S&P 500 and Nasdaq end Thursday slightly higher as summer rally struggles

Stocks ended Thursday's session slightly higher. The Dow inched up 18.72 points, or 0.06%, to 33,999.04, while the S&P 500 gained 0.23% to settle at 4,283.74. The Nasdaq rose 0.21% to 12,965.34.

— Samantha Subin

At least 90% of S&P 500 companies have reported earnings so far this season, but an analysis from Bernstein suggests many names have struggled to dazzle the markets.

"Companies missing expectations on both the top and bottom lines sold off by 380 bps on the print this quarter, while double beats were up by only 70 bps on average," wrote analyst Ann Larson in a note to clients Wednesday. "Beating on either earnings or sales, but not both, sent stocks down by 2-3 percentage points on average post report."

Of the companies that have reported earnings, 82% beat or met estimates from analysts, with real estate, industrials and energy leading the group, she noted.

That said, the earnings and sales beat ratios for the quarter have dropped below the average over the last two years, although they remain above the averages since 2008, Larson wrote.

The major averages turned positive as the final hour of trading kicked off. The Dow was last up 19 points, or 0.6%, while the S&P 500 and Nasdaq Composite gained 0.37% and 0.46%, respectively.

— Samantha Subin

Grantham Mayo van Otterloo, the Boston-based money manager co-founded by noted investor Jeremy Grantham in 1977, is out with its latest forecasts for stock and bond returns over the next seven years, and it again favors emerging market stocks over U.S. companies.

Emerging market value stocks are forecast to return 8.5% annually over the next seven years, the best among five classes of stocks measured. Emerging market stocks as a whole are estimated to return 4.9% annually, international smallcap stocks 3.2% and international large stocks 1.6%. U.S. smallcaps are projected to return -1.9% each year and U.S. large caps -2.2%.

The only positive return GMO projects in fixed income is emerging market debt, at 2.7% annually over the seven years. U.S. inflation-linked bonds are forecast to return - 1.8%, U.S. bonds -2.4% and international bonds (hedged for currency) at -3.4% per annum.

The returns are projected in after-inflation real terms, in local currency and assume a return on U.S. cash holdings of -0.4% per year. GMO also says, "U.S. inflation is assumed to mean revert to long-term inflation of 2.2% [annually] over 15 years." GMO pegs the long term historical U.S. equity return at 6.5%.

GMO managed almost $72 billion as of the end of the first quarter 2022.

— Scott Schnipper

Minneapolis Federal Reserve President Neel Kashkari said Thursday that he's not sure whether raising interest rates to halt inflation will lead to a recession. He indicated that's a price the economy may have to pay.

"The question right now is, can we bring inflation down without triggering a recession? And my answer to that question is, I don't know," he during a luncheon Q&A in his home district. "We know we have more work to do in raising rates to bring inflation down."

Kashkari did not indicate whether he would be in favor of a third consecutive three-quarter-point interest rate hike at the Fed's next meeting in September.

Though he traditionally has been more dovish, or in favor of lower rates, in his approach to monetary policy, his remarks Thursday echoed some of his recent comments that he thinks the central bank needs to stay aggressive.

"I do know we have a job to do and I know we're committed to doing it," he said.

Inflation current is running near its highest levels in more than 40 years and is well above the Fed's 2% target. The central bank began raising rates earlier this year after insisting through much of 2021 that inflation would be "transitory" and subside once pandemic-specific factors abated.

Kashkari acknowledged that the Fed got the inflation take wrong.

"We didn't see inflation being that high. We didn't see inflation sticking around this long," he said. "It's our job to keep inflation at 2%, and we obviously didn't do that. So we need to get it right."

—Jeff Cox

Stifel's chief equity strategist Barry Bannister told CNBC's "Power Lunch" on Thursday that he believes markets should end the year on a high note as inflation subsides.

According to Bannister, the firm's models expect the headline consumer price index to drop to 3% by December as energy, goods and food prices come down.

"All of this really is supportive of a choppy market waiting to see what the Fed does next, but I think a very strong finish to the year," Bannister said.

While Bannister expects the S&P to hit the 4,400 mark, he could see the index pushing even higher to 4,600, led by big tech and growth stocks. Bannister also expects the central bank to pause its hiking cycle come December.

— Samantha Subin

St. Louis Fed president James Bullard told the Wall Street Journal on Thursday that he "would lean toward" a three-quarters-of-a-percentage-point rate hike next month.

The Fed has done hikes of that size at each of its past two meetings, the biggest increases in more than two decades. Market expectations are currently split between a half-point hike and a three-quarters-of-a-point hike for the September meeting.

Bullard told the Journal that "we've got a long way to go to get inflation under control" and that "I don't really see why you want to drag out interest rate increases into next year."

Bullard is seen as one of the more hawkish members of the Federal Open Market Committee, which votes on the central bank's policy rate.

—Jesse Pound

Wall Street cheered Cisco's stronger-than-expected results, putting the stock on pace for its biggest one-day gain since Nov. 13, 2020 — when the stock popped 7.1%.

The stock last traded higher by 6%. It also hit its highest level since May.

—Fred Imbert, Ashley Capoot

Michelle Gass, the CEO of Kohl's, told CNBC's Courtney Reagan on "The Exchange" that the company is confident in its dividend and stock buyback program despite the retailer cutting its guidance.

"This is a short-term thing. As you look forward, our cash flow will be absolutely fine over time," Gass said.

The company's redesign of its stores to include retail space for Sephora is part of the short-term impact on cash flow, Gass said.

Shares of retailer are down 6% on the session.

— Jesse Pound

Investors should anticipate volatility ahead as one of the lowest volume weeks of the year kickstart on Monday, said Art Hogan, chief market strategist at B. Riley Financial.

"Next week is likely going to be the lowest volume week of the summer as we unwind through the dog days of summer," Hogan said. "Lower volumes tend to add volatility so don't be surprised if markets get choppy."

The shift isn't unusual as traders venture out on vacation and economic reports and earnings season slowdown. September is generally regarded as a historically weak month for stocks.

— Samantha Subin

Semiconductor stocks rose on Thursday, pushing the S&P 500's information technology sector higher. Shares of Broadcom, Nvidia, Micron and Applied Materials jumped more than 2% each, while ON Semiconductor soared 8%.

— Samantha Subin

Shares of Wolfspeed surged 28% after topping revenue estimates in the recent quarter. The semiconductor company also posted a smaller-than-expected loss per share and shared better guidance than anticipated for the current quarter.

Wolfspeed reported a loss of 2 cents per share on $229 million in revenue for its fiscal fourth quarter. Analysts had anticipated a loss of 10 cents per share on $208 million in revenue.

— Samantha Subin

JPMorgan strategist Marko Kolanovic stuck to his bullish market stance Thursday, noting that the S&P 500 is now closer to his year-end target of 4,800 than to the "most common 'bearish' price target" of 3,500.

"While this was an out of consensus view, we are again out of consensus and maintain that inflation will
resolve on its own as distortions fade," Kolanovic said in a note to clients. He also pointed out that buying the dip this year has "yielded positive returns and has worked better, than e.g. suggestions to stay out of the market and start 'nibbling' at 3500 or 3300, levels that have not been reached."

The strategist has been one of the most sanguine on the Street this year, even as the Federal Reserve raises rates to temp down inflationary pressures not seen in years.

His latest comments come as the market digests a sharp off a mid-June low. In that time, the S&P 500 is up more than 16%.

To be sure, Kolanovic said he suggests "not to buy the S&P 500 as a whole and we remain open to a possibility that the final S&P 500 price slightly underperforms our target." Instead, he recommends looking at reasonably values parts of the market such as energy.

—Fred Imbert

The Federal Reserve is more determined to bring down inflation than the market thinks, according to Citigroup.

As the market digests minutes released Wednesday from the Fed's last meeting in July, Citi economist Andrew Hollenhorst thinks a popular interpretation that the central bank is getting ready to decelerate policy tightening is mistaken.

"Risk markets seem determined to read a dovish message into Fed communications that we think simply is not there," Hollenhorst wrote Thursday. "A committee that values its 'resolve' in fighting inflation is unlikely to turn substantially more dovish so long as underlying inflation remains well above target and is not convincingly slowing."

The minutes stated that Federal Open Market Committee members figured that after a series of rate hikes, "it likely would become appropriate at some point to slow the pace" of increases. But there was no specificity on when that might happen, and officials repeatedly stressed the importance of bringing inflation down to 2%.

Hollenhorst said he understands the market confusion, but noted that there "is not really any informational content" in the "at some point" phrasing.

Still, markets over the summer have priced in a more timid Fed when it comes to raising rates, even after consecutive 0.75 percentage point moves in June and July.

After wavering earlier in the week, futures pricing Thursday morning indicated a 66% chance of a half-point rate hike in September, according to CME Group data. Traders see another similar-sized move in November then a quarter-point increase in December. Rates are then expected to stay in a range of 3.5%-3.75%, with the first cut priced in near the end of 2023.

—Jeff Cox

Energy stocks moved higher on Thursday as oil prices rose following the release of fresh U.S. crude data.

The S&P 500's energy sector was last up 2%, boosted by shares of Halliburton, Devon Energy and APA, which jumped more than 4% each. Occidental Petroleum and Exxon Mobil both added 2%.

Brent crude futures were last up $2.39 to $96.04 a barrel, while U.S. crude futures climbed 2.3% to $90.15.

— Samantha Subin

Orange juice futures hit 167 on Thursday. That's the lowest level since July 28 when OJ futures hit 164. Since the start of the week, OJ is down nearly 7% and on pace for its worst week since July 15.

— Samantha Subin, Gina Francolla

Shares of Cisco popped more than 6% after the company beat estimates for its fiscal fourth quarter.

The networking equipment producer also shared a better-than-expected outlook for the 2023 fiscal year as supply chain issues ease. Cisco said it expects revenue growth of 4% to 6%. That's above estimates of 2.3%, according to analysts surveyed by Refinitiv.

— Samantha Subin, Jordan Novet

Shares of Bed Bath & Beyond fell 26% on Thursday morning as investors reacted to activist investor Ryan Cohen's filing that he intends to sell his entire stake in the meme stock.

The filing comes after Bed Bath & Beyond had surged in August amid abnormally high trading volume. It is unclear whether Cohen has already dumped his stock.

Bed Bath & Beyond said in its own filing on Thursday that it was "pleased to have reached a constructive agreement with RC Ventures in March" and was looking at potential changes to its financial structure.

"We have been working expeditiously over the past several weeks with external financial advisors and lenders on strengthening our balance sheet, and the Company will provide more information in an update at the end of this month," the filing said.

— Jesse Pound

Existing home sales dropped 5.9% in July, the National Association of Realtors said Thursday in its monthly report. The drop brought the sales count to a seasonally adjusted annualized rate of 4.81 million units.

The findings also marked the sixth straight month of declines and the slowest pace in sales since November 2015, with the exception of a slight drop when the pandemic began. Sales also fell 20% from a year earlier.

— Samantha Subin, Diana Olick

Shares of BJ's Wholesale jumped more than 8% after the company surpassed estimates on the top and bottom lines. The retailer posted earnings of $1.06 per share on revenues of $5.01 billion and upped its outlook for the year.

Bank of America upgraded the stock to a buy rating.