Stocks fell Thursday after another hot inflation report, and a decline in jobless claims, showed the economy is holding up amid the Federal Reserve's rate hikes.
The Dow Jones Industrial Average shed 431.20 points, or 1.26%, to close at 33,696.85. The S&P 500 dipped 1.38% to 4,090.41, and the Nasdaq Composite fell 1.78% to close at 11,855.83. Microsoft and Disney contributed the most to the Dow's decline, down 2.66% and 3.12% respectively. Tesla shed 5.69% following a vehicle recall, weighing on the S&P 500.
Stocks slipped after January's producer price index, another inflation measure, rose 0.7% on the month per Thursday's report, while economists surveyed by Dow Jones expected a 0.4% increase. Initial jobless claims unexpectedly fell for the week ending Feb. 11, per a Labor Department report.
The new data comes after January's consumer price index and retail sales report were both higher than expected, suggesting that the Fed may have further to go in its efforts to tame inflation.
"Both inflation readings this week point to the stickiness of inflation and that the fight isn't over, especially when considering today's PPI reading was the highest month-over-month increase since early summer," said Mike Loewengart, head of model portfolio construction at Morgan Stanley.
He added that declining jobless claims suggest the labor market remains tight.
"It shouldn't be a surprise to see the market take a breather as hopes of a dovish Fed in the coming months fade," Loewengart said. "Bottom line is investors should recognize inflation may not return to normal levels as quick as many hope, and with that may come more volatility."
Comments from St. Louis Federal Reserve President James Bullard that he'd advocated for a 50 basis-point interest rate hike at the last meeting and could see a hike of that magnitude in March also weighed on equities. Cleveland Fed President Loretta Mester also said she supported a larger hike.
The Dow is on track for a third consecutive week of losses. The S&P 500 is flat on the week, and the Nasdaq is poised to gain slightly.
Stocks sold off sharply in the final minutes of trading Thursday, sending the Dow to a fresh daily low. All three indexes ended the day lower.
The Dow Jones Industrial Average shed 431 points, or 1.26%. The S&P 500 dipped 1.38% and the Nasdaq-Composite fell 1.78%. Microsoft and Disney contributed the most to the Dow's decline, down more than 2% each.
The economic backdrop will weigh on certain market sectors more than others, according to a Tuesday note by Goldman Sachs.
A slew of economic data Thursday seems to be bringing back recession fears among investors, including the decline in the Philly Fed index, poor momentum in the U.S. housing market, higher than expected PPI and stronger than anticipated retail sales.
These "suggest that the fight against high inflation is still ongoing and there still remains more work for the Fed that has to be done," the note said.
"And on the back of this, the 10-Year US Treasury yields are climbing -- now at 3.85% -- 30 bps higher from a month ago -- putting further pressure on some of the longer duration and growth sectors like Consumer Discretionary and Information Technology."
Stocks were still down heading into the final hour of trading Thursday as investors mulled hotter-than-expected inflation reports and an unexpected dip in initial jobless claims.
The Dow Jones Industrial Average shed 138 points, or 0.40%. The S&P 500 dipped 0.43% and the Nasdaq-Composite fell 0.52%. Microsoft, Disney and Amgen contributed the most to the Dow's decline, down more than 1% each.
Energy and consumer sectors led the Dow lower, offset slightly by gains in technology and health services. Transportation was the biggest laggard on the S&P 500 for the day as railroad stocks fell.
JPMorgan's JEPI ETF and its 11% yield have been a hot topic for investors, but it is not the only income ETF seeing strong inflows.
CNBC Pro took a look at some of the newer funds and strategy groups that are gaining momentum, including international dividend funds.
Read more about what's next for income ETFs here.
— Jesse Pound
St. Louis Federal Reserve President James Bullard said Thursday that he pushed for a higher interest rate increase at the last meeting and could see a more aggressive move ahead.
The policymaker said he advocated for a half percentage point rate increase at the Jan. 31-Feb. 1 Fed meeting and said he wouldn't rule out pushing for one at the March session.
"I was an advocate for a 50-basis-point hike and I argued that we should get to the level of rates the committee viewed as sufficiently restrictive as soon as we could," Bullard said during a speech in Tennessee, according to Reuters.
Cleveland Fed President Loretta Mester also said Thursday she wanted a higher increase than the quarter-point approved by the Federal Open Market Committee. Neither Mester nor Bullard vote this year on the FOMC.
Bullard added that he sees the larger economic trend moving toward disinflation, despite recent high readings for inflation.
"In part due to front-loaded Fed policy during 2022, market-based measures of inflation expectations are now relatively low," Bullard said.
"Continued policy rate increases can help lock in a disinflationary trend during 2023, even with ongoing growth and strong labor markets, by keeping inflation expectations low," he added.
The comments come despite separate data releases this week showing that both consumer and producer prices increased more than expected in January. Bullard acknowledged that inflation is still too high, but said higher interest rates will keep it in check despite continued economic growth and a robust labor market.
"These factors may combine to make 2023 a disinflationary year," Bullard said.
Analog Devices still has room to grow after a solid fourth quarter and a hot start to the year for its stock, according to Bank of America.
Analyst Vivek Arya hiked his price target on the semiconductor company to $230 per share from $215, saying in a note to clients that Analog Devices is a "best-in-class share gainer."
"ADI should be able to sustain profitability growth in an industry downturn. More importantly, with capital intensity peaking likely at 8%-9% and coming down over time, we see a path to 40%+ FCF margins, well above analog peer [Texas Instruments]," Arya wrote.
Shares of Analog Devices were last down 0.8% for the day but are still up more than 18% in 2023.
— Jesse Pound
A flurry of factors have come together recently to spark a big comeback for crypto, says Bernstein.
CNBC Pro subscribers can read more about why crypto prices are rising again here.
— Hakyung Kim
BTIG chief market technician Jonathan Krinsky thinks the stock market could be at a turning point, noting that "nearly every meaningful catalyst (NFP, FOMC, CPI, retail sales, etc.) has resulted in dip buyers stepping in."
"When it feels like the market is unable to trade lower on a sustained basis, that is usually near a turning point. The question now becomes: is today that turn?" he said, noting that the S&P 500 is back above 4,100 and could close above its 20-day moving average for the first time in more than a month.
— Fred Imbert, Michael Bloom
The newest models tend to rule the electric vehicle world, according to Bernstein analyst Toni Sacconaghi. And he said that could be bad news for Tesla.
Sacconaghi noted that 60% of the best-selling EV models in 2019 failed to grow volume in their fourth year. On top of that, 80% of the top sellers were launched within the last three years.
The market share for EVs typically peaks within the first two years.
Those statistics don't bode well for Tesla, as he does not expect the company to have a new high-volume offering before 2025. And it could be especially tough for the industry leader as more competitors enter the market in the coming years.
"The latest is the greatest in EVs," he said in a note to clients Thursday. "And that's the near-term challenge for Tesla."
Sacconaghi has an underperform rating on the stock and expects shares to fall 30% over the next year.
— Alex Harring
Here are three stocks making headlines during midday trading.
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— Sarah Min
Two stocks on the Dow remained in the green amid the indexes nearly 200-point slide Thursday.
Shares of Apple inched higher, up 0.4%. Cisco Systems gained 5.75%, helping to offset some of the broader index losses during the day. The stock surged after beating earnings estimates and boosting its full-year guidance.
The WisdomTree Cloud Computing Fund is down more than 2% on Thursday and on pace for its first negative day in four.
Major moves in a few key stocks included in the fund are weighing on the performance. Shares of Toast, Shopify, Amplitude and RingCentral are all down more than 10%. In addition, Toast and RingCentral are on track for their worst days since Feb. 2022 and March 2020, respectively.
On the flipside, shares of Twilio and Fastly are both up more than 10% today, curbing losses in the ETF. On the week, the fund is still up 4.5% and on pace for its fifth positive week in six.
The January producer price index report, a measure of inflation, come in higher than expected on Thursday, sending equities lower.
It may signal though that the worst is behind the U.S. in terms of bringing inflation down, according to John Lynch, chief investment officer for Comerica Wealth Management.
"Today's wholesale inflation data, when coupled with the CPI report, suggests that the easy battles against price pressures have been won," Lynch wrote Thursday. "We believe the move from ~9.0% to ~6.0% will prove to be much less challenging than the journey from ~6.0% to ~3.0%."
Still, because of the reports, the Federal Reserve will remain steadfast and keep policy tighter for longer than equity markets have been pricing in since October, he said.
"We look for higher rates to pressure P/E multiples and we continue to position portfolios for value over growth, with active strategies likely to outperform passive indexes in the months and quarters ahead," he said.
Deutsche Bank reiterated its hold rating on NVIDIA shares, saying that secular themes overshadow the AI computing company's muted fundamentals.
Analyst Ross Seymore said that NVIDIA's growth outlook remains unclear — particularly its fast-growing AI GPU accelerator business — given the recent cautious guides from INTC and AMD.
"Overall, clearly NVDA shares have benefited from renewed enthusiasm surrounding AI compute," Seymore wrote in a Thursday note. "Nevertheless, we believe the shares remain fully valued at current levels."
The firm set its price target for the company at $170, implying a 25.3% downside from Wednesday's closing price.
— Hakyung Kim
Piper Sandler upgraded Baker Hughes to overweight from neutral, citing the improving visibility within the company's industrial and energy technology business.
"There are some drags on IET margins in '23, but w/ volume/mix, cost synergies, along w/ supply chain and product design improvements, there's the potential for IET EBITDA margins to expand into the 20% realm by '25/'26," analyst Luke Lemoine wrote in a note Wednesday.
While liquified natural gas orders will naturally step down over the coming years, IET orders can remain in at least the $10 billion to $11 billion range over the next few years, he said.
Lemoine also hiked his price target on the stock to $43 per share from $34, implying nearly 34% upside from Wednesday's close. Baker Hughes shares are up about 10% year to date.
— Michelle Fox
Analyst Benjamin Soff upgraded the gaming stock to buy from hold and raised his price target by $7 to $90. His target share price implies the share price could rise 15.1% from where it ended Wednesday's session.
"We remain cautious on the regulatory approval process for Microsoft's acquisition of Activision due to the increased scrutiny over big tech by regulators across the US, UK and Europe," Soff said in a note to clients Thursday. "However, we believe that Activision is well positioned on a standalone basis, and that its well capitalized balance sheet can support attractive shareholder returns."
He added that the company's strong brands has helped it buck consumer spending and mobile gaming slides.
— Alex Harring
Canaccord Genuity is bullish on Generac as the company's business challenges begin resolving.
Analyst George Gianarikas upgraded the stock to buy from hold and raised his price target by $71 to $175. His new price target implies an upside of 29.4% from Wednesday's close.
The upgrade comes after the company's most recent earnings report, which Gianarikas said marked the end to a tough year but also showed signs of improvements within the business. CNBC Pro subscribers can read the full story here.
— Alex Harring
Stubbornly high January consumer prices and much stronger-than-expected January retail sales have done zilch for the price of gold this week.
April gold futures are off 1.4% week-to-date, their third straight weekly decline.
As a result, the VanEck Gold Miners ETF (GDX) is down almost 3% WTD, on pace for its fifth straight weekly loss (the longest since last July).
Individual miner moves are more pronounced still: Hecla (HL) is lower by more than 10% WTD, on pace for its fourth straight weekly loss and the worst week since last August (coincidentally when the S&P 500 ended its last little bear market rally).
Equinox, AngloGold, B2Gold and Kinross are down by more than 6% each this week.
— Scott Schnipper, Gina Francolla
Initial claims for unemployment benefits dipped 1,000 to 194,000 for the week ended Feb. 11, the Labor Department said on Thursday. Economists polled by Dow Jones had forecast jobless claims at 200,000.
The number from the prior week was revised to 195,000 from 196,000, according to the Labor Department.
The labor market has remained resilient even amid the Federal Reserve's series of interest rate hikes.
— Yun Li