Stocks close higher on cooler inflation report, notch second day of gains

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

Stocks rose Tuesday after the release of new U.S. inflation data, while traders awaited a key Federal Reserve policy decision.

The Dow Jones Industrial Average climbed 103.60 points, or 0.3%, to 34,108.64. The S&P 500 added 0.73% to 4,019.65. The Nasdaq Composite rose 1.01% to 11,256.81.

Earlier in the session, the Dow was up as much as 707.24 points, or 2.08%. The S&P 500 advanced 2.77%, while the Nasdaq gained 3.84%.

Stocks initially rallied after the consumer price index showed an increase of just 0.1% from the previous month, and a gain of 7.1% from a year ago, the Labor Department reported Tuesday. Economists surveyed by Dow Jones had been expecting a 0.3% monthly increase and a 7.3% rise over the past 12 months. Excluding volatile food and energy prices, so-called core CPI rose 0.2% on the month and 6% on an annual basis, compared to respective estimates of 0.3% and 6.1%.

However, major indexes came off their best levels as the day continued.

Investors are anticipating the Federal Reserve's next rate-hiking decision at the conclusion of its two-day policy meeting on Wednesday. Traders are largely pricing in a 50-basis point increase, a slight decline from the previous four hikes. (One basis point equals 0.01%.)

"While the inputs of inflation coming into that Fed meeting are modestly better, we still don't know for sure if the Fed's going to raise by 50 basis points, if they're going to raise their terminal rate. So, we have quickly shifted gears into a mode of 'wait and see' for the Fed meeting tomorrow," said Art Hogan, chief market strategist at B. Riley Wealth.

The 10-year Treasury yield slipped after the CPI report and touched a low of 3.421%. Energy stocks led the gains, with shares of Chevron the leading outperformer in the Dow.

Tech stocks that have been hit the hardest from rising inflation and rates in 2022, also rose. Shares of Meta and Google-parent Alphabet were up 4.7% and about 2.5%, respectively.

Lea la cobertura del mercado de hoy en español aquí.

Stocks close higher

Stocks rose for a second day Tuesday after the release of new U.S. inflation data, while traders awaited a key Federal Reserve policy decision.

The Dow Jones Industrial Average climbed 103.6 points, or 0.3%, to 34,108.64. The S&P 500 added 0.73% to 4,019.65. The Nasdaq Composite rose 1.01% to 11,256.81.

Earlier in the session, the Dow was up more than 700 points, or 2.08%. The S&P 500 advanced 2.77%, while the Nasdaq gained 3.84%.

— Sarah Min

BTIG's Krinsky expects Tuesday's 'gap' will be filled

BTIG's Jonathan Krinsky expects Tuesday's "gap" will be filled.

A gap occurs when a stock or index suddenly moves up or down typically on catalysts outside of trading hours. These gaps can "fill" when the price moves back to the pre-gap level.

"When there is market moving data, whether a single stock's earnings release, or a macro report like CPI, it's always the market's reaction to the initial reaction that is most important," Krinsky wrote in a Tuesday note.

Stocks pared their gains after an initial rally following a lighter-than-expected inflation report. The Dow Jones Industrial Average was last up 138 points, or 0.41%. The S&P 500 added 0.86%, while the Nasdaq Composite rose 1.22%.

Earlier in the day, the Dow was up more than 700 points. At session highs, the S&P 500 and Nasdaq Composite were up 2.77% and 3.84%, respectively.

"[So] far the high of the day in futures came right around 8:30. This also leaves a massive gap on the chart in SPY. Not all gaps get filled, but most do," Krinsky wrote. "To be fair, there are also unfilled gaps above from August at 425.50 and 421.22. Eventually those are likely to get filled, but our thinking is today's gap gets filled first."

— Sarah Min

Some stocks could rise once inflation is past its peak, Bank of America says

Investors cheered November's CPI report, which came in cooler than expected, signaling that the persistent inflation the U.S. has been dealing with has likely peaked.

High inflation and subsequent interest rate hikes from the Federal Reserve have weighed on stocks. As inflation cools, however, some stocks will be poised to gain more than others, according to an inflation analysis from Bank of America.

CNBC Pro subscribers can read more here.

—Carmen Reinicke

Fed needs to stop looking at 'stale housing data,' says Wharton's Siegel

The Federal Reserve is looking at the wrong housing figures, according to Jeremy Siegel, professor of finance at the University of Pennsylvania's Wharton School of Business.

"If the Fed stops looking at stale housing data — and I don't know why they don't —they would actually realize that inflation is, as I said a month ago, over," he told CNBC's "Halftime Report" on Tuesday. "Now, whether they recognize that, I don't really know. I already think they're in overly restrictive territory."

Elevated housing and shelter prices have contributed heavily to recent inflation data and remain one of the largest spending areas for consumers. Shelter data from the November CPI report, which makes up a large chunk of the "core" number, rose by 0.6%.

According to Siegel, that shelter number is "nonsensical" and "bogus," given that other housing indexes and data show a decline. Inflation for housing, he added, is probably much lower than the Fed thinks.

"It's negative now, it will be negative next month, and it's actually been negative for the last two months," he said.

Siegel expects a 50 basis point hike this month from the central bank, although data next year should prompt a halt in hikes.

— Samantha Subin

Stocks making the biggest moves midday

Check out the stocks making the biggest moves in midday trading:

  • Moderna – The drugmaker saw its stock soar more than 22% after the company issued promising data about its cancer treatment. Moderna announced that its experimental melanoma vaccine combined with Merck cancer treatment Keytruda cut the risk of skin cancer recurrence or death by 44%, compared with a treatment of only Keytruda.
  • Pfizer – The Covid vaccine maker gained 1% after Goldman Sachs upgraded the stock to buy from neutral, saying progress in other areas make the firm confident the stock will perform even as the need for its pandemic-related offerings decreases.
  • Oracle - Shares of the software company slipped more than 1%. Late Monday, the firm reported better-than-expected results in its fiscal second quarter as cloud infrastructure revenue jumped. But Oracle did issue a lighter earnings forecast than analysts had predicted.
  • United Airlines – The airline stock shed 6% following news that it's purchasing at least 100 Boeing 787 Dreamliners to replace its less fuel-efficient planes. The aircrafts are slated for delivery between 2024 and 2032. Boeing shares gained more than 1% on the news.

See the full list here.

— Alex Harring

Airline stocks lead market lower

Airline stocks were under pressure on Tuesday, with the U.S. Global Jets ETF falling 2.9%.

The declines came after Jetblue said in a securities filing that "the adverse impact of the fourth quarter holiday calendar timing is greater than previously forecasted." The airline said it expects revenue per available seat mile for the quarter to be at the low end of prior guidance.

Shares of JetBlue fell more than 8%. United Airlines dropped more than 6%, and American Airlines shed 5.7%.

— Jesse Pound

Robinhood will feel negative impacts from FTX collapse, Citi warns

Chaos within crypto will weigh on Robinhood stock, according to Citi.

Analyst Christopher Allen downgraded the stock to neutral from buy and cut his price target by $1 to $10, which implies a 4.4% increase over where it closed Monday.

"In our view, HOOD has done a lot to right its ship recently, including materially lowering the cost base, improving active trader offerings, and rolling out attractive products," he said in a Monday note to clients. "However, we see a mixed outlook from here given potential headline risk from upcoming SEC market structure proposals, a cautious equity market outlook, and potential fallout from FTX impacting crypto trading revenues and the customer base."

CNBC Pro subscribers can read more about why crypto will impact the trading platform's shares here.

— Alex Harring

Citi strategist raises 2023 year-end forecast

Citi's Scott Chronert raised his 2023 year-end target for the S&P 500, saying investors should identify buying opportunities in the first half of next year.

The U.S. equity strategist at Citi raised his 2023 year-end S&P 500 target to 4,000, up from 3,900, implying roughly flat performance for the broader market index. Meanwhile, he lowered his midyear 2023 target to 3,700 from 3800.

"We look for index weakness early in the year as a buying opportunity," Chronert wrote in a Monday note. "While our year-end 2023 index price target of 4000 implies flattish performance, the year should be defined by ongoing volatility, but with increased dispersion effects setting up stock, sector, and thematic investment opportunities."

The strategist revised his outlook as investors continue to worry about the likelihood and scale of a downturn next year, which "may be the most widely anticipated recession in decades," he wrote.

— Sarah Min

Pinterest could gain advertising market share next year, Piper Sandler says

Piper Sandler thinks an improving advertising landscape should help Pinterest next year despite technology more broadly expecting to see declines in the space.

Analyst Thomas Champion upgraded the social media stock to overweight from neutral and hiked his price target to $30. The new target reflects a 27% upside from where the stock closed Monday.

"We like the new leadership, investor activism, and we see a buyback coming," Champion said in a Tuesday note to clients. "The lows are likely already in."

It's the only platform in Piper Sandler's survey of advertisers to show improvements in return on investment, targeting and measurement. And that could result in more advertising spend going forward, Champion said.

CNBC Pro subscribers can read more about the upgrade here.

— Alex Harring

Tesla drops to lowest level in 2 years

Tesla shares fell more than 2% on Tuesday, bucking the broader market's move higher, and touched its lowest level since November 2020. The stock hit a low of $161.74.

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Tesla has had a tough year, losing more than 53%.

— Fred Imbert

Stocks off their highs of the day

The major averages were off their highs of the day as trading continued Tuesday. The Dow Jones Industrial Average was up 181 points, or 0.54%. The S&P 500 added 1.24%, while the Nasdaq Composite rose 1.86%.

Earlier in the day, the Dow was up as high as 707 points, or 2.08%. The S&P 500 had gained as much as 2.77%. The Nasdaq Composite was up 3.84% at its best levels.

In the prior session, the Dow jumped 500 points as investors bet on a bullish CPI report.

— Sarah Min

KBW downgrades U.S. banking sector on slowing revenue growth forecast for 2023

Wells Fargo building in San Francisco.
Source: CNBC

KBW cut its recommendation on the U.S. banking sector to "market weight" from "overweight" on expectations that the industry's main driver for revenue growth will slow next year.

Net interest income growth will likely peak in this year's fourth quarter at 30% and decline to just 5% by the fourth quarter of 2023, KBW analysts said Tuesday in a research note.

Banks are generating more interest income this year after the Federal Reserve began its most aggressive rate-hiking cycle in decades. That was one of the reasons KBW upgraded its recommendation on banks in Sept. 2021 to "overweight."

But the group hasn't fared particularly well amid a broader stock selloff on fears that the Fed would trigger an economic downturn that would increase loan losses.

"Bank fundamentals proved strong, but multiples still narrowed and remain cheap – and this is despite higher EPS estimates," the analysts noted.

The slowing revenue growth will make "positive EPS revisions more challenging" and will hurt the group's ability to trade higher, they added.

Within its larger call, the analysts said investors should favor bigger lenders, especially those with Wall Street operations, over smaller banks that rely solely on earning interest income.

Under its most likely scenario, KBW said that Morgan Stanley, Goldman Sachs, Wells Fargo and State Street were good banks to own.

—Hugh Son

Cathie Wood's Ark Innovation ETF rallies 8%

Cathie Wood's flagship Ark Innovation ETF (ARKK) jumped nearly 8% Tuesday after CPI report came in lighter than expected.

Leading the rally was tech name 2U, which soared 17%, while Twist Bioscience gained 10%. One of its biggest holdings Roku climbed 9%. Twilio and Shopify each popped 7%.

Wood's disruptive darlings had been under massive pressure this year in the face of rising rates. Investors are now betting that inflation has peaked, which will lead to a slower pace of rate hikes.

— Yun Li

S&P 500, Russell 2000 trade above 200-day level

Both the S&P 500 and Russell 2000 traded above their respective 200-day moving averages — on an intraday basis — for the first time since Dec. 5 following November's lighter-than-expected CPI report.

Both the S&P and Russell are trading above their respective 200-day levels of 4,034.01 and 1,856.45.

Both averages have not closed above the 200-day level since Dec. 2.

— Samantha Subin, Gina Francolla

Popular bond ETF climbs after CPI report

Bond ETFs are rallying after the lighter than expected inflation report on Tuesday morning, including one of the most popular funds for government debt.

The iShares 20+ Year Treasury Bond ETF (TLT) rose 2.2% as yields fell sharply. The fund has nearly $30 billion in net assets.

2022 has been a brutal year for bond funds, including for safe U.S. government debt. Entering Tuesday, the iShares fund had a total return for the year of -26.5%, according to FactSet.

—Jesse Pound

Market reaction on point for CPI data, says Peter Boockvar

The market reaction to the latest consumer price index numbers are on point, since the data likely means the Federal Reserve rate hikes will be less aggressive than expected early next year, according to Peter Boockvar, chief investment officer of Bleakley Financial Group.

While he still anticipates a 50 basis point hike this month, it's possible the central bank will only hike by 25 basis points and not 50 at its Feb. 1 meeting, he said in a note Tuesday.

"The market reaction speaks for itself, with stocks, bonds, FX and gold reacting as they should. We know the 2022 pain points were 40 yr highs in inflation and the most aggressive monetary response in 40 years," Boockvar wrote.

Now that the Fed is close to ending its rate hikes, the focus next year will shift to the economic consequences of living with a higher cost of capital for longer, as well as the central bank's reduction of its balance sheet, he said.

— Michelle Fox

Dow opens more than 600 points higher

Stocks jumped after a lighter-than-expected consumer prices report for November raised expectations that inflation is peaking.

The Dow Jones Industrial Average gained 623 points, or 1.8%. The S&P 500 added 2.5%, while the Nasdaq Composite rose 3.3%.

— Sarah Min

Bank stocks rise after cooler-than-expected inflation report

A combination file photo shows Wells Fargo, Citibank, Morgan Stanley, JPMorgan Chase, Bank of America and Goldman Sachs.

Shares of the six biggest U.S. banks by assets climbed after the consumer price index showed that inflation was cooling after hitting multi-decade highs earlier this year.

Bank of America, Wells Fargo, Goldman Sachs, Morgan Stanley and Citigroup rose at least 2% in premarket trading on the news, while JPMorgan Chase shares climbed 1.8%.

The improving picture on inflation means that the Federal Reserve may not be forced to raise interest rates as sharply compared to a scenario in which price increases continued unabated.

While banks benefit from higher rates because they earn more interest income, the sector has traded off this year on hot inflation numbers on concerns that the Fed would trigger a recession, which would lead to a wave of loan defaults.

JPMorgan CEO Jamie Dimon has warned that a financial "hurricane" was nearing because of a combination of higher rates and geopolitical risk.  

—Hugh Son

Dollar falls on inflation data

The dollar index, which weighs the U.S. dollar among a basket of foreign currencies, dropped following the cooler-than-expected CPI data. It was last down 1.4%.

The dollar declined as expectations for inflation eased on the report, while Treasury rates tumbled at the same time. Meanwhile, gold and oil prices both rose.

The falling greenback could help multinational stocks with business oversees. Caterpillar and Boeing both rose in premarket trading, adding 2% and 3%, respectively.

— Alex Harring

Market sees lower peak for rate hikes following CPI report

Markets now think the Federal Reserve may not have to raise interest rates as much, following Tuesday's soft inflation report.

Futures pricing for the Fed's "terminal rate," or point when it can stop hiking, eased to 4.85% in both the May and June 2023 contracts, according to CME Group data. That's down from earlier indications closer to 5%.

In addition, the market now sees an even greater certainty of a 0.5 percentage point interest rate hike this week. That probability rose to just shy of 80% after the consumer price index report showing inflation up just 0.1% in November, according to the CME's FedWatch gauge. The reading compared to about 73% on Monday.

The Fed will announce the rate decision Wednesday at 2 p.m. following the conclusion of its two-day meeting.

—Jeff Cox

Tech stocks jump after cooler than expected CPI report

A slew of technology company stocks jumped Tuesday in premarket trading after November's consumer price index, a measure of inflation, was cooler than anticipated.

This bodes well for technology companies as they're sensitive to rising interest rates. Because the latest inflation data shows that price increases are slowing, stocks are now pricing in a 0.5 percentage-point interest rate hike from the Federal Reserve Wednesday. The slowing pace of rate hikes means the market is hopefully one step closer to rate cuts.

Shares of Tesla jumped 5% and Amazon rose 4.6%. Apple and Microsoft gained 3.6% and 3.8%, respectively. Meta traded 5.7% higher.

—Carmen Reinicke

BMO's Lyngen calls a 50 basis point rate hike all but assured

The lighter-than-expected CPI reading fueled hope that the Federal Reserve will slow the pace of rate hikes. The data came just a day before the central bank wraps up the last policy-setting meeting of the year.

 "The kneejerk rally that has followed resonates with the peak inflation narrative gaining steam," Ian Lyngen, BMO's head of U.S. rates, said in a note, adding that a 50 basis point rate hike is all but assured.

The yield on the benchmark 10-year Treasury dropped 13 basis points to 3.48%. The 2-year Treasury yield was last down by 12 basis points to 4.27%. Yields and prices move in opposite directions and one basis point is equivalent to 0.01%.

— Yun Li

JPMorgan trading desk sees 4% to 5% gain on this CPI scenario

We could be in for a sizable market gain Tuesday if the JPMorgan trading desk note that turned heads Monday is correct.

The note correctly anticipated a lighter report and gave different scenarios on how much the market would jump depending on the CPI numbers.

The November consumer prices report came in at 7.1% from a year ago.

The report assigned a 15% probability to a CPI of 7.0% to 7.2% and said the S&P 500 would gain 4% to 5% in reaction to such a number.

"A bullish outcome that could pull terminal rate lower," the note said of this scenario.

As of now we are up 2.7% on S&P 500 futures.

But also we should take into account the 1.4% gain in the S&P 500 on Monday, which came as the JPMorgan report circulated on Wall Street.

— John Melloy

Inflation rise less than expected in November

The consumer price index, a widely followed measure of inflation, rose less than expected in November, raising hope that inflationary pressures in the U.S. could be abating.

The index rose 7.1% year over year, less than a Dow Jones estimate for a 7.3% gain. Excluding food and energy, prices rose 6% on a year-over-year basis, less than an estimate for 6.1%.

— Jeff Cox

Goldman Sachs upgrades Pfizer, says company can outperform outside of Covid vaccine

Pfizer's work on non-Covid products will help the company maintain its momentum even as the Covid vaccine becomes a smaller business element, Goldman Sachs said.

Analyst Chris Shibutani upgraded the stock to buy from neutral with a price target of $60, which reflects a 15% upside over Monday's close. His previous price target of $47 indicated the stock would fall from Monday's close.

"Following a year of pipeline progress and activity on the M&A front, our view on the stock has changed," he said in a note to clients Tuesday. "We now believe that positive updates from the company's pipeline, and the potential for outperformance from the commercial new product launch portfolio over the course of the coming year, can drive meaningful upside to the value that should be ascribed to PFE's base business."

The stock gained 2.2% in premarket trading.

CNBC Pro subscribers can read the full story here.

— Alex Harring

Stocks making the biggest moves in the premarket

Take a look at some of the biggest movers in the premarket:

  • Oracle (ORCL) – Oracle gained 3% in the premarket after the business software giant posted top and bottom line beats for its latest quarter. Oracle continues to make significant progress in shifting more of its business to the cloud.
  • Boeing (BA) – Boeing rose 2.2% in premarket action after United Airlines (UAL) announced a 200-jet order that includes 100 787 Dreamliners and 100 737 Max jets, with options for further purchases. The order is worth $43 billion at list prices.
  • Moderna (MRNA) – The drugmaker announced that its experimental melanoma vaccine combined with Merck (MRK) cancer treatment Keytruda cut the risk of skin cancer recurrence by 44% compared with a treatment of only Keytruda. Moderna rallied 7.5% in the premarket, while Merck gained 1.9%.

Read the full list here.

— Peter Schacknow

United Airlines announces large order from Boeing

United Airlines announced Tuesday that is buying at least 100 Boeing 787 Dreamliners to replace part of its aging fleet. The company said it is the largest order of widebody planes ever by a U.S. commercial airline.

United is also purchasing additional 737 Max narrow body planes. The company said it expects to take on 700 new planes by the end of 2032.

Shares of Boeing were up 2.4% in premarket trading. Shares of United were down about 1%.

Jesse Pound, Leslie Josephs

Citi downgrades Robinhood

Robinhood shares dipped more than 2% in the premarket after Citi downgraded the trading platform to neutral from buy.

The bank sees "a mixed outlook from here given potential headline risk from upcoming SEC market structure proposals, a cautious equity market outlook, and potential fallout from FTX impacting crypto trading revenues and the customer base."

CNBC Pro subscribers can read more here.

— Alex Harring

European markets mixed as investors await latest U.S. inflation reading

European markets were cautious on Tuesday as global investors await the latest U.S. inflation data and hope to see signs that inflationary pressures are easing.

The pan-European Stoxx 600 was little changed in early trade, with oil and gas stocks adding 1.1% while utilities fell 1%.

- Elliot Smith

German inflation 10% in November, in line with expectations

The German consumer price index (CPI) rose by 10% year-on-year in November, shrinking by 0.5% from the previous month, in line with forecasts.

On an EU-harmonized basis, annual inflation was 11.3% while there was no monthly change.

- Elliot Smith

CNBC Pro: 'Global contenders': BofA names stocks with earnings momentum that look cheap

BofA has identified a bunch of stocks it says are "inexpensive" but have strong earnings momentum and price momentum.

"Our back-testing and subsequent performance show that stocks with above-average earnings momentum tended to outperform, stocks with above-average price momentum tended to outperform, but stocks with both the characteristics tended to perform even better," it wrote.

BofA said that these "global contenders" have outperformed the MSCI AC World Index by 6.9% year-to-date.

CNBC Pro subscribers can read more here.

— Weizhen Tan

FTX founder Sam Bankman-Fried arrested in Bahamas

Sam Bankman-Fried was arrested by authorities in the Bahamas on Monday after United States prosecutors filed charges against the former crypto billionaire and FTX founder.

Bahamas Attorney General Ryan Pinder said the U.S. had criminal charges against the former FTX CEO, who stepped down from his position after his crypto trading firm imploded, and is "likely to request his extradition."

Bankman-Fried was slated to testify before the House Financial Services Committee on Tuesday.

— MacKenzie Sigalos, Rohan Goswami

Market risk-reward looks unfavorable in the near-term, says Truist's Lerner

Don't be surprised if the market stays rangebound in the near term, according to Truist's Keith Lerner.

"We have this tug of war," he told CNBC's "Closing Bell: Overtime" on Monday. "Positioning is relatively light, sentiment is still negative, but I think most of us are looking ahead and seeing macro challenges."

If there's a solid print, Lerner views a potential 4% to 5% upside for the market, although he perceives the risk-reward as unfavorable over the next six to twelve months.

"It's really a roll of the dice as far as what happens after the CPI print tomorrow," he said.

— Samantha Subin

Oracle rises on earnings beat

The software stock added about 2% postmarket after surpassing analysts' expectations for the recent fiscal quarter.

Oracle posted a beat on the top and bottom lines, sharing earnings of $1.21 a share on $12.28 billion in revenue. Analysts surveyed by Refinitiv expected earnings of $1.18 a share on revenues of $12.05 billion.

The company's overall revenue grew 18% on a year-over-year basis, while infrastructure revenue surged 53%.

— Samantha Subin, Jordan Novet

Stock futures open flat

Stock futures opened flat Monday.

Futures tied to the Dow Jones Industrial Average traded flat, while S&P 500 and Nasdaq 100 futures traded 0.09% and 0.07% lower, respectively.

— Samantha Subin