Stocks close higher as investors await inflation report, Nasdaq notches 3-day win streak

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 advanced Tuesday as investors continued building on the new year's early rally while waiting for economic data and corporate earnings coming later in the week.

The Dow Jones Industrial Average gained 186.45 points, or 0.56%, to end at 33,704.10. The S&P 500 traded up 0.70%, to close at 3,919.25 points.

The Nasdaq Composite led the major indexes for another day, adding 1.01% to end the session at 10,742.63. The average has rallied for the past three sessions as optimism over cooling inflation pushed investors to beaten-up technology stocks. It was the index's first three-day win streak since November.

Billionaire investor Paul Tudor Jones was optimistic on the stock market Tuesday morning, saying the Federal Reserve likely would not break the economy, halting rate hikes before it does so. Jones, who noted he wasn't making a specific forecast, said there was huge demand for stocks on the way this year due to share repurchases and mergers.

"You've probably got something just under a trillion dollars of excess demand in U.S. stocks," Jones said Tuesday on CNBC's "Squawk Box." "Where is the selling going to come to offset that that demands coming from buybacks, from the corporate line items, from some combination of buybacks and M&A? That's a significant amount. Ceteris paribus, everything being the same, the stock market would be up 7% or 8% this year."

Investors came into the new year worried that higher interest rates could tip the economy into a recession. However, many appear to be mounting bets that inflation is starting to ease. They will watch consumer price index data coming Thursday and big bank earnings on Friday for any clues into the health of the economy or signals of how the Fed will move interest rates going forward.

"We're going to probably be in this really tight range and most likely directionless until we get through at least Thursday with the CPI report and then the kickoff to earnings season, which is also later this week," said Megan Horneman, chief investment officer at Verdence Capital Advisors. "Right now, I just think the market's kind of caught in the middle of waiting for the economic data and absorbing some of the Fed speech."

Lea la cobertura del mercado de hoy en español aquí.

Stocks end session up

The three major averages closed Tuesday trading up.

The Nasdaq Composite once again led the way, gaining 1%. Tuesday marked the first three-day win streak for the technology-heavy index since November.

The S&P 500 and Dow followed, advancing 0.7% and 0.6%, respectively.

— Alex Harring

KeyBanc upgrades Bumble

KeyBanc Capital Markets upgraded shares of Bumble to overweight from a sector weight rating, saying that shares could rally more than 30% as it capitalizes on online dating trends.

"When coupled with product initiatives ... international ramps, and moderating FX headwinds, we are increasingly confident the core Bumble app can sustain 20%+ annual revenue growth," wrote analyst Justin Patterson in a Monday note.

Read more on the call from KeyBanc here.

— Samantha Subin

Copper hits highest price since June

Copper hit a high not seen since June.

The metal settled up just under 1.3% at $4.0775. It posted a high of $4.0835, which was its most expensive since it hit $4.1160 on June 17.

Copper has gained about 7% since 2023 began.

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— Gina Francolla, Alex Harring

Here's another way to look at the first five days indicator

The so-called "‘first five days" is a simple indicator used on Wall Street that suggests if the market rises within the first five days of the year, it often ends the year in positive territory, according to the Stock Trader's Almanac.

But there's another way to look at the how the first few trading days can impact the rest of the year.

According to data compiled by Bespoke Investment Group, the median return for the rest of the year after a more than 1% gain during the first trading week stands at 13.9% on average. The market also offers positive returns 79% of the time in these cases.

In all other years since 1953, the rest of the year brought a median return of 5.6% on average and positive gains 59% of the time.

CNBC Pro subscribers can read more on the "first five days" phenomenon here.

— Samantha Subin

Two NYSE stocks advance for every decliner

As the broader market remains on track to post gains Tuesday, a majority of stocks on the New York Stock Exchange are set to end the day up.

Of stocks on the exchange, 2,064 are poised to advance. That's more than double the 1,005 on pace to post losses. The remaining 150 are unchanged.

— Chris Hayes, Alex Harring

Stocks trade up entering final hour

The three major indexes were trading positively as investors entered the final hour of trading.

The Dow was up 0.3%. Meanwhile the Nasdaq Composite and S&P 500 gained 0.7% and 0.4%, respectively

— Alex Harring

Too early to declare victory on wages, but Fed can still relax, Ned Davis Research says

The market got a boost last week from wage data in the jobs report that was lower than expected, easing fears of higher wages creating sticky inflation.

But while the headline number was encouraging, some peculiarities in the data and other indicators suggest that it is too early to declare wage growth has normalized, according to Ned Davis Research.

"We found it quite curious that growth of services wages has plunged from 7.0% last January to 4.9% at yearend. Yet goods wages are down marginally to 5.5% from a high of 5.9% in March, despite more persistent weakness in the goods sector compared to services," Joseph Kalish, NDR's chief global macro strategist, said in a note to clients on Monday.

Still, inflation does not appear to be a major driver of inflation at the moment, so the Federal Reserve does not need to hyper-focus on it, Kalish argued.

"The Fed has been concerned that high compensation will drive up inflation. But the Fed should not be overly concerned with wage growth at this point in the cycle. Wages are simply catching up to the surge in prices last year, which resulted in persistently declining real wages," Kalish said.

— Jesse Pound

Morgan Stanley upgrade Royal Caribbean, calls company the 'superior cruise operator'

Morgan Stanley is getting more positive on shares of Royal Caribbean, upgrading the stock to equl weight from underweight.

"RCL looks better positioned than peers, having recovered occupancy fastest, and its superior cost control has led to a faster recovery in EBITDA (ex. fuel) vs peers," wrote analyst Jamie Rollo.

CNBC Pro subscribers can read more on the call and which cruise stock Rollo downgraded here.

— Samantha Subin

Ritholtz's Josh Brown sells Netflix

Ritholtz Wealth Management CEO Josh Brown sold shares of Netflix, citing the streaming stock's recent outperformance.

While the company could post solid results, he's holding back from owning shares near term given the uncertain stock reaction to upcoming earnings.

CNBC Pro subscribers can read more on Brown's stock move and investment case here.

— Samantha Subin

GDP growth tracking at a 4.1% pace for fourth quarter, Atlanta Fed gauge shows

Despite worries of a looming recession, economic growth in the fourth quarter likely was robust, according to the Atlanta Fed's GDPNow data tracker.

The widely followed gauge is pointing toward real GDP growth increasing at a 4.1% annualized rate, an update Tuesday showed. That was an improvement of 0.3 percentage points from the last update, due to an improving picture on both real personal consumption expenditures and gross private domestic investment.

If the pace holds up, it will mark the fastest growth quarter of 2022, which began with two consecutive negative GDP readings, meeting the traditional definition of a recession. The last time GDP grew faster was in the fourth quarter of 2021, which saw a 7% surge.

Most economists think at least a shallow recession is possible this year, the result of interest rate hikes from the Fed aimed at curtailing inflation.

—Jeff Cox

Communication services leads S&P 500

Communication services stocks led the S&P 500 Tuesday.

The sector gained 0.9%, followed by consumer discretionary and health care at 0.8% and 0.7%, respectively.

Utilities performed the worst of the 11 S&P 500 sectors, dropping 0.6%. Real estate was the only other sector trading down, shedding 0.2%.

Consumer staples traded near the flatline, whipsawing between positive and negative.

— Alex Harring

Stocks making the biggest midday moves

Here are some of the names making the biggest moves in midday trading:

Warner Bros. Discovery — Shares jumped nearly 7% after Bank of America added the stock to the "US1" list of best investment ideas. The Wall Street firm said it likes the media company's long-term potential.

Regeneron Pharmaceuticals — The stock was up about 3%, a day after shares fell on news about the negative impact an off-label competitor had on Regeneron's Eylea drug. On Tuesday, CEO Leonard Schleifer told CNBC that activity was "transient" and should not have any impact on the long-term trajectory of Eylea.

CureVac — The biopharmaceutical company gained nearly 15% after saying it plans to advance patient trials of its mRNA vaccines for Covid-19 and the flu.

To read more midday movers, click here.

— Michelle Fox

Earnings season could be downside catalyst, strategist says

The major banks kick off the fourth quarter earnings season later this week, and this round of corporate reports could bring a hard dose of reality to the market, according to Andrew Smith, chief investment strategist at Delos Capital Advisors.

"The slowdown's not over. And if there's any earnings season that's most critical at this point, it's this one," Smith said.

He pointed out that earnings estimates have been coming down but the market is still expensive when viewed through an earnings multiple. That means that earnings misses could have extra downside risk if multiples move lower along with future estimates.

Rising credit card balances and the weakening ISM services data are two warning signs about the economy, Smith said.

For his part, Smith said that he was looking to Treasuries to protect his portfolio in the near term.

— Jesse Pound

JPMorgan CEO says Fed may need to raise rates to 6%

JPMorgan CEO Jamie Dimon said Tuesday the Fed could need to raise interest rates to 6% as the central bank attempts to bat down inflation.

That would be higher than many market observers expect. The central bank last month projected raising rates to as high as 5.1%.

"I think the implied yield curve is, we get to 5%," he said on Fox Business Network. "I think there's probably a 50% chance that's right, I think there's a 50% chance it'll have to be 6(%). That's, you know, I don't know."

— Alex Harring

Fed's Bowman says expect more rate hikes ahead

Fed Governor Michelle Bowman said Tuesday she expects more interest rate increases ahead, with higher rates to prevail for a while until inflation is subdued.

"I am committed to taking further actions to bring inflation back down to our goal," she said in remarks prepared for a speech in Florida. "In recent months, we've seen a decline in some measures of inflation but we have a lot more work to do, so I expect the [Federal Open Market Committee] will continue raising interest rates to tighten monetary policy."

— Jeff Cox

No stocks post new 52-week lows

No stocks hit 52-week lows in trading Tuesday.

But these three hit new highs:

  • Las Vegas Sands, at a high not seen since July 2021
  • Deckers Outdoor, at a level last seen in December 2021
  • Grand Canyon Education, hitting a high last reached in April 2021

— Chris Hayes, Alex Harring

Don't get too confident about a new year rally, says Wolfe's Senyek

Wolfe Research strategist Chris Senyek said in a note to clients on Tuesday that the stock market's strong start to the year could continue in the coming days, but investors should be cautious.

"Our sense is that there could be some additional near-term follow through, especially if December's CPI print comes in light once again on Thursday morning," Senyek wrote.

Instead, this could be a time to make portfolios even more defensive in anticipation of a weakening economy in the coming months, according to Senyek.

"As a reminder, wage growth and reported payrolls are lagging indicators! Several forward indicators, like the decline in temporary workers, appear to be sending ominous signals for the job market and overall U.S. economy," Senyek wrote.

Wolfe's 10-item market bottom checklist, meanwhile, still has zero metrics flashing for a more lasting rebound. That suggests the stock market still has at least one more big dip in it before the bear market is over.

— Jesse Pound, Michael Bloom

Gold trades near 8-month high

Gold's strong start to the year continued on Tuesday, with the precious metal trading near an 8-month high. Spot gold was last up 0.42% at $1879.49 per ounce.

On Monday, gold hit $1881.50, it's highest point since May 9, before cooling off on signals of continued aggressive monetary policy actions from Fed officials. Gold futures were last up 0.31% at $1883.60.

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Gold's 5-day performance

— Michelle Fox, Elliot Smith

Wholesale inventories increase for November in line with expectations

November data shows wholesale inventories increased as much as expected.

The Monthly Wholesale Trade Survey, which estimates sales and inventories within wholesale trade industries, came in at a 1% increase. That's the same percentage gain as was anticipated in the consensus estimate compiled by Dow Jones.

— Alex Harring

Wells Fargo upgrades AT&T, says growth outlook is more attractive than Verizon's

Wells Fargo upgraded AT&T to overweight from an equal weight rating, saying that shares look more attractive than Verizon.

According to analyst Eric Luebchow, the company offers a better growth trajectory than Verizon and offer a good opportunity for investors looking to play defense.

The stock gained 1.2% in the first hour of trading.

Read more on the call from Wells Fargo here.

— Samantha Subin

Stocks open up as trading kicks off

Stocks moved higher in the first minutes of the trading day.

All three indexes traded up within 15 minutes of the opening bell.

The Dow led the way, up just under 0.2%. The S&P 500 and Nasdaq Composite each gained 0.1%.

— Alex Harring

Fed should stay politically independent while tackling inflation, Powell says

Fed Chairman Jerome Powell on Tuesday stressed the need for the central bank to be free of political influence while it tackles persistently high inflation.

In a speech delivered to Sweden's Riksbank, Powell noted that stabilizing prices requires making tough decisions that can be unpopular politically.

"Price stability is the bedrock of a healthy economy and provides the public with immeasurable benefits over time. But restoring price stability when inflation is high can require measures that are not popular in the short term as we raise interest rates to slow the economy," the chair said in prepared remarks.

"The absence of direct political control over our decisions allows us to take these necessary measures without considering short-term political factors," he added.

— Jeff Cox

Bed Bath & Beyond advances 12% following earnings call

Bed Bath & Beyond gained more than 12% in premarket trading as it reported a larger quarterly loss than expected and leadership admitted the retailer was not meeting turnaround goals.

When reporting for the quarter, the retailer posted a loss of $3.65 per share, bigger than the average $2.23 loss expected by analysts. Revenue was also worse than anticipated, coming in at $1.26 billion compared with the $1.34 billion average expected by analysts.

Bed Bath & Beyond shares dropped 35.5% since the start of 2023 — which has only had five complete trading sessions — after warning of a potential bankruptcy. That follows a beating in 2022, when Bed Bath & Beyond plummeted 82.8% over the course of the year.

The stock surged 23.7% in Monday trading ahead of the call.

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Bed Bath & Beyond's stock

— Melissa Repko, Alex Harring

Futures remain down heading into final hour of premarket

Futures remained in the red as investors looked entered the final hour before the bell.

Dow and S&P 500 futures lost 0.5%. Nasdaq-100 futures took a slightly bigger dip, shedding 0.6%.

— Alex Harring

Oak Street Health, Sotera Health making biggest premarket moves

Two health care companies are making major moves in premarket trading.

Oak Street Health – Shares of Oak Street Health surged 36% after a Bloomberg report that CVS is exploring options to buy the health care company for more than $10 billion. CVS stock ticked down about 0.5% on the news.

Sotera Health – Shares soared more than 58% in the premarket after the company announced its subsidiaries came to agreements to settle more than 870 cases relating to the exposure of ethylene oxide, a carcinogen, from its Willowbrook facilities. Sotera agreed to pay $408 million and said the settlement is not an admission that the emissions posed a safety hazard.

Read more here.

—Carmen Reinicke

Optimism among small businesses falls in December, data shows

A gauge of optimism among small businesses fell in December and came in worse than expected, pointing to a souring mood in America's Main Streets.

The National Federation of Independent Business's Small Business Optimism Index fell to 89.8 in December from 91.9 a month prior. That came in lower than the 92 consensus estimate compiled by Dow Jones and marked the 12th consecutive month the index came in below its 49-year average of 98.

"Overall, small business owners are not optimistic about 2023 as sales and business conditions are expected to deteriorate," Bill Dunkelberg, NFIB's chief economist, said in a statement. "Owners are managing several economic uncertainties and persistent inflation and they continue to make business and operational changes to compensate."

December small business survey shows inflation optimism
December small business survey shows inflation optimism

— Alex Harring

Coinbase to layoff 20% of workforce

Coinbase's stock gained 6% after the crypto exchange operator announced plans to slash 20% of its workforce in an attempt to trim costs.

The layoffs will impact 950 jobs and marks the second round of cuts from the company in recent months. Coinbase laid off 18% of its workforce in June in preparation for a potential recession and crypto winter, saying that it had grown "too quickly" during the bull market.

Crypto markets have come under pressure following the collapse of FTX, one of the industry's largest operators.

Coinbase said the new round of layoffs will bring down its operating expenses by 25% for the quarter ending in March, according to a new regulatory filing.

— Kate Rooney, Samantha Subin

Boeing shares fall after Morgan Stanley downgrade

Morgan Stanley downgraded Boeing to equal weight from overweight, noting there's little upside in the stock from current levels.

"We see a balanced risk reward as the majority of the near- and medium-term positive catalysts for the stock have been realized," the bank said. Boeing shares fell more than 2% in the premarket.

— Samantha Subin

European markets fall on caution over Fed comments

European markets retreated on Tuesday as caution returned to global sentiment ahead of U.S. Federal Reserve Chairman Jerome Powell's speech later in the day, after hawkish comments from two Fed officials on Monday.

The pan-European Stoxx 600 index was down 0.7% in early trade, with retail stocks shedding 1.3% to lead losses as all sectors and major bourses slid into the red.

Investors are also gearing up for more inflation data later this week, with U.S. consumer price data for December due Thursday.

- Elliot Smith

Danaher shares rise in extended trading

Shares of Danaher rose nearly 2% after hours after the maker of medical, industrial and commercial products issued upbeat guidance for fourth-quarter non-GAAP core revenue. The company now expects growth in the high single digit percentages on a year over year basis. It previously projected flat to low single digit percentage declines.

— Tanaya Macheel

Stock futures open flat

Stock futures opened almost unchanged on Monday evening.

Dow Jones Industrial Average futures began trading barely higher by 0.003%. S&P 500 futures were unchanged and Nasdaq 100 futures opened lower by 0.002%.

— Tanaya Macheel