Dow closes more than 500 points higher to start the week as investors await Fed meeting, inflation data

Pro Picks: Watch all of Monday's big stock calls on CNBC
Pro Picks: Watch all of Monday's big stock calls on CNBC

The Dow Jones Industrial Average jumped Monday, clawing back some of the steep losses from the previous week, as traders looked ahead to a highly anticipated Federal Reserve meeting and new inflation data.

The blue-chip Dow added 528.58 points, or 1.58%, to 34,005.04. That was its first close over 34,000 since Dec. 2. The S&P 500 gained 1.43% to close at 3,990.56, and the Nasdaq Composite rose 1.26% to 11,143.74.

A lift in Boeing shares pushed the Dow higher following reports that the airline is close to a deal with Air India. Elsewhere, energy stocks rose as oil prices steadied, following several weeks of declines.

Wall Street is coming off a rocky week that saw all three major averages lose ground. The Dow and S&P 500 had their worst weekly losses since September, falling 2.77% and 3.4%, respectively. The Nasdaq dropped about 4%.

"Today's action is mostly a reflex bounce after last week's poor performance," said Yung-Yu Ma, BMO Wealth Management chief investment strategist. "There's probably some cautious optimism ahead of tomorrow's CPI report, but also some underlying concern. We can see that concern today in an up market for equities that actually has the VIX rising quite sharply."

"Europe, which outperformed last week is down today while the U.S. is bouncing," he added. "It speaks to a choppy market with low conviction; strong markets have better uniformity."

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A slew of deal-making activity boosted sentiment. Coupa Software and Horizon Therapeutics were among biggest movers on Monday after the companies announced they've agreed to be bought. Shares of Coupa gained 26%, while Horizon added 15%.

Meanwhile, a New York Fed survey showed consumers had grown more optimistic about inflation in November. The bank's survey of of Consumer Expectations showed consumers expected one-year inflation to run at a 5.2% pace, down 0.7 percentage point from October.

On Tuesday, the November consumer price index will be released and traders will be looking for a sign that inflation is slowing. The same day, the Federal Reserve will begin its two-day meeting and is expected to announce another rate hike on Wednesday, though traders anticipate a smaller move than in recent months.

In addition to the expected rate hike, the Fed's updated economic projections and Chair Jerome Powell's press conference could be key signals for what the central bank wants to do in the coming months.

"Financial conditions have eased dramatically since the October CPI reading released last month, so the Fed will likely use the December FOMC meeting to walk those back," said Cliff Hodge, chief investment officer for Cornerstone Wealth. "We think the markets are too sanguine on rates after the first quarter and we expect Powell to take a more hawkish tone and for the dots to indicate higher rates for a longer period of time than what is currently being priced in by the futures markets."

Lea la cobertura del mercado de hoy en español aquí.

Stocks close higher on Monday

Stocks ended the trading session higher on Monday as investors looked ahead to Tuesday's CPI data and Federal Reserve meeting.

The Dow Jones Industrial Average rose 528.58 points, or 1.58%, to end at 34,005.04. The S&P 500 gained 1.43% to close at 3,990.55. The Nasdaq Composite rose 1.26% to 11,143.74.

— Tanaya Macheel

DoubleLine’s Gundlach says 2023 will be a recessionary year

DoubleLine Capital CEO Jeffrey Gundlach said an economic downturn will arrive next year, which could prompt the Federal Reserve to swiftly reverse its policy stance.

"The effects of these rate hikes and the accumulation of quantitative tightening and draining of liquidity from the bond market [are] going to make 2023, in my view, probably a recessionary year," Gundlach said Monday during a DoubleLine investor webcast.

The so-called bond king thinks the odds are greater than 75% that there's a rate cut in 2023.

— Yun Li

December has had a slow start, but don't count it out yet

Even though the S&P 500 has had a slow start in December, it's too early to discount the index in the final month of the year, according to Adam Turnquist, chief technical strategist, and Barry Gilbert, asset allocation strategist, at LPL Financial.

"December is off to a rough start, and so far it's not living up to its seasonal reputation of being one of the best months for equity market returns," they wrote. "Since 1950, the S&P 500 has historically produced average returns of just over 1.5% and has finished the month in positive territory 75% of the time."

Still, while the index is down as of Friday, seasonality trends point to a potential recovery in the second half of the month.

"Part of the strong second-half December story is attributable to the market's tendency to advance during the final trading days of the year and early into the next," according to the note.

The end of the year may also set up the S&P 500 for a better 2023.

"January returns following a down year historically outperform the average January monthly return for all years going back to 1950 (1.0% on average, 1.5% median)," they wrote. "Following a down year, the S&P 500 has finished the following year above its 200-day moving average (dma) 79% of the time, compared to down years that only close above the 200-dma 21% of the time."

—Carmen Reinicke

This week is the ‘last hope’ for a year-end rally, says Defiance ETFs’ Jablonski

This is a critical week for markets with the latest consumer price index data coming in Tuesday morning, the Federal Reserve's two-day meeting beginning the same day, and jobless claims and retail data later in the week, Defiance ETFs CEO and chief investment officer Sylvia Jablonski told CNBC. Investors will be watching the data closely for a better sense of the likelihood of an end-of-year rally.

"It is arguably the last hope for that year-end rally that we've all been anxiously awaiting," she said. "Today's market seems to be pricing in the idea that CPI will be as expected and potentially that the 50bps, is what we will see regardless of CPI. The market could swing viciously in either direction, depending on this date."

"If the results turn out to be worse than feared, not all is bad," she added. "With pessimism at an all-time high, earnings starting to come in, bond market pricing in a recession, it may be bad in the short term, but it won't be the end. Value creation happens in markets like this, in times like this. Any surprise to the upside gets us that year-end rally. We can't forget that the markets posted their best post cpi read, ever last November. If that is any indication, positive news could give us several percentage points."

— Tanaya Macheel

Don't trust the market bounce from the November low, Goldman Sachs says

The S&P 500 has jumped more than 6% since hitting a closing low on Nov. 3, but Goldman Sachs' Cecilia Mariotti isn't ready to trust this bounce.

"The rally in risky assets has likely forced a reversal of some of these positions and likely triggered some short squeeze," Mariotti said in a note Monday. "Despite the rebound of our positioning indicator we are not convinced we are past the 'true' trough in positioning. Temporary relief from bearish levels can drive large reversals in equities, but we think a favorable shift in macro momentum will be needed for a sustained recovery across risky assets and any rebound in both positioning and sentiment."

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— Fred Imbert, Michael Bloom

It's too early to take a 'meaningful position' in semiconductor stocks, says Requisite Capital Management's Talkington

Investors looking to trade semiconductor stocks may be better off waiting it out until 2023, according to some big investors.

"We can't buy cyclicals — and I would put semis in this camp — until the cycle has reset and that has not happened yet, in my opinion," Liz Young, head of investment strategy at SoFi told CNBC's "Halftime Report" on Monday. "I would wait on this a little bit. If we get another stab down in the market though that's when I would start buying semis."

Bryn Talkington, managing partner at Requisite Capital Management agreed with Young's sentiment, adding that she'd consider beefing up her current position in Nvidia and building a stake in Lam Research should circumstances change.

"It's too early to take a meaningful position here," she said, noting she's holding out until next year at the earliest.

Growth stocks have come under pressure this year as the Federal Reserve hikes rates and fears of an economic slowdown mount among investors. The VanEck Semiconductor ETF tracking the industry is down more than 28%.

While Lam Research is slightly more expensive than some other semi-equipment names, Joe Terranova, senior managing director at Virtus Investment Partners said he prefers the stock given its strong balance sheet and the fact that it's undergone a "valuation reset."

— Samantha Subin

Morgan Stanley reiterates overweight rating on Disney

Morgan Stanley is staying overweight on Disney, saying the parks businesses should help it meet already-lowered expectations for the 2023 fiscal year.

While analyst Benjamin Swinburne reiterated the rating, he did lower the price target by $10 to $115. That reflects an upside of 23.2%.

Still, he noted returning CEO Bob Iger has to handle significant headwinds related to driving down expenses, creating a new succession plan and refocusing on content.

But Swinburne said the new targets for 2023 are reachable given earnings potential from its park business, which has strong forward bookings despite the softening economy. The expectations have also already been reduced given the weakening backdrop, he noted. Swinburne said the company could start driving revenue through media by fiscal year 2024 if the business is reorganized and content is strong.

"The returning CEO arrives with Disney facing known but real secular and cyclical headwinds," he said in a note to clients.

Disney stock was up less than 1% on Monday. The entertainment giant has lost 39.2% this year.

— Alex Harring

JPMorgan Chase is `best-of-breed’ for investors, says Bank of America analyst with $145 target

JPMorgan Chase is the top bank stock to own because of its diversified model and "top-notch execution," according to Bank of America analyst Ebrahim Poonawala.

Poonawala said Monday in a note he was confident in the quality of the bank's loans and growth opportunities after a meeting with commercial bank head Doug Petno. The analyst reiterated his "buy" rating and raised his price target on the New York-based bank from $132 to $145.

"While the stock has significantly outperformed peers QTD, we consider JPMorgan as best-of-breed for investors looking to maintain/add exposure to bank stocks" at current valuations, he said.

"While we expect a tough environment for bank stocks over the coming months, JPM's credit defensibility, diversified revenue mix, market share opportunities, differentiated tech strategy, internal capital generation and top-notch execution are drivers of superior earnings growth and stock performance," he added.

Shares of JPMorgan have slipped 17% this year, a better showing than the 25% decline in the KBW Bank Index.

—Hugh Son

Deutsche Bank upgrades Lam Research on improving 2024 outlook

Though 2023 will be worse than previously expected for Lam Research, 2024 will be better, according to Deutsche Bank.

That's good news for the chipmaker's stock. Analyst Sidney Ho upgraded the semiconductor stock to buy from hold and increased his price target 30% to $520, which would imply a new upside of 15.5%.

Before the upgrade, Ho expected the stock to fall to $400.

"While we still see some risks to memory WFE [water fabrication equipment] in the near term, investor expectations are already low enough and should not have a significant impact on LRCX's share price," he said Sunday in a note to clients. "Looking beyond the near term, memory WFE is poised to rebound in CY24, as we believe CY23 memory WFE spend is at unsustainably low levels."

The stock is up about 1.5%.

CNBC Pro subscribers can read the full story here.

— Alex Harring

Stocks making the biggest midday moves

These are the stocks making the biggest moves during Monday's session.

  • Horizon Therapeutics – Shares of the drugmaker jumped 15% after the company announced it has agreed to be acquired by Amgen in a deal valued at approximately $26.4 billion, or $116.50 per share, in cash.
  • Coupa Software – The maker of business spending management software jumped 26% after the private-equity firm Thoma Bravo agreed to buy the company in an all-cash deal worth $8 billion, or $81 per share.
  • Weber – Shares of the grill manufacturer jumped 23% after the company announced a deal to be taken private by BDT Capital Partners. BDT will purchase Weber for $8.05 per share, according to the announcement.

Read more here.

—Carmen Reinicke

Oppenheimer projects stocks to enjoy solid rally next year

Oppenheimer Asset Management has taken one of the more bullish stances on the stock market for next year.

Chief investment strategist John Stoltzfus said in a note to clients on Monday that the firm expects the S&P 500 to end 2023 at 4,400, up about 12% from Friday's close.

Part of the optimism comes from the belief that the Federal Reserve won't go too far in hiking rates to tamp down inflation.

"The better the improvement in the inflation rate when the Fed either takes pause or pivots the less likely a hard landing," Stoltzfus said.

Read more about the outlook on CNBC Pro.

— Jesse Pound

Consumers see inflation easing considerably in the next year, New York Fed survey shows

A New York Federal Reserve survey released Monday showed consumers are growing more optimistic about inflation. Respondents in the central bank's Survey of Consumer Expectations indicated they see inflation coming down both in the short term, one year out, as well as in the three- and five-year outlook.

Consumers see one-year inflation running at a 5.2% pace, down 0.7 percentage point from the October reading, according to the study. The inflation-rate projection for three years from now edged lower to 3%, down 0.1 percentage point from the previous month. And a relatively new data series reflecting the five-year outlook declined by the same level, to 2.3%.

— Jeff Cox, Tanaya Macheel

Gap could rally nearly 30% amid strong growth outlook for 2023, Goldman Sachs says

Gap, known for brands such as Old Navy and Banana Republic, should perform well in 2023 despite a rocky broader outlook for retail, according to Goldman Sachs.

Analyst Brooke Roach upgraded the stock to buy from neutral and hiked her price target to $18 per share from $10, implying upside of 29.5% from Friday's close.

"While we acknowledge valuation is elevated for this business, we believe accelerating earnings growth (especially in 1H) will support share outperformance, particularly in a softer landing scenario," she said in a note to clients.

The stock rose slightly following the note. CNBC Pro subscribers can read more about the call here.

— Alex Harring

Fed members starting to split on future policy moves, WSJ report says

After a year in which the Federal Reserve presented a mostly unified front in the measures needed to tackle inflation, cracks are beginning to form among policymakers, according to a Wall Street Journal report Monday.

Nearly all of the six interest rate increases since March have received unanimous approval from the monetary policy-making Federal Open Market Committee. However, remarks over the past several weeks show some members think the Fed now can exercise patience, while others want to push ahead.

The article puts Philadelphia Fed President Patrick Harker and Boston President Susan Collins in the dovish camp, in favor of less restrictive policy and lower rates. Governor Christopher Waller was noted as being part of the more hawkish group.

The FOMC will release its rate decision following the conclusion of its two-day meeting Wednesday. Along with the rates move, committee members will be updating their "dot plot" of future expectations, as well as revised outlooks on GDP, unemployment and inflation.

—Jeff Cox

A sweeter deal for grill maker Weber is still below its IPO price

During the pandemic lockdowns, consumers happily fired up shiny new grills. Weber tried to turn the wave of strong sales it saw at the time into a splashy public debut. But it struggled from the start.

Weber's debut price of $14 in August 2021 was below the range it targeted, and once its sales growth began to falter coming out of the peak lockdown period, the stock sunk lower. By July, Weber's CEO had stepped down, it withdrew its 2022 forecast and suspended its dividend. Its stock hit a low of $4.82 in trading on Oct. 24.

But its majority owner BDT Capital Partners said Monday it will take the company private again for $8.05 per share, a 24% premium to its closing price on Friday. It's also a sweeter deal than the $6.25 a share BDT offered in late October after the stock dropped below the $5 mark. In the wake of the news, Weber shares are up more than 23%.

Weber isn't the only stock that went public in 2021 that looked for an exit this year. Mattress company Casper Sleep is another example.

—Christina Cheddar Berk

Goldman says it’s ‘difficult’ to envision a substantially higher market next year

David Kostin, Goldman's head of U.S. equity strategy, said it's hard to get bullish on stocks in 2023 amid recession risks, shrinking margins and stubborn inflation.

"It is difficult to outline a realistic scenario that drives the S&P 500 substantially higher next year," Kostin said in a note.

The Wall Street firm said its base case is the S&P 500 will fall about 8% from here to 3,600 in the first half of 2023 before rallying 11% to 4,000 by the year-end. If the economy tips into a recession, Goldman said the S&P 500 would decline to 3,150.

— Yun Li

Goldman Sachs says inflation could continue chilling Cheesecake Factory demand

Traffic slides could continue for Cheesecake Factory as the impacts of inflation continue to be felt by the restaurant chain, Goldman Sachs says.

Analyst Jared Garber downgraded Cheesecake Factory to sell from neutral. He also lowered his price target for the stock to $29, which reflects a downside of 12.2% over Friday's close.

"We see macroeconomic pressure in FY23 — across the Casual Dining space, as we've noted in this report — with limited pricing power support from broader inflation and incremental traffic declines, while cost pressures are likely to remain a headwind for margins," he said in a note to clients.

The stock lost 2.5%.

It's not Goldman Sachs' only restaurant downgrade. CNBC Pro subscribers can read the full story here.

— Alex Harring

Stocks are overbought and at resistance, says MKM Partners' O'Hara

Stocks rose to start the week on Monday after declining 3.37% last week, failing to break above the declining downtrend channel, and failing to hold above the declining 200-day moving average, MKM Partners' chief market technician JC O'Hara said in a note Monday.

"Overbought and at resistance is a difficult position to buy stocks, especially in front of this week's CPI inflation report and the Federal Reserve's meeting," he said. "Last week's pullback can easily deepen to 3800 on the S&P 500. The risk to the market is the fact that every time the downtrend line was tested and failed, price went on to make a new low."

— Tanaya Macheel

Wells Fargo downgrades Qualcomm, says smartphone exposure will hurt chipmaker

Smartphone exposure will be bad for Qualcomm next year, Wells Fargo warned.

Analyst Gary Mobley downgraded the stock to underweight from equal weight. Mobley also maintained his price target to $105, which implies a downside of 11.8% over Friday's close.

"Our Underweight rating reflects our desire to make sure we have the right ratings on the right stocks once investor sentiment turns more positive and once we see signs the chip cycle is hitting a bottom," he said in a note to clients. "Once investors are convinced we've reached a bottom in the chip cycle, we believe the sector may rally."

The stock dipped 1%. It has dropped 34.9% this year.

CNBC Pro subscribers can read more here.

— Alex Harring

Stocks open higher to start the week

U.S. stocks opened higher Monday morning, ahead of a week with several highly-anticipated events in the ongoing fight against inflation.

The Dow Jones Industrial Average added 76 points, or 0.2%. The S&P 500 gained 0.2% and the Nasdaq Composite added 0.1%.

— Tanaya Macheel

Natural gas higher for a 4th day; drillers rally 4% or more in premarket

January natural gas futures rallied to $7.058 per million BTUs early Monday, the highest in almost two week and the fourth straight day of gains.

Comstock, Antero, Southwestern and Range Resources are all higher by 4% or more in pre-market trading.

Crude oil headed south early Monday, with January West Texas Intermediate contracts briefly falling as low as $70.25, above Friday's low of $70.08, which was the weakest since December 22, 2021. That was also the last time WTI traded below $70 a barrel.

So far this quarter, WTI Is down 10%, on pace for its second straight quarterly decline. It tumbled almost 25% in the third quarter and is now down almost 5% on the year.

The  Energy Select Sector SPDR Fund is up by more than 15.5% in the fourth quarter, on track for the 4th quarterly advance in the past five, and the most since the first quarter's 38% rally. Quarter-to-date leaders include Halliburton, Schlumberger and Baker Hughes, all higher by 30% or more in the fourth quarter.

— Scott Schnipper, Gina Francolla

El-Erian says rates aren't coming down next year as the market expects

Investors betting on a pivot from the Federal Reserve in 2023 are likely to be disappointed, Mohamed El-Erian of Allianz said on CNBC's "Squawk Box" on Monday.

"I think ultimately the Fed is going to have to maneuver this very, very difficult road towards the middle of next year," he said. "I think we have clarity on what happens next with the Fed, but the further out you go in 2023, the harder it gets, and we're not going to get rates coming down as the market expects."

He added that while he doesn't think a recession is necessary to bring down inflation, one is highly likely. And, he worries that inflation will get sticky around 4%, putting the Fed in a difficult position of potentially having to crush the economy further to bring price increases in check.

—Carmen Reinicke

Stock making the biggest moves in premarket trading

These are some of the biggest stock moves in premarket trading Monday.

  • Coupa Software – The maker of business spending management software jumped 26% in early morning trading after private-equity firm Thoma Bravo agreed to buy the company. The deal is worth $8 billion, or $81 per share in cash.
  • Weber – The maker of grills and other outdoor cooking products saw its shares surge 21% after it agreed to be taken private by BDT Capital Partners for $2.32 billion in cash, or $8.05 per share.
  • Horizon Therapeutics – The drugmaker's shares gained 15% in the premarket after it agreed to be bought by Amgen for $116.50 per share in cash, with the deal valued at $27.8 billion.

For more movers check out our full list here.

— Peter Schacknow, Tanaya Macheel

Rivian halts plans to create electric vans with Mercedes-Benz

Rivian shares slumped nearly 4% after the electric vehicle company announced it's halting plans to make electric commercial vans in Europe.

The company first announced plans of the joint venture with Mercedes-Benz in September, saying that both companies would work together to manufacture two different EV vans.

"At this point in time, we believe focusing on our consumer business, as well as our existing commercial business, represent the most attractive near-term opportunities to maximize value for Rivian,"  said Rivian CEO RJ Scaringe, adding that company is open to working with Mercedes-Benz on future projects.

— Samantha Subin, Anmar Frangoul

Coupa Software halted for news pending

Coupa Software shares were halted for news pending after Bloomberg News reported Sunday that the company was in advanced talks to be acquired by private equity firm Thoma Bravo.

Coupa was up 21% when it was halted.

— Fred Imbert

Horizon Therapeutics surges on Amgen acquisition

Horizon Therapeutics shares rallied 15% in the premarket after the company announced it will be acquired by Amgen for $116.50 per share, valuing the company at more than $27 billion on a fully diluted basis.

"In nearly 15 years, we have built one of the fastest growing and most respected companies in the biotechnology industry from the ground up. We have accomplished a tremendous amount for patients, their families and our customers, and created significant value for shareholders," Horizon CEO  Tim Walbert said in a statement.

Amgen shares dipped 2%.

— Fred Imbert

Microsoft buys near 4% stake in London Stock Exchange and launches 10-year partnership

U.S. tech giant Microsoft on Monday announced a 10-year partnership with the London Stock Exchange Group and took a near 4% stake in the U.K. bourse operator.

The partnership involves next-generation data and analytics, as well as cloud infrastructure solutions, according to a statement by the LSEG. It involves a new data infrastructure for the London exchange and analytics and modelling solutions with Microsoft Azure, AI, and Microsoft Teams.

Read the full story here.

- Matt Clinch

European markets pull back as investors look ahead to next Fed meeting

European markets retreated on Monday as investors look ahead to the last U.S. Federal Reserve meeting of 2022 this week, as well as the latest inflation reading.

The pan-European Stoxx 600 was down 0.6% in early trade, with retail stocks shedding 1.6% to lead losses as all sectors and major bourses opened in negative territory.

- Elliot Smith

CNBC Pro: Dan Niles is betting the S&P 500 will hit a new low in 2023. Here’s how he is trading it

Dan Niles' Satori Fund is beating the market this year. He shares what's behind the outperformance and how he's trading the market as recession looms.

Pro subscribers can read more here.

— Zavier Ong

Futures fall slightly

Stock futures have slowly declined throughout the first hour of trading. Dow futures are down about 50 points, or around 0.2%, while Nasdaq 100 futures have dipped about 0.3%.

— Jesse Pound

Amgen discussing acquisition of Horizon Therapeutics, report says

One stock that could impact the Dow on Monday is drugmaker Amgen.

The Wall Street Journal reported on Sunday night that Amgen is in advanced talks to buy Horizon Therapeutics.

The Journal, citing people familiar with the discussions, reported the deal could be finalized by Monday.

Amgen closed on Friday at $278.65 per share, making it one of the most impactful stocks in the price-weighted Dow.

—Jesse Pound

Futures open flat

The futures market was calm on Sunday night ahead of a key week in the fight against inflation. Futures for the Dow, S&P 500 and Nasdaq 100 were all within 0.1% of the flatline.

—Jesse Pound

Wall Street coming off losing week

The major averages fell on Friday to clinch a losing week, snapping a two-week winning streak for Wall Street.

Here are the key stats from last week:

  • The Dow fell 2.77%, suffering its worst stretch since September.
  • The S&P 500 fell 3.37%, suffering its worst stretch since September.
  • The Nasdaq composite fell 3.99%, suffering its worst weekly stretch in a month.
  • The Russell 2000 fell 5.08%, marking the worst week since September for small caps.
  • All 11 sectors were negative for the week, led to the downside by energy.

—Jesse Pound, Christopher Hayes