Stocks rose Monday as traders looked ahead to Tuesday's key inflation report, regaining their footing after the S&P 500 and Nasdaq Composite suffered their worst weekly declines in nearly two months.
The Dow Jones Industrial Average closed 376.66 points higher, or 1.11%, to end the session at 34,245.93, its best day in February. The S&P 500 climbed 1.14% to close at 4,137.29, and the Nasdaq Composite advanced 1.48% to 11,891.79.
Microsoft led the Dow's gains, rising 3.1%. Nike and Salesforce each gained 2.4%, boosting the index. Intel added 2.7%.
Investors will get more inflation data this week. On Tuesday, January's consumer price index report will be released, showing if price increases have slowed amid the central bank's rate hikes.
So far, investors seem to be betting on a solid CPI print on Tuesday that shows inflation is cooling and that a pause or pivot in Fed rate hikes may be near.
"The Goldilocks-like mix of industrial production recovery and falling inflation we expect this quarter has helped boost risk appetite and equities," said Ray Farris of Credit Suisse in a Monday note.
This boost could dissipate by the summer, however, especially as the lagging impact of central bank rate increases tightens global financial conditions.
On the flip side, a miss on the Tuesday report would likely signal that the Fed will hike interest rates even more, putting downward pressure on equities.
"The market is starting to sense that the very comforting disinflation story is more complex than we'd like it to be," Mohamed El-Erian, chief economic advisor at Allianz, said on CNBC's "Squawk Box" on Monday.
The final leg of earnings season also continues this week, with Coca-Cola, Marriott, Cisco, Marathon and Paramount. So far, companies have reported worse-than-expected results, making this year the worst earnings season in more than two decades, excluding recessions, according to Credit Suisse.
All three major indexes are coming off a losing week. The Dow last week slipped 0.17%. Meanwhile, the S&P 500 fell 1.11%, and the tech-heavy Nasdaq slid 2.41%, marking their biggest weekly losses since December.
The moves came after Federal Reserve Chairman Jerome Powell said that there is still a long way to go in the fight against inflation. He also noted that interest rates could rise more than markets anticipate if inflation numbers do not abate, reversing some of the prior optimism that rate hikes would soon ease.
Stocks end Monday higher
Stocks climbed Monday as traders looked ahead to Tuesday's key inflation report, regaining their footing after the S&P 500 and Nasdaq Composite suffered their worst weekly declines in nearly two months.
The Dow Jones Industrial Average traded 377 points higher, or 1.11%, to close at 34,246.32 its best daily performance in February. The S&P 500 climbed 1.15% to close at 4,137.40 and the Nasdaq Composite advanced 1.48% to 11,891.67.
Energy sector is the biggest laggard Monday
Energy stocks slipped Monday, dragging the sector lower amid a winning day for markets.
The energy minerals sector was the biggest laggard across the Dow, S&P 500 and Nasdaq. Oil and gas companies such as EQT Corporation, ConocoPhillips and Marathon Oil weighed on the sector the most.
Bernstein's quality stock picks for 2023
Investors looking for protection — and possibly even outperformance — this year will benefit from being more selective about the quality stocks they buy, according to Bernstein.
The market has had a strong start to 2023, with all three major indexes up year-to-date. However, the potential of a recession and further interest rate hikes by the Federal Reserve have investors uncertain as to how long the rally can last.
Against such a backdrop, investors would normally buy into high-quality stocks. The problem this year, however, is that quality stocks are trading at a 12.5% premium to their historical valuation, analyst Sarah McCarthy said in a note.
With this in mind, Bernstein compiled a list of quality stocks that are trading at a "reasonable price."
CNBC Pro subscribers can read more about Bernstein's stock picks here.
— Hakyung Kim
Stocks holding onto gains heading into final hour of trading Monday
Stocks held onto gains Monday as investors looked to regroup after last week's rout.
Next, investors will be looking at the January consumer price index report, due Tuesday morning. The inflation data will signal what the Federal Reserve may do next.
See the stocks that Morgan Stanley's chief U.S. equity strategist thinks are 'unfairly punished'
There's still risk in the stock market, said Mike Wilson, chief investment officer at Morgan Stanley. But that doesn't mean he's sitting out.
"In the tough macro environment we are in, stock picking remains key," he said in a note to clients Monday.
With that in mind, Wilson screened for stocks that he believes are "unfairly punished." CNBC Pro subscribers can see 10 that made the list and read more about his methodology here.
— Alex Harring
Evercore ISI upgrades Zillow Group
Zillow Group shares could jump more than 40% from here on a 'rapid recovery' in the housing market, according to Evercore ISI.
"We are in significant part making a macro call here – that the housing market is either already beginning to recover or will very soon do that," analyst Mark Mahaney wrote in a Sunday note.
CNBC Pro subscriber can read the full story here.
— Sarah Min
Ford moving forward with Michigan battery plant
Ford announced on Monday that will work with a Chinese company CATL on a $3.5 billion battery plant in Michigan, despite political pushback against Ford's relationship with the firm.
The plant is expected to open in 2026 and employ about 2,500 people, according to Ford.
Ford's stock is up about 2% for the day.
Three stocks in S&P 500 touched 52-week highs earlier
Three stocks in the S&P touched new, 52-week highs earlier, one of them an-all-time:
- Progressive (PGR), all-time high back to 1971 IPO
- Eaton Corp (ETN), highest since Jan. 2022
- CDW Corp (CDW), highest since Jan. 2022
Outside the S&P 500, the following four stocks reached 52-week highs Monday, one of them an all-time high:
- Five Below (FIVE), highest since Jan. 2022
- Coty (COTY), highest since Jan. 2022
- Kyndryl (KD), highest since Feb. 2022
- Penske Automotive Group (PAG), all-time high back to 1996 IPO
Outside the S&P 500, one stock made a new 52-week low:
- Hanesbrands (HBI), lowest since 2012
— Christopher Hayes, Scott Schnipper
On the earnings calendar this week: Coca-Cola, Kraft Heinz, Analog Devices
The earnings calendar is slowing down this week, but still underway after more than two-thirds of companies in the S&P 500 have already reported earnings.
Here are some big names scheduled for this week:
- Monday: SolarEdge Technologies, Cadence Design Systems, Palantir Technologies
- Tuesday: Coca-Cola, Airbnb, Marriott International, PerkinElmer
- Wednesday: Analog Devices, Shopify, AIG, Kraft Heinz, Cisco Systems, TPG
- Thursday: Applied Materials, Digital Realty Trust, DoorDash
So far, companies are reporting subpar results, with many failing to meet analyst expectations. If the broad index reports a decline in earnings for the fourth quarter, it will mark the first year-over-year decline in earnings since the third quarter of 2020, according to a recent FactSet note.
— Pia Singh
Tesla shorts are down big in the past month, S3 Partners says
It has not been an easy month for hedge funds shorting Tesla.
Data compiled by S3 partners shows hedge funds have lost $7.56 billion shorting Tesla on a mark-to-market basis over the last 30 days. That's more than double the losses incurred by the second-least profitable short on the list, Apple.
Per S3, hedge funds shorting the tech giant have lost more than $2.6 billion in the past month. Even those losses combined with those from shorting Coinbase, Microsoft and Lucid still don't reach the losses incurred by Tesla shorts.
Tesla shares have been on fire over the past month, surging more than 58%.
— Fred Imbert
Meta shares rise after report that further layoffs could come
Meta advanced more than 3% following a Financial Times report saying more layoffs could come.
The outlet reported that multiple teams have faced delays when finalizing budgets as it prepares for another round of cuts. In November, the Facebook parent announced it was laying off around 11,000 employees, which equates to 13% of its staff.
CEO Mark Zuckerberg said during the company's earnings call earlier this month that 2023 would be the "year of efficiency" at Meta.
Bank of America analyst Justin Post said that while the article did not provide detail on the size of potential layoffs, he sees "room for additional efficiencies" given the company has around 76,000 estimated employees — meaning it's still much larger than two years ago, when the company had 58,000 employees.
The stock has gained nearly 50% since the start of 2023, clawing back a chunk of the more than 64% it lost in 2022.
— Alex Harring
Don't expect the good times to last for stocks, Wolfe Research says
Stocks recovered some of the ground lost last week, but Wolfe Research strategist Chris Senyek still sees the market struggling later in the year.
"Despite big gains to start the year, our intermediate-term bearish base case remains intact," he wrote in a note to clients Monday. "We still expect core inflation to be 'sticky,' the Fed to hike higher (5.5%) and/or hold for longer (into 2024) than consensus expects, a deeper-than-expected recession to hit this year, and valuations to increasingly come under pressure."
Senyek's comments come a day ahead of a highly anticipated consumer price index report. Economists polled by Dow Jones expect CPI to have increased by 6.2% in January on a year-over-year basis. That's down from a 6.5% increase in December.
— Fred Imbert
Twilio shares rise 2% after announcement of additional layoffs
The company employed 8,992 people as of Sept. 30. The announcement came after the cloud communications software maker already laid off around 11% of its workforce as part of a restructuring plan in September.
In an email Monday to employees, CEO Jeff Lawson said the additional cuts were driven by the need to reorganize Twilio in order to succeed. "These changes hurt," he wrote. "The weeks ahead will be about processing all this change and working together to acclimate to our new structure."
— Yun Li
Largest defense ETF hits a new high
The iShares U.S Aerospace & Defense ETF (ITA) hit a multiyear high on Monday dating back to February 2020.
Defense stocks, which outperformed in 2022 due in part to the war in Ukraine, may be seeing a boost from the recent unidentified objects that have been shot down by the U.S. military.
Check out a breakdown of the ETFs tracking the aerospace & defense sector on CNBC Pro.
Bear markets are often short-lived, so stay invested: Shah
Investors worried about the bear market and recent volatility should stay the course, according to Seema Shah, chief global strategist at Principal Asset Management.
"Despite recent outperformance, with the possibility of a recession still at the forefront of many investors' minds, some may be tempted to withdraw from this market," Shah said in a Monday note. "Yet, while downturns can indeed be difficult, history shows that they are often shorter-lived than bull markets."
Since World War II, bear markets have lasted on average 14 months and resulted in a decline of 36%, while the average bull market lasts 5 years, 9 months and returns 192%.
That means that staying invested in the market, even during periods of volatility, is important.
"Investors can reduce portfolio volatility by maintaining proper diversification, as assets rarely all move in the same direction during challenging market environments," said Shah.
"Historical cycles, even recently, show that staying invested through the market cycle, in a diversified portfolio, is typically the best investment approach," she added.
Bank of America upgrades Ralph Lauren
Bank of America upgraded Ralph Lauren to buy from neutral, saying the apparel brand can pull away from its peers as retailers deal with a promotional backdrop.
"We are upgrading Ralph Lauren (RL) to Buy to reflect our confidence in strong revenue trends continuing given the brand's global diversification and management's ability to pull cost levers in this choppy environment (the new norm)," analyst Christopher Nardone wrote in a Monday note.
CNBC Pro subscribers can read the full story here.
— Sarah Min
Earnings calls highlighting 'resilient' consumer spending at odds with recession narrative
Give "resilience" a chance, not "recession."
That's one of the messages of recent corporate earnings conference calls, where references to "resilient" consumer spending is at least as prominent to references to a looming recession.
CNBC combed through call transcripts, earnings statements and CNBC interviews to find comments from marquee companies attesting to buoyant consumer spending in recent weeks. Look at these:
MasterCard – "Consumer spending has remained resilient…From an overall consumer spending standpoint, we expect the consumer to be relatively resilient. Spending patterns have largely normalized relative to the effects of the pandemic with the notable exception of China."
Ralph Lauren – "Our core consumer remains quite resilient. And that's true around the world, and that's true across channels."
Mondelez – "The consumer remains resilient and elasticity continues to be well below normal levels."
Kellogg – "The consumer in our space remains incredibly resilient…Even as we've been forced to take more price than we would like to take, our consumer has stuck with us."
Kimberly-Clark – "Consumer demand in our categories generally remains very resilient."
Clorox – "At the moment, category and consumer is resilient. Our brands are very resilient."
Goodyear Tire – "Replacement [tire] volume was helped by a U.S. consumer who remained resilient through the fourth quarter."
Dow – "Easing inflation is leading to improving consumer confidence, albeit from depressed levels in late 2022, while consumer spending remains resilient."
Merck – "Consumer is truly a resilient business, very strong through this cyclical environment, January is off to a really good start."
Listen in coming weeks for whether such observations are echoed in similar remarks by travel companies, major retailers and other food companies as they report results.
— Robert Hum, Nick Wells, Scott Schnipper
JPMorgan resumes coverage of Disney with an overweight rating
JPMorgan resumed coverage of Disney with an overweight rating, and a December 2023 price target of $135 that implies shares could advance more than 20% through year-end.
"While we are cautious on the media landscape overall due to sustained streaming losses and advertising headwinds, Disney is our favorite name among the group due to the company's strong asset mix and what we expect to be a rapid decline in streaming losses in the next year," analyst Philip Cusick wrote in a note Monday.
CNBC Pro subscribers can read the full story here.
— Sarah Min
Stocks rise to start the week
Stocks rose slightly at Monday's open as traders regained their footing after the S&P 500 and Nasdaq Composite suffered their worst weekly declines in nearly two months.
The S&P 500 climbed 0.17%. The Dow Jones Industrial Average rose 41 points, or 0.12%, while the Nasdaq composite climbed 0.29%.
Investors will be looking ahead to inflation data due Tuesday. The report will show how if disinflation is continuing, signaling what the Federal Reserve may do next.
Credit Suisse says this is the “worst earnings season” in 24 years, excluding recessions
With 80% of the S&P 500's market cap having already reported earnings, Credit Suisse is forecasting overall fourth-quarter EPS estimates to have contracted by 2.2% as a result of margin weakness.
EPS estimates have dropped 1.7% since the fourth quarter ended on Dec. 31. The firm said that on average, earnings estimates increase by 2.8% following the end of the quarter.
"This is the largest decline in 24 years, outside of the 2001 recession, the financial crisis, and the initial pandemic quarter," Credit Suisse's Chief U.S. Equity Strategist Jonathan Golub wrote in a note to clients on Monday. The firm said EPS growth is also expected to decline in the first quarter of 2023.
— Pia Singh
Morgan Stanley downgrades logistics stock XPO
Morgan Stanley downgraded XPO to equal weight from overweight following what he considered a lackluster quarter for the less-than-truckload (LTL) shipping company. LTL refers to the transportation of smaller freights that often don't require the use of an entire trailer.
"The 4Q print was tougher than expected and we believe the stock could be in a 'penalty box' for a while, as the market seeks more evidence on execution and traction toward LT targets," analyst Ravi Shanker wrote in a Monday note.
CNBC Pro subscribers can read the full story here.
— Sarah Min
Bowman sees Fed 'far from' inflation goal, indicates more rate hikes
Federal Reserve Governor Michelle Bowman expects interest rates to continue to rise until the central bank makes more progress against inflation.
In a speech Monday morning, Bowman did not provide a specific forecast for rates. But she indicated that there's more work to be done, following eight increases since March 2022.
"We are still far from achieving price stability, and I expect that it will be necessary to further tighten monetary policy to bring inflation down toward our goal," she said in remarks before the American Banking Conference in Orlando, Fla.
"While there are costs and risks to tightening monetary policy to lower inflation, I see the costs and risks of allowing inflation to persist as far greater," she said.
Bowman also spoke on banking regulation, saying she does not think it's the Fed's place to direct institutions on which sectors where they should be allowed to lend. Congressional Democrats have pushed the Fed to discourage lending to fossil fuel companies.
Recent pullback in stocks could be a pause that refreshes growth; Oppenheimer
Last week's dismal stock performance could be a pause that ultimately refreshes the market's upward trajectory, according to John Stoltzfus at Oppenheimer. It may also be a good opportunity for investors to bolster their portfolios with winners poised to gain.
"We remain positive on equities and consider the current retracement as an opportunity for investors to seek out 'babies that got thrown out with the bathwater'," Stoltzfus wrote in a Monday note, referring to good-quality stocks that get sold off in market downdrafts.
"In our experience of nearly four decades in the markets, fed fund cycles that take time to work out are never easy to experience but can be rewarding for investors who practice diversification and exercise patience," he added.
One of the firm's favorite investment mantras during such periods is "know what you own and why you own it relative to y