Stocks closed higher amid volatile trading Thursday as investors remained concerned about the path of the Federal Reserve's rate hikes.
The S&P 500 gained 0.53% to close at 4,012.32 and snap a four-day losing streak. The Dow Jones Industrial Average gained 108.82 points, or 0.33%, closing at 33,153.91. The Nasdaq Composite rose 0.72%, ending the session at 11,590.40.
The major averages are still on pace to end the week on a downturn, with the S&P 500 on track for its worst weekly performance since Dec. 16.
The Fed has been a focal point for investors this week since the rollout of its latest meeting minutes. Policymakers indicated that inflation "remained well above" the central bank's 2% target, even as data has shown "a welcome reduction in the monthly pace of price increases."
Brendan Murphy, head of core fixed income, North America at Insight Investment, said that a recession is not necessary to achieve the Fed's 2% target for inflation.
"While a recession would almost certainly hasten the return of inflation to target, it should not be considered a necessary condition," Murphy said. "While we have seen a significant improvement in realized inflation over the last 6 months, this was largely driven by base effects and the ongoing normalization of supply chains."
"We are now in a period of low growth and moderating inflation," he added. "The big question is how far can inflation come down in that type of environment. It is possible that if supply pressures continue to abate in a period of below-trend growth, inflation will eventually return to the Fed's target. However, this period of below-trend growth might need to be quite long, which is why the Fed is talking about keeping rates restrictive for an extended period."
Stocks ended up on Thursday
Wavering in the markets looking to continue, according to BankRate
The back-and-forth rally in the markets is looking to continue in the near future, according to BankRate's chief financial analyst Greg McBride.
"The market is rallied a couple of times under this false premise that the Federal Reserve is going to pivot and start cutting interest rates right. And time and time again, the Fed pushes back on that, and the market eventually gets the message, and we see a pullback. I don't expect it to play out any differently this time," said McBride. "The economy is the economy is remarkably strong. Inflation is still hot. The labor market was tight. And all of that argues for a fed that is going to continue raising interest rates."
McBride added that currently, the markets are only pricing in a soft landing.
He added, "The market has not priced in the risk of recession. The market has not priced in the no landing scenario where the Fed has to continue raising interest rates because of elevated inflation and for the foreseeable future."
— Hakyung Kim
Keep investing in the U.S., says Hayman Capital Management's Kyle Bass
Investors should keep investing in the U.S. rather than international markets, according to Kyle Bass, founder and chief investment officer of Hayman Capital Management.
"Europe has so poorly mismanaged their energy transition," Bass said on CNBC's "Power Lunch" on Wednesday. "I think in the next two years, we're going to see countries like Germany that, on average, spend less than 1% of GDP on energy — that number could go to 8% or 9% of GDP."
Bass continued, "Europe is in such dark times for the next 10 to 15 years. I can't imagine — outside of a trade — buying Europe and selling it quickly. I would keep investing in the U.S."
— Hakyung Kim
Keep an eye on the 3,900 S&P 500 level, chart analyst Katie Stockton says
Fairlead Strategies' Katie Stockton said she's closely watching the 3,900 level at the S&P 500, noting it's in danger of being broken. "Unfortunately, the next support level is that 3,500 level that was tested back in October."
The S&P 500 traded around 3,990 on Thursday, struggling to snap a four-day losing streak — its longest slide since December.
The broader market index has also given up a chunk of its January gains. It was last up about 4% for the year after popping more than 6% in January.
"That abrupt reversal shows a shift in market sentiment that, I think, is … going to be difficult to weather in the near term," Stockton said on CNBC's "Squawk Box."
— Fred Imbert
Us equity markets have entered the 'Death Zone,' says SocGen
Equity markets are running out of oxygen after the January rally, according to Societe Generale.
"Investors would do well to be extremely skeptical about the strong January US data," analyst Albert Edwards wrote in a Thursday note.
"Aside from the well known seasonal adjustment problems, which have resulted in sharp rises in January payrolls and retail sales with irritating regularity (only for them to subside later in the year), January saw unusually warm weather," he added.
Edwards mentioned Michael Wilson of Morgan Stanley's comparison of the S&P's rally since October with an "Everest ascent."
"'Investors left the safety of base camp last October (when the PE was 15x and the equity risk premium 270bp) but we are now close to the valuation summit (PE at 18.6x and the ERP of just 155bp). Mistakes are made when oxygen (valuation support) is this thin. Climbers call this the 'Death Zone,'" Edwards wrote.
— Hakyung Kim
Hedge funds remain 'cautiously positioned,' Morgan Stanley says
The long book of hedge fund portfolios remains "cautiously positioned," according to Morgan Stanley's prime brokerage data. The cohort opted to own stocks that are more defensive in nature and have lower volatility, the Wall Street firm said, adding that there's also been a tilt towards owning large caps.
"Traditional Defensives have stood out as one of the few themes that has seen long additions on a net basis at the start of 2023, causing net exposure to the theme to reach multi-year highs," the firm said.
Defensive stocks typically consistent dividends and stable earnings regardless of the overall volatility in the market, such as well-established companies like Procter & Gamble, Johnson & Johnson and Coca-Cola.
— Yun Li
Earnings disappointments overshadowing big Nvidia pop, Goldman says
Traders at Goldman Sachs noted that "negative reactions to a slew of stocks reporting last night and this morning are overshadowing the positive reaction to NVDA -- the 7th largest stock in the US."
Moderna, eBay and Lucid Group are among the stocks trading lower on the back of disappointing quarterly results.
— Fred Imbert, Michael Bloom
Nvidia on pace for its longest weekly winning streak on record
Nvidia shares are up more than 9% this week, with the bulk of those gains coming Thursday. That would mark its eighth straight weekly gain — a record for the chipmaker.
— Fred Imbert
Walmart leads Dow declines
Walmart fell more than 2% to lead the Dow Jones Industrial Average lower. Verizon, Travelers and Cisco Systems also fell more than 1%.
— Fred Imbert
Stocks making the biggest moves midday
Here are three stocks making headlines in midday trading:
- Nvidia — The chip stock spiked 12% after Nvidia topped expectations on the top and bottom lines in its most recent quarter. Wall Street analysts approved of the results, saying AI opportunities will drive growth for the chipmaker.
- Lucid Group — The electric vehicle maker tumbled more than 18% after posting fourth-quarter revenue that fell short of analysts' expectations. Bank of America also downgraded the stock to neutral from a buy rating, citing near-term demand concerns.
- Bumble — Shares added more than 4% after Bumble beat fourth-quarter revenue expectations. However, the company posted a quarterly loss of 85 cents per share, a figure that included an impairment charge from shutting down operations in Russia and Belarus.
— Sarah Min
Netflix falls after price cuts
The markets include countries in the Middle East, Africa, Latin America and Eastern Europe, according to the report.
Netflix confirmed that it is "updating" the price plans in some countries, a company spokesperson told CNBC.
The stock was down more than 4% on the day.
— Jesse Pound
Caution signals flashing in latest round of retail and restaurant reports
The latest batch of earnings reports from retailers and restaurants are showing some signs of caution ahead.
Domino's shares are down 9% after the pizza chain turned in a mixed quarter and cut its long-term growth forecast, citing macro-economic headwinds. It now sees global retail sales growth of 4%-8%, down from a prior forecast of 6%-10%.
Wayfair shares are down 18% after it posted a wider-than-expected loss, but the big takeaway is that sales for the quarter-to-date period are trending down 10%. The number of active customers and the number of orders per customer declined in the latest quarter, it said.
Steve Madden said it's seeing "conservative initial spring orders" as retailers manage inventories, but its stock is up nearly 7% in trading.
"SHOO is a high-quality business with a strong management team, and it was prudent for them to take a cautious initial view of guidance," Wedbush analyst Tom Nikic wrote in a research note. He attributed the stock's upward move to investors taking a "last cut" view of the forecast.
-Christina Cheddar Berk, Robert Hum
SVB Securities upgrades Teladoc shares
SVB Securities upgraded Teladoc to outperform from market perform Thursday, saying its bear thesis has been "fully reflected" in the shares and that a forward arc looks "achievable."
"While we expect shares will be down tomorrow, with TDOC's bear case largely playing out over the past year and a half, we believe the valuation will fully reflect the downside scenario—effectively, we are past the final overhang," CVB analyst Stephanie Davis said in a note.
"With estimates re-based to an achievable level and valuations near a trough, we believe TDOC shares can work by solely executing against its outlook," she added.
— Tanaya Macheel
Morgan Stanley upgrades Intel, says limited downside is ahead
Morgan Stanley upgraded Intel to equal weight from an underweight rating, saying that the stock's recent underperformance and dividend cut should mean limited downside is ahead.
"With material underperformance YTD and in late 2022, and this negative catalyst out of the way, we see balanced risk reward," wrote analyst Joseph Moore in a note to clients this week.
Moore called the more than 60% dividend cut the "right thing to do" long term to bring the yield more in check with its peers. Commentary from the company and slight capital expenditure cuts also signal that Intel is working toward a "more disciplined approach" to capital management, he added.
"Reducing the dividend to a more palatable ~2% dividend yield is both more in-line with the peer group and more supportive of the company's multi-year capital spending strategy, with $10's of billions of foundry spending still ahead of the next several years," Moore said.
Along with the upgrade, Morgan Stanley trimmed its price target to $28 from $29.50 a share, representing about 10% upside from Wednesday's close. Shares are down about 3% year to date after tumbling about 49% in 2022.
"While we are not yet out of the woods in terms of FCF pressures, the dividend cut does help to alleviate some of those concerns and points to a floor on valuation, which we feel we are nearing," he said.
— Samantha Subin
Goldman Sachs upgrades Nvidia, cites growing AI demand
Goldman Sachs upgraded shares of Nvidia to a buy from neutral rating on Thursday, citing growing artificial intelligence adoption.
Analyst Toshiya Hari added that "the combination of positive estimate revisions and a potential expansion in the stock's multiple - consistent with historical recovery phases - will drive continued outperformance in the stock."
Shares of Nvidia were last up nearly 13% before the bell on the heels of a slight fourth-quarter beat as AI chip demand increases.
Read more on the call from Goldman here.
— Samantha Subin
Lordstown Motors shares slide on production pause announcement
Shares of electric vehicle maker Lordstown Motors slid more than 8% in early morning trading after the company announced a production and delivery pause to address quality issues with certain Endurance components.
"While our experienced team has made significant progress in addressing the underlying component and vehicle sub-system issues affecting the Endurance build schedule, we remain committed to doing the right thing by our customers and to resolve potential issues before resuming production and customer shipments," said CEO Edward Hightower said in a statement Thursday.
Lordstown plans to give more details in its upcoming earnings call on March 6.
— Tanaya Macheel
Chip stocks rise on Nvidia results
Better-than-expected results from Nvidia boosted the chipmaker's stock by more than 13% and lifted shares of some of its competitors.
Nvidia on Wednesday posted a slight revenue beat due in part to demand for its AI chips. Shares were up almost 20% off their 52-week high of $289.46 on Mar. 29.
— Samantha Subin
Stocks open higher on Thursday
Loop Capital initiates coverage of Walgreens Boots Alliance
Loop Capital initiated coverage of Walgreens Boots Alliance with a buy rating and $45 price target, suggesting shares could gain more than 20% from Wednesday's close.
"Over the past two years the company has also lowered its costs and assembled a portfolio of health care providers that we expect to strengthen WBA's core retail business and accelerate its growth and profitability by increasing its engagement with consumers," wrote analyst Joseph France.
Read more on the call from Loop Capital here.
— Samantha Subin
Dollar index hits highest level since Jan. 6
The dollar index briefly hit a high of 104.683, or its highest level since Jan. 6 when the index reached a high of 105.631.
The index is up 0.6% this week, heading for its fourth straight positive week for the first time since May 13, 2022.
Meanwhile, the euro fell to a low of 1.0584 against the dollar, which is the lowest level since Jan. 6 when the euro traded as low as 1.0482 against the dollar. The euro is 0.7% lower this week, on pace for its third negative week in four.
The dollar is up 0.6% this week against the yen, putting it on pace for its sixth straight positive week for the first time since Oct. 14, 2022.
— Gina Francolla, Sarah Min
Fourth-quarter growth in 2022 was less than initially projected
Economic growth wasn't as strong as originally thought as 2022 came to a close, the Commerce Department reported Thursday.
Gross domestic product increased 2.7% at an annualized pace in the fourth quarter, down from the initial 2.9% estimate. Economists surveyed by Dow Jones had not been expecting a change in the first revision.
The primary reason for the downward revision was that consumer spending, which drives about two-thirds of the economy, wasn't as strong as the initial estimate. Personal consumption expenditures increased just 1.4% for the quarter, weighed down by a decline in purchases of long-lasting goods such as appliances and autos.
Upward revisions to nonresidential fixed investment helped offset the downward changes to spending.
In other economic news, jobless claims edged lower to 192,000 for the week ended Feb. 18, the Labor Department reported. That was 3,000 less than the week before and slightly below the 197,000 Dow Jones estimate.
Stocks making the biggest premarket moves
These are the stocks making the biggest moves in early morning trading.
- Lucid Motors — The electric vehicle maker saw shares slide 14% premarket after reporting that fourth-quarter revenue fell short of expectations. Bank of America downgraded the shares Thursday, citing near-term demand concern.
- Nvidia – Shares of the chip giant leaped more than 9% in early trading after Nvidia posted beats Wednesday on the top and bottom lines for its latest quarter. Wall Street praised Nvidia's results Thursday.
- Dollar General — Shares fell about 5% after Dollar General reported preliminary results for its fourth-quarter and fiscal year 2022 that were lower than prior guidance and weaker than consensus expectations from FactSet.
For more big movers check out our full list here.
— Tanaya Macheel