Stocks jumped Thursday as traders cheered another report pointing to cooling U.S. inflation.
The S&P 500 climbed 1.33% to 4,146.22 for its highest close since February. The Nasdaq Composite advanced 1.99% to 12,166.27. The Dow Jones Industrial Average added 383.19 points, or 1.14%, to 34,029.69.
The March producer price index, a measure of prices paid by companies and often a leading indicator of consumer inflation, declined by 0.5% month over month versus economists' expectations for prices to be flat. Excluding food and energy, the core wholesale prices reading shed 0.1% month over month, much better than the 0.2% increase expected by economists polled by Dow Jones.
The PPI data confirmed the easing inflation trend from Wednesday's March's consumer price index report, which advanced just 0.1% month over month. Consumer prices grew 5% on an annual basis, the smallest increase in nearly two years.
Tech stocks, which were among the hardest hit during periods of rising inflation and rates, leapt Thursday. Both the communication services and information technology sectors were among the notable gainers in the S&P 500. Mega-cap tech stocks advanced, with shares of Amazon up 4.7%. Shares of Google-parent Alphabet and Meta were up 2.7% and about 3%, respectively. Tesla shares also rose nearly 3%.
"The market was a little poised to potentially go up on any positive news, and in this case, the PPI number was quite a bit better than expected," said Spouting Rock Asset Management's Rhys Williams. "And I think that gives people some comfort that in fact the Fed probably doesn't have to raise rates in the next meeting."
Wednesday marked a 2-day losing streak for the S&P 500 as the minutes from the March Federal Open Market Committee meeting showed the Fed expects the recent banking crisis to cause a mild recession later this year.
"Markets might be getting a little too ahead of themselves, as far as optimistic, that the Fed will be able to cut when the markets are pricing that in," said Verdence Capital Advisors' Megan Horneman.
"I don't think the Fed's going to be able to do that. I think the Fed's going to have to stay on hold for longer than people anticipate, and then maybe rate cuts next year, but I think they're going to have to stay on hold because we still are in a very sticky inflation environment."
Lea la cobertura del mercado de hoy en español aquí.
Correction: Tech shares jumped on Thursday. An earlier version of this story misstated the day.
Stocks closed higher Thursday, with the S&P 500 notching its highest close since February.
The S&P 500 climbed 1.33% to 4146.22. The Nasdaq Composite advanced 1.99% to 12,166.27. The Dow Jones Industrial Average added 383.19 points, or 1.14%, to 34,029.69.
— Sarah Min
Goldman Sachs said Warner Bros. Discovery remains a top pick in media after the conglomerate unveiled new information into its streaming service that's launching next month.
The Wall Street firm said that "Max," the new streaming platform from Warner Bros. Discovery launching May 23, is "well positioned" compared to other streaming services because of its extensive content library, as well as its improved user experience. "Max" is expected to merge content from HBO Max and Discovery+.
"It also represents the first time that WBD has come to market with a significant offer that leverages the combined content, technology and distribution resources of legacy Discovery and WarnerMedia," Brett Feldman said in a Thursday note.
"As such, we believe that a successful roll-out of max during 2023-2024 could be an incremental positive catalyst for the stock, beyond investors' outlook for material cost synergies."
What's more, the analyst said the risk/reward for Warner Bros. Discovery is the most attractive among its peer group. The firm's 12-month price target of $19 represents roughly 35% upside potential from Wednesday's closing price.
— Sarah Min
Stocks hit their highs of the session heading into the final hour of trading.
The Dow Jones Industrial Average added about 400 points, or 1.2%. The S&P 500 climbed nearly 1.4%, while the Nasdaq Composite advanced 2%.
— Sarah Min
UBS upgraded shares of Ingredion to buy, saying that an "inflection [is] on the horizon" for the company.
"We believe Ingredion is in the early innings of a beat and raise cycle as it stands to benefit from several strategic initiatives and secular tailwinds," analyst Cody Ross wrote in a Wednesday note. "We see a credible path for INGR to expand GM by 100+ bps over the next three years and deliver more consistent GP dollar growth over the [long-term]."
The firm's price target of $121 implies shares having more than 13% upside over the next 12 months. Shares have gained 8.6% year to date.
"As the company begins to deliver more consistent results, we expect its multiple to expand in kind," said Ross.
— Hakyung Kim
Solar stocks SolarEdge Technologies and Enphase Energy led gains in the S&P 500 on Thursday, jumping more than 7% each.
On Thursday, HSBC analyst Daniel Yang initiated coverage of both stocks with buy ratings. Yang said SolarEdge, which is the world's largest provider of module level power electronics (MLPE), is finding new growth opportunities as it expands into the energy storage system battery market.
The analyst was also bullish on Enphase, saying the leading microinverter provider is expanding its European footprint, which "will be the next growth market for Enphase."
— Sarah Min
The SPDR S&P Biotech ETF (XBI) is on pace to post its best session in five months.
The ETF has gained more than 4.5% in Thursday's session. That's the highest it's gained in a day since Nov. 10, when the fund advanced 7.7%.
Sana Biotechnology led the index up with a 21% jump on the back of pre-clinical data. Relay Therapeutics, another top performer, popped 14% on the back of Raymond James initiating coverage of the stock as overweight. Multiple stocks in the ETF are slated to participate in the American Association for Cancer Research annual meeting starting Friday.
Thursday's rally puts the index up 3.7% for the week. If that performance holds through Friday's close, it would be the best week for the index since Jan. 13, when it gained 5.7%.
Despite the recent performance, the ETF is still down 4% compared with the start of the year.
— Alex Harring, Gina Francolla
It's unlikely that the S&P 500 has reached its bear low yet, according to data compiled by Canaccord Genuity. The firm noted that, going back to 1957, the S&P 500 "has never made 'the' low before a recession even began."
Recession fears have plagued investors' minds for most of this year. However, the National Bureau of Economic Research, the arbiter on U.S. recessions, has yet to declare one.
"Our game plan remains the same: stay lighter in exposure and slightly defensive in sector allocation, and stand ready to take advantage of any weakness if/when bad news becomes bad news, and the market moves back to/below the October low," Canaccord said.
— Fred Imbert, Michael Bloom
William Blair initiated coverage on Costco Wholesale with an outperform rating on shares.
"We expect the strong value proposition, engaged membership, efficient operations, and long runway for growth support further market share expansion," analyst Phillip Blee wrote in a Tuesday note to clients.
Blee noted that although Costco is trading at a slight premium compared to other high-growth retailers and value-based peers, the stock is still a promising name for investors.
"We believe the premium is warranted given the stability of the membership base and increasing appeal of Costco's value proposition," Blee said.
He continued, "We expect the primary driver of the stock will be sustainable earnings growth in the low-double-digit range with potential for additional upside from further share repurchases, membership fee increases, and international maturation."
— Hakyung Kim
Progressive was the biggest laggard in the S&P 500, dropping about 6.6% during early afternoon trading. The insurance company reported a loss of 26 cents per share in March, down from a profit of 38 cents per share in the year-earlier period.
— Sarah Min
Check out some of the companies making headlines in midday trading.
Apple — The tech giant climbed more than 2% Thursday. A report a day earlier said the company is doing away with plans to more heavily include haptic touch technology from supplier Cirrus. Reports had been circling ahead of the launch of the iPhone 15 later this year that the model would include a physical side button that used Cirrus' solid state technology.
Bed Bath & Beyond — The meme stock favorite dropped 5.9%. Earlier this week, the company sold about 100 million shares to bookrunner B. Riley Securities.
Netflix — Shares of the streaming platform rose 4.5%, following other major tech-related names higher. However, Goldman Sachs reiterated its sell rating on the stock. Meanwhile, Wells Fargo said it was bullish on the streaming giant, saying paid account sharing in the U.S. could help lift its profit and loss statement.
Read the full list here.
Morgan Stanley upgraded World Wrestling Entertainment to overweight from equal weight on Thursday, citing the pending merger between WWE and UFC.
While the new venture, controlled by Endeavor Group, has yet to be named, it will be publicly traded under the ticker symbol TKO.
"We see TKO, which investors can gain exposure to through WWE shares today, as offering an attractive risk/reward given the secular tailwinds behind sports and entertainment media rights revenues, live content, and the defensive characteristics of largely contracted revenue growth," analyst Benjamin Swinburne wrote in a note Thursday.
Shares of WWE, up 50% year to date, hit a 52-week high on Thursday.
— Michelle Fox
Wells Fargo analyst Jared Shaw said in a note to clients that there are several regional banks that appear to have long-term trends of sticky deposits.
"Given the dislocation among banks, the stickiness of deposits are being tested more now than in the last few years. While small retail deposits are generally considered the most sticky and less prone to being impacted by higher rates, the strength of customer relationships is also a key factor, especially for commercially-focused banks," Shaw wrote.
The companies with strong long-term trends include Webster Financial, First Interstate BancSystem and Columbia Banking System, according to Wells Fargo. These banks have "generally large weightings toward retail deposits," Shaw wrote, and Webster in particular has seen its percentage of retail deposits grow since 2019.
On the other hand, Shaw listed PacWest and BankUnited, which rely on commercial deposits, and Bank Ozk, which has heavier exposure to CDs, as banks whose business mix "could indicate less sticky deposits."
— Jesse Pound, Michael Bloom
Netflix shares rose nearly 4% on Thursday after Wells Fargo said it was bullish on the streaming giant ahead of its earnings report.
Analyst Steven Cahall said the focus will be less about earnings and more on commentary about the rollout of its paid sharing program in the U.S. Earlier this year, the company outlined how the plan would work in Canada, New Zealand, Portugal and Spain. Netflix has been testing the program internationally before implementing a fee in the U.S.
"We're bullish on NFLX into 1Q23 results as we think management will be optimistic on the lift to the P&L from paid sharing implementation," Cahall said, using an acronym to refer to the company's profit and loss statement. "This should push estimates higher, and supports NFLX's continued evolution."
Netflix's stock has gained almost 17% this year and ended Wednesday's session at $331.03 per share. But even with the 2023 rally, the stock is still trading just over 45% below where it ended 2021.
— Alex Harring
Shares of WeightWatchers parent WW International surged another 16% on Thursday, bringing its week-to-date gain to 80%.
That jump was sparked by a Goldman Sachs upgrade earlier this week to buy from neutral. The bank also slapped a $13 per share price target, which implies upside of 100% from Wednesday's close.
Goldman said it turned bullish on the stock after WW's acquisition of Sequence, a telehealth company that provides access to GLP-1 medications such as Wegovy and Ozempic.
— Fred Imbert
Retail traders moved out of individual stocks last week, according to JPMorgan.
Strategist Peng Cheng said in a note to clients that retail traders net sold $360 million of individual equities last week, with several large tech stocks seeing significant selling.
However, there were two financial stocks that saw net buying from retail investors last week.
On the ETF side, equity and fixed income ETFs both saw inflows, according to JPMorgan.
— Jesse Pound
Tech stocks outperformed, with the communication services and information technology sectors the leading sectors in the S&P 500. They were last up 1.8% and 1.2%, respectively.
Megacap tech stocks advanced, with shares of Google-parent Alphabet, Apple and Meta each up more than 2%. Netflix shares rose 3.5%.
— Sarah Min
Most eyes are on big banks' earnings Friday and their ability to stir up volatility, but one unassuming stock could move prices a lot more.
UnitedHealth has by far the biggest weighting in the Dow Jones Industrial Average. The 126-year-old blue-chip benchmark is price-weighted, meaning stocks with higher share prices are given the most weight.
The insurer reports earnings Friday before the bell, along with JPMorgan and Wells Fargo. UnitedHealth has contributed almost 319 points to the Dow's April point gain of 410.64, responsible for almost 78% of the average's entire move. The stock is on a tear this month, rallying more than 10%.
— Yun Li
Goldman Sachs still disagrees with the rest of Wall Street on the odds of a recession.
The firm thinks the likelihood of a full-blown slowdown sits at just 35%, well below the 65% consensus surveyed by Bloomberg. Although Goldman increased their outlook from 25% to 35% after the collapse of Silicon Valley Bank, the firm thinks the risk of further turmoil in the banking sector has abated.
"The risk of an outright banking crisis has declined sharply, as no additional institutions have failed since SVB weekend, Fed lending to banks has come off the highs, and deposit flight has subsided," Goldman Sachs chief economist and head of global investment research Jan Hatzius wrote on Wednesday.
Meanwhile, Hatzius added that while the March inflation report showed price pressures are slowing only gradually, the central bank may not need to force the U.S. economy into a recession and pointed toward "encouraging" labor market data, which has kept the unemployment rate at 3.5% for a full 12 months while payrolls continue to grow.
— Brian Evans
The major averages rose to start Thursday's session. The Dow advanced 40 points, or 0.1%. The S&P 500 gained 0.3%, and the Nasdaq Composite climbed 0.7%.
— Fred Imbert
Excluding food and energy, the core wholesale prices reading showed a 0.1% decline month over month in March, or its lowest level since April 2020 when the core PPI showed a fall of 0.3%.
— Gina Francolla, Sarah Min