The S&P 500 fell Wednesday, notching a sixth consecutive daily loss and hitting the lowest close since November 2020 as investors looked ahead to a key consumer report that will inform the pace of the Federal Reserve's rate hikes going forward.
The Dow Jones Industrial Average shed 28.34 points, or 0.10%, to close at 29,210.85. The S&P 500 lost 0.33%, falling to 3,577.03. The Nasdaq Composite inched down by 0.09% to end at 10,417.10.
Earlier in the day, stocks ticked up and bond yields dropped after minutes from the Federal Reserve's September meeting were released in the afternoon. The minutes showed that the central bank expects to keep hiking interest rates and keep them high until inflation shows signs of cooling off.
One comment in the meeting minutes led to optimism that the Fed might slow its tightening campaign or even walk it back if there was more financial market turbulence.
"Several participants noted that, particularly in the current highly uncertain global economic and financial environment, it would be important to calibrate the pace of further policy tightening with the aim of mitigating the risk of significant adverse effects on the economic outlook," the minutes stated.
Stocks whipsawed between gains and losses when the September producer price index, a gauge of final-demand wholesale prices, came in higher than expected. The print was up 0.4% in September, more than the consensus estimate of a 0.2% increase, according to Dow Jones.
The PPI number is one of the inflation gauges investors are watching alongside the Federal Reserve. If inflation stays high, the central bank is more likely to continue its aggressive path of interest rate hikes to bring it back into check. That means rates will continue to rise and may stay high for longer than markets expect, weighing on stocks.
Investors will get even more important inflation data on Thursday. The consumer price index is a measure of price changes in a basket of common consumer goods and services.
"Prices remain elevated so it shouldn't be a surprise to see producer goods and services rise. Keep in mind the increase is still below what we were seeing consistently month after month earlier this year," said Mike Loewengart, head of model portfolio construction at Morgan Stanley Global Investment Office.
"No doubt the Fed still has its work cut out for them, and if tomorrow's CPI read is hot, don't be surprised to see some investors come to grips with how long the road to tamer inflation may be."
Stocks close lower after choppy session
All three major averages closed lower Wednesday after whipsawing between gains and losses throughout the day.
The S&P 500 shed 0.33%, falling to 3,577.03, its lowest close since November 2020 and its sixth consecutive daily loss.
The Dow Jones Industrial Average shed 28.34 points, or 0.10%, to close at 29,210.85. The Nasdaq Composite fell 0.09% to close at 10,417.10.
Banks face increasing pressure to set aside reserves for loan losses, Morgan Stanley’s Graseck says
Banks have mostly resisted setting aside significant reserves for loan losses this year as the financial health of consumers and companies held up.
That may be about to change as financial institutions disclose third-quarter results starting Friday, according to Morgan Stanley banking analyst Betsy Graseck. The analyst expects a mixed quarter from banks including JPMorgan Chase and Bank of America, as rising net interest income conflicts with higher expenses, lower fees from things like investment banking, and a hit from rising loan-loss reserves.
"We do see pressure in credit quality building, and we think that we'll start hearing about that" this quarter, Graseck told CNBC's Sara Eisen.
That could pressure bank stocks further, despite the shares of three of the six biggest U.S. banks hitting 52-week lows this week. The current valuations of large and mid cap bank stocks don't reflect "much credit risk," she said.
Amid the tough outlook, good bets are banks with excess capital, liquidity and the ability to grow revenue more than expenses, Graseck said. Those include Wells Fargo, Regions Financial and M&T Bank, according to the veteran analyst.
Big short interest increase in this outperforming pharma stock
Traders have been mounting bets against pharmaceutical company Tricida, with its short interest accounting for 36% of tradable shares.
Tricida has been on fire this year, rising more than 30% in that time, while the broader market struggles. The stock has fared even better over the past 12 months, nearly tripling in value in that time.
— Nick Wells, Fred Imbert
Stocks are mixed heading into final hour of trading Wednesday
Stocks were mixed at 3:00 p.m. ET in New York, starting the final trading hour of the day.
The Dow Jones Industrial Average gained 62 points, or 0.21%, led by strong gains in the finance sector as bank stocks such as JPMorgan and Goldman Sachs ticked higher.
The S&P 500 slipped 0.004%, dipping into negative territory after whipsawing throughout the session. The index was lifted by gains in consumer staples, energy and transportation sectors with stocks Moderna, Norwegian Cruise Line Holdings, Royal Caribbean, Carnival and Valero energy as the top performers. Slumps in the utilities sector dragged the index lower.
The Nasdaq Composite also ticked down 0.05%, also weighed down by utilities and communications companies.
Stocks climb, bond yields fall after FOMC minutes contain no new surprises
Treasury yields fell and stocks rose, as investors bought both bonds and stocks after the release of the Federal Reserve's latest meeting minutes.
"i would say it was maybe people were unwilling to buy ahead of the risk of a hawkish surprise," said Ben Jeffery, rate strategist at BMO. "That's why we saw stocks rise, yields fall."
Now markets are squarely focused on Thursday morning's release of the September consumer price index. Jeffery said a hotter-than-expected inflation reading would push the market assumption on fed rate hikes higher.
""I just don't think anyone wants to make a high conviction decision ahead of it," he said.
Michael Schumacher of Wells Fargo said some investors may be latching on to a line in the minutes that several officials saw a need to calibrate tightening to mitigate the risks. But the more important comment in the minutes was in fact hawkish and could have triggered the opposite market reaction, he said.
"Many participants emphasized that the cost of taking too little action to bring down inflation likely outweighed the cost of taking too much action," the minutes said. The minutes said Fed officials also planned to hold rates higher once they stop hiking rates.
Fed minutes show central bank sees more rate increases, higher rates for longer
The Federal Reserve's September meeting minutes, released Wednesday, show that the central bank expects to continue increasing interest rates and hold them higher until inflation shows signs of abating.
The minutes reflect policymaker's discussions ahead of the last 0.75 percentage point increase, the third consecutive hike of that size delivered this year.
The central bank has been surprised with the persistent pace of inflation, but remain optimistic that rate hikes will help bring price increases back in check.
—Carmen Reinicke, Jeff Cox
Stocks making the biggest moves midday
These companies are making headlines in midday trading.
Moderna — Shares of Moderna jumped 9% after the drug maker and Merck announced a partnership to jointly develop and sell a cancer vaccine. Moderna's vaccine is being studied in combination with Merck's Keytruda to treat patients with high-risk melanoma in a Phase 2 trial.
PepsiCo — Pepsi's stock rallied nearly 4% after the snack and beverage maker reported profits and revenue that topped analyst expectations. The company also raised its guidance for the year as it was able to successfully raise prices on its products.
T. Rowe Price — Shares of T. Rowe Price fell nearly 5% after the financial firm said preliminary net outflows for the third quarter were $24.6 billion, bringing preliminary year-to-date net outflows to $44.6 billion. T. Rowe Price reported preliminary month-end assets under management of $1.23 trillion as of Sept. 30.
— Michelle Fox
No 'true pivot' coming soon, says Morgan Stanley's Mike Wilson
Morgan Stanley's Mike Wilson said on "Tech Check" that investors should not count on the Fed changing course and rescuing stocks.
""We don't think there's an imminent pivot coming anytime soon, in terms of a true pivot where they not only cause but really start cutting rates," Wilson said.
The Fed is widely expected to hike rates by three-quarters of a percentage point again in November.
Watch Wilson's full interview, including what he thinks could cause a true Fed pivot, on CNBC Pro.
— Jesse Pound
Stocks higher at midday
All three major averages held onto gains at midday, with the Dow Jones Industrial Average leading. The Dow gained 77 points at 12:30 p.m. ET, or 0.27%. The S&P 500 was slightly up at 0.03%, and the Nasdaq was barely in the green.
71% of clients expect to increase equity exposure in coming days, weeks, JPMorgan says
An interim look at results of a survey of JPMorgan's clients shows that a majority plan to buy equities in the near term.
Some 71% of clients said that they are going to increase their equity exposure in the coming days and weeks, according to the results released Wednesday. At the same time, 75% said that they would be increasing their bond portfolio duration in the coming days and weeks.
Investors seem to be buying into the bearish market, but see stocks as more likely to fall than gain in the near-term. Some 59% of JPMorgan clients said that they see the S&P 500 reaching the 3,250 level before surging to 4,000.
Economic concerns, central banks overshadowing midterms
The U.S. midterms are now less than a month away, but the election appears to be on the backburner for Wall Street. Discussions about seasonal trading around elections are being replaced by focus on inflation reports and how central banks will react to them.
"The biggest factor in the market right is central bank outlook. ... I think that is the dominant factor and will overwhelm elections this cycle," said Chris Dyer, director of global equity at Eaton Vance.
Politics could become a bigger factor for markets if it starts to clash with central banks, which is what happened in the United Kingdom when a budget proposal appeared to spark chaos in the government bond market.
"There is tension between central bank policy and government policy, and we've seen that most explicitly in the U.K. in recent weeks. That has the potential to continue that volatility through the market if investors are questioning the ability or the credibility to tame inflation because their efforts are being offset by government initiatives," Dyer said.
— Jesse Pound
Consumer staples leading stocks higher
Stocks are wavering between gains and losses Wednesday, but the strongest gains lifting markets are from consumer staples.
The sector is leading the S&P 500 higher, up about 0.07% at 11:00 a.m. ET. The Consumer Staples Select Sector SPDR Fund is up about 1.5% on the day.
Top names rising in the fund include PepsiCo, up more than 4% today, and Coca-Cola, up about 2.5%. Molson Coors Beverage, Constellation Brands and Mondelez also gained.
Rates are likely to stay higher for longer and weigh on markets, Shah says
The macro issues that plagued markets in the third quarter are likely to persist and mean that interest rates may stay higher for longer, according to Seema Shah, chief market strategist at Principal Asset Management.
"Markets struggled in the third quarter due to the synchronized global downturn," Shah said in a Wednesday note. "With the Federal Reserve making clear its intention to keep rates higher for longer, these challenges will likely continue to plague markets through the remainder of the year and into 2023."
That includes all major indices being in a bear market, rising rates, high inflation and a global economic slump.
"The macro environment, and thus today's investing landscape, is almost completely dependent upon upcoming inflation readings," said Shah. "While the August data showed that energy prices in the U.S. improved significantly, core inflation, which excludes the often-volatile food and energy prices, reaccelerated—driving the Fed's desire to move inflation back toward target levels and avoid a wage spiral."
That means investors need to be careful going forward.
"Despite the year-to-date declines, global valuations are still not particularly appealing," Shah said. "Investors should continue to move to a more defensive mix by underweighting equities and fixed income, and focus further on real assets."
RBC’s Lori Calvasina cuts 2023 earnings forecast
RBC Capital Markets' Lori Calvasina is cutting her forecast for markets at the start of what many investors expect will be a rough third-quarter earnings season.
The head of U.S. equity strategy said she trimmed her 2022 S&P 500 earnings per share forecast to $216, down from $218. Her 2023 EPS outlook fell to $208 from $212, as she cited weak GDP through next year.
Calvasina's year-end 2022 S&P 500 forecast dropped to 3,800, down from 4,200. The strategist set a new, 2023 preliminary target of 4,100.
The strategist expects that stocks will continue to bounce around over the next several months as markets struggle with rising inflation and downside earnings revisions. Still, Calvasina expects there will be a "modest recovery" next year after those choppy moves.
— Sarah Min
Stocks waver around flat line as investors look ahead
For a second day, major averages are mixed and stocks are flipping between gains and losses as investors look ahead to key consumer data due Thursday.
The Dow Jones Industrial Average is up 151 points, or 0.52%. The S&P 500 rebounded from a slight loss to trade 0.19% higher around 10:30 a.m. ET. The Nasdaq also regained losses to trade flat.
Stocks open lower Wednesday after stronger than expected PPI
Stocks fell at Wednesday's open as investors weighed stronger than expected producer price index data from September. The gauge of inflation signals that the Federal Reserve will likely keep on the path of aggressive interest rate hikes going forward.
The Dow Jones Industrial Average shed 83 points, or 0.29%. The S&P 500 and Nasdaq Composite were both down 0.33%.
Tesla showing a 'topping formation,' chart analyst says
Tesla is a target for short-selling as the stock's chart pattern peaks and it is likely to be a continued downside leader, according to Katie Stockton, founder of Fairlead Strategies.
"We actually are recommending shorting Tesla," she said on CNBC's "Worldwide Exchange." "And I have to say that because we have a short-term [chart] breakdown – it's a significant loss of relevant strength that we've seen, and of course momentum has deteriorated."
The stock was down about 2.9% at Tuesday's close, bringing the loss so far in 2022 to about 46%. That means the stock is performing worse than the tech-heavy Nasdaq composite.
— Alex Harring
Bond market sees slight negative in PPI, focus turns to upcoming consumer inflation report
Treasury yields ticked slightly higher after a report showing producer prices jumped more than expected in September.
But traders noted that the core producer price index inflation reading was in line with expectation, and the bond market reaction was muted. The benchmark 10-year Treasury yield rose to 3.96%. Yields move opposite price.
"The market is reading it as slightly bad… Maybe it's a little bearish for bonds, perhaps an ominous signal for CPI tomorrow," said Michael Schumacher of Wells Fargo. "Normally markets shrug off PPI. Now that people are so worried about inflation, people are looking at it more than they normally would. I don't think it's a big deal. The big number is tomorrow's CPI."
September's PPI rose by 0.4%, above the expected 0.2%. Excluding food and energy, PPI rose 0.3%, and at an annual pace of 7.2%, in line with estimates. The more widely watched consumer price index is expected at 8:30 a.m. ET Thursday.
"It certainly doesn't move the needle for the Fed or offer much indication for what we're going to see tomorrow in CPI," said Ben Jeffery of BMO. "We saw a basis point increase in 10-year yields but nothing dramatic."
A basis point equals 0.01 of a percentage point.
Producer prices rise more than expected in September
The producer price index rose by 0.4% in September, beating a Dow Jones forecast for a 0.2% gain. Year over year, PPI rose 8.5%, a slight deceleration from the 8.7% increase in August.
— Fred Imbert, Jeff Cox
Stock futures pare gains after September producer price index is higher than expected
The September producer price index, an inflation gauge that measures final-demand wholesale prices, came in higher than anticipated Wednesday.
The September reading for PPI was up 0.4%, higher than the 0.2% consensus estimate according to Dow Jones. In August, the gauge fell 0.2%.
Stocks pared gains after the report was released with the Dow Jones Industrial Average up only 24 points, or 0.08%. The S&P 500 was up 0.21% and the Nasdaq rose 0.27%
Moderna surges after Merck exercises option to collaborate on cancer vaccine
Shares of Moderna surged more than 8% in premarket trading Wednesday after Merck announced it would exercise an option to collaborate with the company on a cancer vaccine.
Merck will pay $250 million to exercise the option. The drug, mRNA-4157, is being tested alongside Keytruda, another key cancer medication from the company.
Data on the vaccine is expected in the fourth quarter.
- Carmen Reinicke
Citi likes Apple into earnings
Citi isn't spooked by Apple's upcoming earnings report this Halloween season, despite media and investor fears. The tech giant is set to release its fiscal-year fourth quarter results Oct. 27.
"Apple shares have slightly outperformed the broader market, given better-than-feared results [year to date], continued product launches, and positive news flow on consumer preference for higher ASP iPhone 14 Pro models," analyst Jim Suva wrote in a note Tuesday.
Among the reasons he is positive are checks that suggest iPhone 14 build is still on track, its $90 billion stock buyback and new product category launches such as augmented reality/virtual reality headsets and Apple Car in 2025 or later.
Citi's price target of $185 implies 33% upside from Tuesday's close. The stock is down nearly 22% year to date.
— Michelle Fox
Detrick sees stocks nearing market bottom in October, Shah disagrees
Two stock market analysts disagree about the timing of the bear market bottom looking ahead to earnings season and midterm elections.
Ryan Detrick, chief market strategist at Carson Group, thinks that the market bottom is near and will likely come in October.
The month has a reputation for volatility and crashes he said, but there are some things that point to markets falling. Sentiment has fallen, and the VIX volatility index is in backwardation.
"We're pretty optimistic we're getting closer to a pretty significant low here," he said on CNBC's Squawk Box.
Seema Shah, chief global strategist at Principal Asset Management, disagrees.
"We could be building up for a technical rally, but I wouldn't call it the market bottom," she said. Going into earnings season, any companies that miss or beat weak expectations could boost stocks, she added.
Still, she agreed that markets are too negative right now. But, instead of that leading to the market bottom, she said stocks could rally at the end of the year as investors snap up deals.
Third quarter earnings sentiment already weighed down, according to Wells Fargo
Even though only 4% of S&P 500 companies have reported third quarter earnings, sentiment has already taken a hit, according to Wells Fargo.
"Q3 earnings reactions are off to a tough start," wrote Chris Harvey in a Wednesday note. "We expect reactions to improve as we move through the season, but the not-so-great tone from early reporters, coupled with a generally bleaker macro environment, has weighed on sentiment."
Some stocks have already been re-priced ahead of announcements due to lowered expectations, especially companies in vulnerable sectors like cyclicals.
"This could help those companies see some relief if they can meet or beat," Harvey said. "We advise focusing on repriced GARP opportunities that may have longer-term upside in what we expect to be a challenged growth environment in 2023."
Companies that miss could face an even harsher penalty than usual, according to the note.
PepsiCo reports better-than-expected earnings, shares rise
PepsiCo shares rose 1.5% after the beverage and snack giant posted quarterly earnings that beat analyst expectations. The company posted a profit of $1.97 per share, beating a Refinitiv forecast of $1.84 per share.
— Fred Imbert
UBS says it's time to buy Norwegian Cruise Line
UBS analyst Robin Farley upgraded shares of Norwegian Cruise Line to a buy rating, citing improved bookings and occupancy rates.
Farley trimmed the bank's price target on the stock, which reflects a near 30% upside for the stock from Tuesday's close.
Shares rose about 3% in premarket trading.
CNBC Pro subscribers can read more on the upgrade here.
— Samantha Subin
Credit Suisse says sell Rocket Lab
Credit Suisse analyst Scott Deuschle initiated Rocket Lab with an underperform rating, citing several risks to the space company's valuation.
"We are concerned that the space economy may experience unfavorable reflexivity from declining public and private space company valuations," he said. "Specifically for RKLB, lower valuations may drive a reduction in capital spend from earth intelligence firms and the broader space startup ecosystem."
Rocket Lab shares slid 1% in the premarket.
CNBC Pro subscribers can read more here.
— Sam Subin
UK economy shrinks by 0.3% in August
U.K. GDP contracted by 0.3% month-on-month in August, the Office for National Statistics said Wednesday, below expectations for stagnation from a Reuters poll of economists.
The fall in activity was driven partly by manufacturing weakness and maintenance work on North Sea oil and gas facilities, the ONS said, while both production and services activity fell.
July GDP growth was revised down to 0.1% from a previous estimate of 0.2%.
"While this figure is not what the country wants to see, it won't make much of a difference to the path we are already on. The Bank of England (BoE) will continue to increase its base rate at it battles to tame runaway inflation," said Marcus Brookes, chief investment officer at Quilter Investors.
"The BoE continues to face the incredibly difficult task of guiding the country through this uncertain period where it finds itself in a rock and a hard place by raising rates to meet inflation but embarking on a gilt buying operation to help steady the markets following the turmoil precipitated by the mini budget."
- Elliot Smith
European markets slightly lower as investors look ahead to U.S. inflation data
European markets were slightly lower on Wednesday, with global growth concerns dominating sentiment and investors looking ahead to Thursday's inflation data out of the U.S.
The pan-European Stoxx 600 was down 0.2% in early trade, with banks shedding 1.1% while health care stocks nudged 0.4% higher.
- Elliot Smith
CNBC Pro: This stock is a better bet than even U.S. Treasurys, fund manager says
Nick Griffin, chief investment officer at Munro Partners, is so bullish on one stock, he says it's a better bet than U.S. Treasurys.
"It's cheaper than a U.S. Treasury. It grows faster than the U.S. Treasury, and it's probably got a better balance sheet than the U.S. Treasury. So from our point of view, it's a fairly safe place to [put your] cash," he said. Short-term U.S. Treasurys have surged in popularity among investors of late as yields pop.
— Weizhen Tan
U.S. economy is doing well amid economic uncertainty, says Treasury Secretary Yellen
Treasury Secretary Janet Yellen said the U.S. is "doing very well" amid global economic uncertainty.
Although the U.S. economy has slowed after a strong recovery, jobs reports indicate a resilient economy, she said in an interview Tuesday with CNBC's Sara Eisen.
She also acknowledged that inflation is too high and that lowering it is a priority for the Biden administration, and emphasized the importance of maintaining a healthy labor market while doing so.
— Chelsey Cox, Tanaya Macheel
Stock futures open slightly higher
Stock futures rose slightly on Tuesday night. Futures tied to the Dow Jones Industrial Average added 44 points, or 0.2%. S&P 500 futures and Nasdaq 100 futures both rose about 0.2% as well.
In regular trading, the S&P and Nasdaq Composite posted their fifth straight day of losses. The Dow ended on a higher note but gave back most of their gains by the close.
— Tanaya Macheel