The S&P 500 was little changed Wednesday as traders pored over the latest commentary on the pace of future monetary policy from Federal Reserve Chair Jerome Powell.
Powell on Wednesday said more restrictive policy is still to come as the Fed continues to fight inflation, including the likelihood of interest rate hikes at consecutive meetings. Powell spoke before a panel with Bank of England Governor Andrew Bailey, European Central Bank President Christine Lagarde and Bank of Japan Governor Kazuo Ueda at the ECB Forum on Central Banking in Sintra, Portugal.
"We're all digesting the comments from the big four central bankers," Bokeh Capital Partners' Kim Forrest said. "And it feels like the market really wants to go higher, but the whole, 'we need to have higher rates for longer' message is kind of serving as today's cap."
Chip stocks fell a day after The Wall Street Journal reported that the U.S. was considering new export restrictions to China. Artificial intelligence beneficiary Nvidia dropped by more than 1%, and the iShares Semiconductor ETF (SOXX) also declined.
Investors are preparing to close out the best first half for the Nasdaq in 40 years, as they ride a wave of optimism around artificial intelligence that has significantly buoyed a handful of mega-cap tech stocks. The S&P 500 and Nasdaq Composite are higher this year by 14% and nearly 30%, respectively.
— CNBC's Jeff Cox contributed to this report.
Correction: An earlier version of this story incorrectly stated the magnitude of the Dow's move on Tuesday.
Dow, S&P 500 close lower Wednesday, Nasdaq ends higher
Latest survey shows early June stock rally can resume, Investors Intelligence says
A shrinking number of bullish financial newsletter writers and a rising number of those believing stocks will suffer a short-term correction "creates conditions for the early June rally to resume," according to the latest weekly survey by Investors Intelligence. "As contrarians, we note the market rarely fulfills expectations."
The percentage of bullish advisors dropped to 50.0% in the latest week from a 19-month high of 54.3% the prior week. Those arguing in favor of a correction, or short-term pullback in prices, widened to 31.4% from 25.7% the week before. Bears fell again, to 18.6% of those polled, once more the lowest since stocks reached an all-time high in January 2022 and down from 20.0% last week.
The "bull-bear spread" narrowed to 31.4 points from 34.3 last week, which was the widest since Nov. 2021. A difference of 30 points or more "is the first sign of elevated risk," II said.
— Scott Schnipper
CME Group gets overweight rating from Barclays
Barclays initiated coverage of CME Group with an overweight rating and a price target of $215 per share, which implies upside of 20% from Tuesday's close. CME shares rose more than 1%.
"We think there could be plenty of tailwinds, such as ongoing growth in newer products, an increased need by customers to hedge (e.g., regional banks may increasingly need to adopt CME rates futures products), market share gains in metals, and the ongoing adoption of passive investing (benefitting the S&P indices in particular)," analyst Benjamin Budish wrote.
— Fred Imbert, Michael Bloom
See where the major averages stand in the final hour of trading
The Nasdaq Composite was the only index trading in positive territory shortly into the final hour of trading, while both the Dow Jones Industrial Average and the S&P 500 were lower.
Here are where the major averages are:
- The Dow Jones Industrial Average is lower by 129 points, or 0.38%
- The S&P 500 is lower by 0.25%
- The Nasdaq Composite is higher by 0.04%
— Sarah Min
Goldman Sachs expects cap on global equity rally
Goldman Sachs' Peter Oppenheimer believes there is a cap on global risk assets from here, as interest rates remain at a high level through the middle of next year.
"We've seen a big rally in equities, of course, over recent months. Much of that, I think, is reflecting an increasing degree of confidence that we can avoid recessions and that inflation has peaked," the firm's chief global equity strategist said on CNBC's "Squawk on the Street" Wednesday.
In part, that can be attributed to the easing of some of the risks seen earlier in the year, such as the battle over the United States' budget and the banking issue, he said.
"Nonetheless, that rally has been very narrowly driven by a few companies," Oppenheimer explained. "The average company has been relatively flat and we think that will probably continue for some time in equity markets."
— Michelle Fox
Utility stocks struggle, Entergy falls 3%
Utility stocks were lagging the broader market on Wednesday, with the Utilities Select Sector SPDR Fund (XLU) falling 1.5%.
That's an unusually large move for a sector fund that typically sees only minor swings. There have only been three other days since the start of May when the XLU moved at least 1.5% in either direction, according to FactSet.
— Jesse Pound
Deutsche Bank says Anheuser-Busch InBev is at an 'attractive entry point'
Anheuser-Busch InBev is at an "attractive entry point" after its recent selloff, Deutsche Bank says.
The U.S. listed shares of Anheuser-Busch InBev are down about 15% this quarter, compared to a more than 6% gain for the S&P 500. Still, Deutsche Bank's Mitch Collett has a buy rating on the brewing company behind Budweiser, and has a buy rating on the stock.
"We see both positives and negatives for ABI from this month's data. However, the lack of deterioration is probably sufficient for the shares given the current valuation discounts no improvement in ABI's US performance," Collett said.
"As discussed in our recent report 'Bud Light at the end of the tunnel', we see scope for outperformance if the US improves and we continue to see ABI as well positioned for the long term," Collett added.
— Sarah Min
Stocks are evenly split between gainers and decliners in the NYSE
Stocks were just about evenly split Wednesday afternoon. Advancers in the New York Stock Exchange outnumbered decliners about 1 to 1.
— Sarah Min
Now transportation stocks are adding to strength in industrial companies, Strategas's Chris Verrone says
Transportation stocks are adding to the recent strength in industrial machinery and building products manufacturers, according to Chris Verrone, head of technical and macro research at Strategas Research Partners.
Almost 40 industrial stocks in the Russell 1000 index traded to new relative performance highs on Tuesday, with transportation companies marking "a welcome addition to an otherwise split market under the surface. While not quite as broad as the Industrials, the Consumer Discretionary sector continues to carry the flag of leadership as well, with both groups still offering credible alternatives to the widely-held impression of a 'tech-only' market," Verrone wrote.
Meanwhile, Steven Strazza of All Star Charts said on Twitter on Wednesday that the S&P 400 Mid Cap Industrials "are the first sector index to achieve new all-time highs" during the latest rally.
— Scott Schnipper, with reporting by Michael Bloom and Alex Harring
Traders expect an 82% chance for a quarter-point hike next month
Current betting among interest rate futures traders is that there's an 82% chance the Federal Reserve raises fed funds a quarter point to 5.25%-5.50% in four weeks, according to the CME FedWatch Tool.
That's up from one month ago when the odds were only 52%.
— Scott Schnipper
Stocks making the biggest moves midday
Check out the companies making the biggest moves midday.
- Pinterest — Shares climbed more than 5% in midday trading. Wells Fargo upgraded Pinterest to overweight due to an Amazon partnership expected to take hold later this year and optimism that Pinterest can continue to boost user engagement.
- Cruise stocks — Carnival popped nearly 10%, Norwegian Cruise Line gained about 9% and Royal Caribbean added more than 3%, extending gains from Tuesday after Carnival reported a smaller-than-expected loss for its second quarter and issued strong guidance. The sector has been on a tear this year as it recovers from the Covid-19 pandemic.
- General Mills — Shares tumbled 4.4% after the maker of Betty Crocker mixes and Cheerios cereal turned in a mixed earnings report for its fiscal fourth quarter. The company exceeded Wall Street expectations on earnings, posting $1.12 in adjusted earnings per share against a consensus estimate of $1.07 from analysts polled by Refinitiv. But $5.03 billion in revenue missed analysts' forecast of $5.17 billion.
— Michelle Fox
Needham hikes price target for Amazon
Needham analyst Laura Martin raised her price target on Amazon to $150 per share from $120 based on the potential of a new product from Amazon Web Services.
AWS held a product launch on Tuesday for AppFabric, a product designed to make it easier for employees to work across different applications with the help of artificial intelligence.
"Our key economic takeaway is that AppFabric should lower AWS customer churn, by increasing exit costs," Martin wrote. The analyst has a buy rating on the stock.
Shares of Amazon were up slightly by 0.05% in midday trading at about $129 per share.
— Jesse Pound
Energy is the biggest advancer in the S&P 500
Energy was the biggest advancer in the S&P 500, with the sector climbing nearly 1% around 12:30 p.m. ET. Nearly all names in the sector were trading in positive territory. Williams Companies posted the biggest gain, up by more than 2%.
The S&P 500 was just about evenly split between gainers and decliners. Six sectors were in the green, while five sectors declined.
The biggest laggards were utilities, materials and consumer staples.
— Sarah Min
Netflix shares rise after Oppenheimer price target hike
Netflix shares rose more than 4% during midday trading. Oppenheimer hiked its price target Tuesday on the streaming stock to $500 from $450 after noting that Netflix may be phasing out its basic ad-free plan. The new price target implies upside of nearly 20% from Tuesday's close.
"Increasing target to $500 (was $450) in anticipation of higher subscribers on bullish indicators for Paid Sharing and higher rev/sub with potential discontinuation of lowest-priced ad-free plan (testing in Canada)," analyst Jason Helfstein wrote on Tuesday.
"Plan shift from lowest-priced ad-free tier is obvious next step, unlocking ~$15.50 rev/sub (advertising + subscription) vs. $9.99 (ad-free) at $6.99 ad-plan unlocking ~$4.4B in annual revenue or 13% of '23E revenue."
— Sarah Min
BlackRock is eyeing 'megaforces' in midyear outlook
The current economic environment is fostering fundamental change to how investors will find profitability, according to BlackRock.
The firm outlined so-called "megaforces" in its midyear outlook that it says are already shifting returns from broad assets and is instead "marking a break from the four decades of steady growth and inflation known as the Great Moderation."
Analysts led by BlackRock investment institute head Jean Boivin and vice chairman Philipp Hidebrand outlined the "megaforces" as consisting of the rise of artificial intelligence, geopolitical-driven globalization, the move toward a net-zero economy, an aging population and an evolving financial system.
"The key is to identify the catalysts that can supercharge them and the likely beneficiaries - and whether all of this is priced in today," the note said.
— Brian Evans