dot on the MarketSmith chart.
CNH Industrial rose 1.9% and broke out of an undefined base, hitting the 17.23 buy point. The agriculture and construction manufacturer stock is in the 5% buy zone, which goes up to 18.09. Its relative strength line also hit a new high. Analysts give mixed ratings on the stock.
Oil and natural gas exploration company Hess jumped 5.3% and broke out of a flat base, hitting the 149.93 buy point. It is in the buy zone extending to 157.43.
PC Peripheral Stock Sells Off
Logitech plummeted over 16% after warning that fiscal 2023 sales will drop 13%-15%, compared with previous guidance for a 4%-8% drop. Wedbush downgraded the PC peripheral maker to neutral from outperform, and dropped the target price to 60 from 70.
KB Home fell 2.1% after reporting lower-than-expected Q4 EPS and sales. The stock backtracked after gaining more than 12% in 2023.
Netflix rose 1.5% after Jefferies upgraded shares to buy from hold, and raised its price target to 385 from 310.
Walt Disney rallied 3.9% after picking Nike executive Mike Parker as its new chair. Traders also speculated that a proxy fight will improve oversight of the struggling entertainment giant. The media and parks stock is today's Dow leader.
Oil services provider Halliburton rose 3.9% after Wolfe Research upgraded the stock to outperform from underperform, with a price target of 51.
