Stocks rise after inflation report, S&P 500 and Nasdaq hit fresh 13-month highs: Live updates

Oracle stock gets upgraded as company beats on earnings. Here's what the pros have to say
Oracle stock gets upgraded as company beats on earnings. Here's what the pros say

Stocks rose Tuesday after new inflation data showed price pressures slowed again in May, adding to investor optimism that the Federal Reserve could skip a rate hike when it next decides on policy this week.

The Dow Jones Industrial Average traded 145.79 points higher, or 0.43%, to close at 34,212.12. The S&P 500 added 0.69% to close at 4,369.01, and the Nasdaq Composite advanced 0.83% to 13,573.32.

The S&P 500 and the Nasdaq notched fresh 13-month highs during Tuesday's session. Both indexes each reached their highest closing levels since April 2022 on Monday. Currently, the broad-market index is up about 25% from its October low, surpassing the simplistic definition of a bull market.

May's consumer price index increased 4% year over year, marking the slowest annual rate since March 2021. Following the report, traders increased their bets that the Fed will keep rates unchanged on Wednesday after hiking at 10 consecutive meetings. The latest odds gave a roughly 91% chance the central bank would keep rates at the current target rate of 5% to 5.25%, according to CME Group's FedWatch tool.

"[The Fed] will buy themselves the maximum amount of optionality by signaling at least one further hike by the end of 2023, aligned with market expectations, and will guide towards a 'skip' instead of an extended pause to sit and observe the effects of raising rates 5% since the beginning of the hiking cycle," said Gargi Chaudhuri, head of iShares investment strategy, Americas, at BlackRock.

Tech shares led the way as easing inflation and rates boosted optimism for the sector. Oracle shares jumped 0.2% a day after the software vendor topped Wall Street's estimates for the fiscal fourth quarter. Shares of streaming giant Netflix climbed 2.8%.

Correction: An earlier version of the story had an incorrect headline on the inflation level low. It is the lowest inflation since early 2021.

Stocks close higher ahead of Federal Reserve policy meeting

Stocks closed higher on Tuesday after traders spent the session adding to optimism that the latest inflation data could support the central bank skipping a rate hike for June.

The Dow Jones Industrial Average added 146 points , or 0.4%, to close at 34,212.12. The S&P 500 gained 0.7% to close at 4,369.01, and the Nasdaq Composite advanced 0.8% to 13,573.32.

The consumer price index showed inflation increased 0.1% in May, down from 0.4% a month earlier, and gained 4% year over year. The Fed will decide its next move on policy Wednesday.

— Brian Evans

Nvidia may have 'too little upside left,' 'Dean of Valuation' says

It may be hard to find more room to rally for Nvidia, said Aswath Damodaran, a New York University business professor also known as the "dean of valuation."

The stock has surged more than 180% this year amid excitement around artificial intelligence. But he said it's hard to see room for shares to get more expensive after trading around $400.

"I've held Nvidia now for five years and I'm happy that I did," Damodaran said on CNBC's "Closing Bell." But at the current price, "Nvidia would basically have to decimate or dominate the entire AI market for it to be justifying this price. And I'm not willing to take that bet. I mean, there's too little upside left when you price that in."

— Alex Harring

Oracle's post-earnings pop fades

Shares of Oracle turned negative in afternoon trading, giving back all of the gains that followed a Monday evening earnings report that beat estimates on the top and bottom lines.

The stock opened trading on Tuesday up nearly 6% and set a new all-time high during the session.

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Shares of Oracle lost their morning gains as the trading day wore on.

— Jesse Pound

CalSTRS CIO says Wall Street is overhyping A.I.

Christopher Ailman, California State Teachers Retirement System's chief investment officer believes the hype in artificial intelligence could be overblown.

"I think Wall Street has overhyped AI but we'll see where it goes," Ailman said on CNBC's "Power Lunch."

Ailman also said this year's market rally is too concentrated on just a few megacap tech names, which could be a sign that it might not sustain.

"I am very concerned at how narrow this market is," Ailman said. "We are cautious in here and I'm worried that tech is, especially the Big Tech, is getting ahead of itself."

— Yun Li

We're in a 'classic bear market rally,' Wolfe Research says

The S&P 500 reached a new 13-month high this week, but the rally may not last, according to Wolfe Research.

"We continue to believe this year's rip higher has been a classic bear market rally, inflation is going to remain 'sticky', the Fed will be 'higher for longer' and a recession will hit later this year," the firm's Chris Senyek wrote Tuesday.

— Sarah Min

Analysts cheer Salesforce's focus on A.I.

Wall Street remained bullish on Salesforce coming off its investor day, with analysts heralding the focus on artificial intelligence.

Barclays, Goldman Sachs and Bank of America were all among firm's reiterating their buy-equivalent ratings.

"While there was not much in the way of major share price-driving announcements, we believe the event went a long way in cementing CRM's position for AI at the Enterprise level," said Barclays analyst Raimo Lenschow. "We continue to like the story."

But not everyone on the Street was as optimistic. Citi maintained its neutral rating, with analyst Tyler Radke noting the company showed a good vision for the role of AI but some questions were unanswered.

— Alex Harring

Nasdaq rally looks like a 'blow-off top,' BTIG says

The rally for tech and growth stocks is likely reaching the end of the road, according to BTIG technical strategist Jonathan Krinsky.

"We are sticking with our call that the pattern this year is largely inverse to last year, and the mid-June low we saw in 2022 around the FOMC meeting will be mirrored by a mid-June peak this year," Krinsky wrote in a note to clients. "While we feel a bit like a broken record, today's gap-up on the NDX has all the hallmarks of a parabolic blow-off top, as the boat is getting very one-sided."

To back up his point, Krinsky pointed out that Nasdaq futures are 22% above their 200-day moving average and that the CBOE 5-day put/call ratio is at its lowest level since August.

— Jesse Pound

Latest economic data shows inflation has been 'defeated,' Bahnsen Group CIO says

Tuesday's consumer price index data showing the annual inflation rate cooled to its lowest level in more than two years is proof that inflation has been "defeated," according to David Bahnsen, chief investment officer of Bahnsen Group.

The data" suggests that inflation has been defeated," he said. "Most of the inflation we are seeing is coming from housing, but it takes time for home price declines to show up in the CPI data, so today's 4% inflation rate is actually much closer to the 2% Federal Reserve target."

Bahnsen said the bond market agrees with the narrative that inflation has been defeated and expected the Federal Reserve to announce a pause on interest rate hikes on Wednesday.

— Alex Harring

Atlantic Equities downgrades PayPal

Atlantic Equities downgraded shares of PayPal to a neutral rating as the payments company grapples with competitive pressures.

"There look to be no quick fixes to PayPal's branded market share or transaction margins, making it tough to see what actions will reignite investor interest in the stock near-term, even from new leadership, so we move to the sidelines with a Neutral rating," wrote Kunaal Malde.

The analyst expects profitability question to linger questioning the company's profitability as business differentiation declines as a result of heightened competition within brand checkout and unbranded processing weighing on margins.

The firm reduced its year-end price target to $72 a share, reflecting 13% upside from Monday's close. Malde expects the valuation to remain rangebound.

— Samantha Subin

Oracle and Urban Outfitters among the stocks making the biggest moves midday

Check out the companies making headlines in midday trading.

Oracle— Shares rose 2.7% to an all-time high on the back of a strong earnings report for the fiscal fourth quarter. Oracle reported $1.67 in adjusted earnings per share, while analysts polled by Refinitiv expected $1.58. Revenue also came in higher than expected at $13.84 billion against a $13.74 billion estimate. Goldman Sachs upgraded Oracle to neutral from sell following the report.

Norwegian Cruise Line Holdings — Norwegian Cruise Line Holdings jumped 4.8% to the highest since May 2022 after Bank of America on Monday raised its price target to $19 from $17, though the firm maintained a neutral investment rating. Carnival's target went to $20 from $11, also rising to the highest since May, 2022, while Royal Caribbean's rose to $95 from $82 and the stock touched the highest since November, 2021.

Urban Outfitters – The retailer gained nearly 4% following an upgrade to overweight by Morgan Stanley. The Wall Street firm cited Urban Outfitters' low valuation relative to peers and improving business fundamentals.

The full list can be found here.

— Hakyung Kim

Expect another rate hike in July as core consumer prices remain elevated, economist says

The central bank had already decided to skip a rate hike for June before Tuesday's consumer price index report, according to Santander chief US economist Stephen Stanley.

"I thought going in that the FOMC had already decided to skip in June, so today's numbers did not impact my thinking for tomorrow's rate decision," Stanley said.

Stanley says despite the headline figure slowing to a 0.1% increase in May, core prices - which exclude volatile food and energy components - still remain elevated and will push the central bank to stay the course to tighten further after June.

"I do expect another rate hike in July, and in my view another large core CPI increase in May underscores how far the Fed still has to go to get inflation under control," Stanley said. "I don't read today's report as dovish at all. It's more of the same in terms of core, which is not what the Fed wants to see."

— Brian Evans

Loop Capital upgrades Ulta Beauty

Loop Capital is getting more bullish on Ulta Beauty, upgrading shares to a buy rating as the company pushes into the luxury market and expands its Target shopping experience.

"We believe the nascent luxury brand expansion represents a multi-year comparable sales growth driver," wrote analyst Anthony Chukumba.

Shares were last up 3.3% Tuesday.

Read more on the upgrade here.

— Samantha Subin

Goldman Sachs upgrades Devon Energy as capital expenditures, production outlook improve

Devon Energy shares added 2.8% Tuesday after Goldman Sachs upgraded shares to buy from neutral, citing an improving outlook for capital expenditures and production.

"While we do not expect DVN to beat its guidance and consensus production expectations, we believe shares are trading at a discount to peers and potentially pricing in concerns around further execution missteps relative to other large-cap peers," said analyst Neil Mehta.

Read more on the upgrade here.

— Samantha Subin

WTI Crude Futures on track for best day since May

WTI (JUL) gained 3.7% to reach $69.74 Tuesday, on track for its best day since May 5, when it gained 4.05%. This is also the commodity's first positive day in the last four trading sessions.

The VanEck Oil Services ETF (OIH) is also up 4%, on pace for its best day since Jun 2, when OIH gained 5.12%. OIH leaders today include NexTier, Patterson-UTI, Nabors, Transocean, which are all up more than 5% during Tuesday's trading session.

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— Hakyung Kim, Gina Francolla

Bernstein says it's time to stop ignoring Amazon's retail business

Investors often ignore Amazon's retail business, but Bernstein's tech trading desk says it's time to start paying attention. In an email Tuesday, Bernstein said this division will drive earnings revisions — and the stock — in the coming years because operating margins are starting to improve as product fulfillment costs ease.

These comments follow analyst Mark Shmulik's decision to make Amazon one of the firm's top picks. Shmulik had noted that the growth of paid units sold started to outpace the increase in shipping costs in the third quarter of 2022, and the gap has continued to widen ever since.

Amazon shares have gain nearly 50% since the start of the year, but trading desk sees "a lot more room for the stock to run."

—Christina Cheddar Berk

China internet ETF rises 4%

The KraneShares CSI China Internet ETF (KWEB) is up about 4% in Tuesday's session.

That puts it on pace for its best performance since June 1, when the fund finished 4.97% higher.

Baidu has led the index up with a gain of more than 7%. iQIYI and Lufax followed, with each advancing more than 6%.

All U.S. stocks in the index were up in Tuesday's session.

Despite the rally, the ETF is still down more than 4% this year.

— Alex Harring, Gina Francolla

MGM still looks cheap, Wells Fargo says

MGM Resorts has been outperforming the broader markets, but it still looks cheap compared to its closest peers and the stock's own history, Wells Fargo analyst Daniel Politzer said in a note to clients.

"Over the past year, MGM is +35% (vs. SPX +11%), but at 6x EV/EBITDAR, its multiple has compressed the most in our Gaming coverage as the stock has not kept pace w/ improving fundamentals, upward est. revisions, and $2b+ in share repo," the note said.

"EV/EBITDAR" is a variation on the traditional price to earnings multiple. MGM has historically traded at closer to a 10 using that metric, according to Wells Fargo.

Politzer has an overweight rating and a $58 price target on MGM. The stock closed at $42.80 per share on Monday.

— Jesse Pound

Fund managers turning more bullish on A.I.'s profit impact, according to Bank of America

A June survey of fund managers by Bank of America shows the group turning more bullish on the near-term impact of artificial intelligence.

When asked about the impact of AI adoption over the next two years, 40% said they expect higher profits, while 14% said they see an increase in both job and profits. A little less than a third of respondents expect neither.

— Samantha Subin

Stocks open higher

The major averages kicked off the session on a high note after a fresh inflation report matched expectations.

The Dow traded 68 points higher, or 0.2%. The S&P 500 climbed 0.4%, and the Nasdaq Composite advanced 0.8%.

— Fred Imbert

Ryan Cohen buys more GameStop stock

GameStop rose 6% in the premarket after Chairman Ryan Cohen disclosed the purchase of 443,842 shares. That's about $10.8 million worth of GameStop shares, based on Monday's closing price.

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GME jumps

— Fred Imbert

JPMorgan downgrades First Horizon

First Horizon shares lost 2.5% after JPMorgan downgraded the regional bank stock to neutral following a non-rating period.

"With expense growth to remain elevated in 2023/2024, deposit costs continuing to rise, fee income acting as a headwind particularly if the Fed doesn't pivot, and the absence of a near-term catalyst, we move to Neutral," wrote analyst Steven Alexopoulos.

Read more on the call here.

— Samantha Subin

Morgan Stanley upgrades Urban Outfitters

Morgan Stanley upgraded shares of Urban Outfitters to overweight from equal weight, citing its attractive valuation relative to peers.

"Altogether, we upgrade now as we want to be ahead of that inflection, & think the aforementioned low relative valuation & outsized EBIT margin expansion potential vs. peers presents oppty," wrote analyst Alex Straton.

Shares gained more than 3% before the bell.

Read more on the upgrade here.

— Samantha Subin

CPI comes in at lowest level in 2 years

The consumer price index rose 4% year over year last month, matching a Dow Jones forecast and marking its lowest level in two years. The CPI's month-over-month change and so-called core measure — which strips out volatile food and energy prices — were also in line with expectations.

— Jeff Cox

Stocks making the biggest moves premarket

Check out the companies making headlines before the bell:

  • Oracle — Shares jumped more than 5% after Or