Stocks were choppy Wednesday as market participants looked ahead to Thursday's jam-packed economic calendar that includes retail sales and the Producer Price Index (PPI). The data is particularly critical after a string of recent hotter-than-expected inflation readings have pushed back expectations for the Fed's first rate cut.
Most recently, Tuesday's release of the February Consumer Price Index (CPI) showed higher prices for airline tickets, gasoline and clothing drove inflation last month.
"Across the major segments of services, goods and commodities, nothing worked for the disinflation narrative last month, with all three categories threatening the Fed's 2% inflation target," says José Torres, senior economist at Interactive Brokers.
The next Fed meeting concludes one week from today. No change to the federal funds rate is expected this time around but the Fed's Summary of Economic Projections (SEP), or the "dot plot," which summarizes what each member expects monetary policy to be going forward, could signal where the central bank expects it to be by year's end.
In December, the SEP indicated most central bank officials were anticipating three quarter-point rate cuts by the end of 2024.
According to CME Group's FedWatch Tool, futures traders are currently pricing in a 58% chance the first quarter-point rate cut will come in June. Odds it will occur in July are at 46%.
Tesla is slapped with a new Sell rating
In single-stock news, Tesla (TSLA) continued its recent downtrend, shedding 4.5% – or $25.5 billion in market cap – after Wells Fargo analyst Colin Langan downgraded the Magnificent 7 stock to Sell from Hold. Langan also slashed his price target to $125 from $200, about 27% below current levels.
Tesla "ain't looking so magnificent," Langan writes in a note to clients. The analyst sees TSLA as a "growth company with no growth," and expects recent price cuts to its electric vehicles to have "a diminishing impact on demand."
Langan is by no means alone in his bearish outlook. Of the 45 analysts covering Tesla that are tracked by S&P Global Market Intelligence, nine say it's a Strong Buy, six have it at Buy, 22 call it a Hold, and eight say it's a Sell or Strong Sell. This works out to a consensus Hold recommendation.
Dollar Tree sinks after earnings
Dollar Tree (DLTR) was another notable decliner, spiraling 14.2% after earnings. The dollar-store chain reported fourth-quarter earnings and revenue that were below analysts' estimates and said it is closing 600 unprofitable Family Dollar stores. It plans to shutter an additional 370 Family Dollar and 30 Dollar Tree stores as their respective leases expire over the next several years.
The company also gave disappointing first-quarter and full-year guidance due in part to what Chief Financial Officer Jeff Davis called "meaningfully worse" levels of shrink than previously expected.
As for the main indexes, the Nasdaq Composite fell 0.5% to 16,177, while the S&P 500, which hit a new intraday record high Tuesday, shed 0.2% to 5,165. The Dow Jones Industrial Average managed to add 0.1% to 39,043 on strength in 3M (MMM, +5.4%) and Chevron (CVX, +1.3%).
