The Nasdaq Composite closed higher Wednesday as investors fled to tech stocks after a tamer-than-expected inflation report.
The tech-heavy index added 1.04%, closing at 12,306.44. The S&P 500 added 0.45% to close at 4,137.64. Finally, the Dow Jones Industrial Average inched downward by 0.09%, or 30.48 points, to end the day at 33,531.33.
April consumer prices climbed 4.9% from a year ago, which was less than the 5% gain anticipated by economists polled by Dow Jones. Month-over-month inflation matched expectations with a 0.4% increase in April.
Treasury yields tumbled following the report, further supporting a stock market which has been worried about higher rates snuffing out economic growth. The yield on the 2-year Treasury fell about 11 basis points to 3.91%, while the rate on the 10-year declined 8 basis points to 3.44%.
"Optimism for the disinflation process to remain in place is high as this report showed shelter prices remain elevated, which just means the lag we are seeing with rent prices should start [to] meaningfully show over the few months," said Ed Moya, senior market analyst at Oanda. "Inflation should continue to decline over the next few months, but falling back to 2% will be a lot harder given the strength in the labor market."
Overall market gains were contained as cyclical stocks, which are most closely linked to the economy, traded lower. Shares like Nike and Caterpillar ended the session lower as some investors reasoned that inflation was slowing because a recession is imminent or has already arrived.
Airbnb and Twilio fell 10.9% and 12.6%, respectively, a day after reporting weak forecasts. Electric vehicle maker Rivian closed 1.8% higher, a day after the company posted a narrower-than-expected loss. Earnings season continues Wednesday with results from Disney and Robinhood.
But despite the latest sign of inflation increasing at a lower monthly clip in April, Wall Street is seemingly cautious on sparking a full-blown rally.
"With each passing month without slowing in core inflation, the chances of getting down to the FOMC's forecast for the year are receding," said Stephen Stanley, chief U.S. economist at Santander US Capital Markets. "So, to me, this is not a dovish result."
Traders also monitored the latest updates on the U.S. debt ceiling as worries mount that an agreement may not be reached before June 1, which is the earliest date the Treasury Department says the U.S. could default. President Joe Biden held a key meeting with congressional leaders after the bell Tuesday, but comments from leadership on both sides of the aisle suggested that little progress was made. Biden and Congressional leaders will meet again on Friday.
Lea la cobertura del mercado de hoy en español aquí.
Correction: Stephen Stanley is chief U.S. economist at Santander US Capital Markets. An earlier version of this story misstated his affiliation.
The Nasdaq Composite notched a 1.04% gain on Wednesday following a cooler-than-expected consumer price index report. The index closed at 12,306.44.
The S&P 500 added 0.45%, ending at 4,137.64. The 30-stock Dow Jones Industrial Average slipped 0.09%, or 30.48 points, to close at 33,531.33.
Among the announcements at its I/O developer conference in Mountain View, California, Google showed off the Pixel 7a Android phone. The company also removed the waiting list for its conversational chatbot Bard and revealed new AI offerings for its Search business and online office suite.
— Samantha Subin
Shares of First Citizens BancShares rose 8% on Wednesday after the North Carolina-based bank released its first quarterly report since it purchased assets from the failed Silicon Valley Bank in March.
First Citizens acquired roughly $107 billion worth of of SVB's assets at a discount out of receivership. The bank booked a preliminary gain of $9.82 billion after taxes on the acquisitions.
That gave the bank a massive jump in profits, at least for one quarter. First Citizens said its first quarter net income was $9.52 billion, up from $257 million in the fourth quarter.
"Building on the considerable strengths Silicon Valley Bank brings to the business, including exceptional talent and expertise, significant scale, geographic diversity, and meaningful solutions for customers, we are confident we will continue to deliver long-term value for our shareholders," First Citizens CEO Frank Holding said in a press release.
— Jesse Pound
Bank stocks are underperforming on Wednesday as the market has given up its early gains.
— Jesse Pound
It's getting busier for Wall Street after the consumer price index reading that came before the bell.
More than 43 million shares of the SPDR S&P 500 ETF Trust (SPY), which tracks the broad S&P 500 index, have been traded as of around 1:30 ET Wednesday, with two-and-a-half hours of trading left. By comparison, the trust saw just 49.2 million shares traded in the entire trading day on Tuesday.
To be sure, it's still been a relatively quiet week on Wall Street. More shares were exchanged on March 16 —in the thick of the fallout from the Silicon Valley Bank closure — alone than have been in total so far this trading week.
— Alex Harring
The WisdomTree Cloud Computing Fund (WCLD) is on track to post its best daily performance since March.
The fund has added 2.5% so far in Wednesday's session. That's the best day since March 31, when it finished 4.1% higher.
— Alex Harring, Gina Francolla
Icahn Enterprises, Carl Icahn's conglomerate, saw its stock drop as much as 20% Wednesday after a regulatory filing revealed the U.S. Attorney's office for the Southern District of New York contacted the company seeking information about corporate governance, capitalization, securities offerings, dividends, valuation, marketing materials, due diligence and other materials.
Regulators sought information a day after notable short seller Hindenburg Research took a short position against Icahn's company. Hindenburg alleged "inflated" asset valuations last Tuesday, among other reasons, for what it says is an unusually high net asset value premium in shares of the publicly traded holding company.
The stock is down more than 38% year to date.
— Yun Li
The percentage of bullish financial newsletter editors (44.6%, down from 45.8% last week) topped the numbers of bears (24.3%, up from 23.6%) for a 25th consecutive week, according to the Investors Intelligence survey.
"That confirms an overall rising market," II said.
The number of editors anticipating a short-term pullback in stocks, or "correction," rose again, to 31.1% from 30.6%. "This group usually increases as markets rally. When that occurs it may signal a trading top. At present they are doing the opposite – increasing as markets decline. That could portend a surprise rally," II said.
— Scott Schnipper
Another new ETF with real estate flavor is hitting the market on Wednesday, but with a twist that could attract investors who want to ride government spending trends.
The IQ CBRE Real Assets ETF (IQRA) will begin trading on Wednesday, with holdings in both real estate and infrastructure.
The holdings of the actively managed fund will be split roughly 50-50 between those two groups, said Jeremy Anagnos, the chief investment officer for listed infrastructure at CBRE Investment Management. The fund may hold preferred shares in additional to common equity, Anagnos said.
The IQRA will have an expense ratio of 0.65%.
TD Cowen is moving to the sidelines on shares of Nikola.
Analyst Jeffrey Osborne downgraded the electric heavy truck maker to market perform, citing concerns of a continued "liquidity overhang" despite conviction in the company's strategy.
"Longer term we see the company evolving into a more broad-based energy technology company as hydrogen fueling infrastructure is slowly built out," he wrote. "However, we see the continued need to raise capital for the next couple of years remaining an overhang for the shares."
— Samantha Subin
Consumer spending weakened in the first week of May, possibly because of a shift in the timing of Mother's Day, according to Citi.
Total spending across 16 subsectors dropped 11.5% in the week ending May 6, Citi's Paul Lejuez wrote in a Wednesday note. That's compared to an 8.6% decline the prior week in April. Excluding food, spending actually fell 11.4% last week, compared to a 9.6% drop the previous week.
"At best this would indicate that spending trends (in the sub-sectors we track) have been generally consistent (and remain weak)," Lejuez wrote. "However, on the surface, spending has deteriorated, so we look to next week's report to see if we get an acceleration this week leading up to Mother's Day."
— Sarah Min
— Samantha Subin
Barclays analyst Tom O'Malley downgraded Lumentum after its latest earnings results, saying the company has had "one too many resets" after posting a weaker-than-expected outlook.
"Another reset, but this time across all segments," O'Malley wrote on Wednesday. "We move to Equal Weight as we struggle to find a compelling reason to support the stock with no imminent positive catalyst and further risk to Telecom."
— Sarah Min
Rivian Automotive's stronger-than-expected results could mean "accelerating growth" from here, though concerns remain for the electric vehicle maker, according to some Wall Street analysts.
Shares popped 7% Wednesday after the company posted a narrower-than-expected first-quarter loss and said it's on pace to produce 50,000 vehicles in 2023.
For some analysts, the results were encouraging. Rivian, which made its initial public debut in 2021, has cratered in the years since as it deals with rising interest rates that dimmed its growth prospects, as well as supply chain issues. On its first day on the Nasdaq, Rivian was valued at $86 billion. Today, it has a market cap of $13 billion. It fell 82% in 2022, and it's down by 24% this year.
Canaccord Genuity's George Gianarikas said "that may now be changing," maintaining his buy rating on the stock. He also kept a $40 price target, implying the stock can jump 188% from Tuesday's close.
CNBC Pro subscribers can read the full report here.
— Sarah Min
The Dow traded more than 100 points higher, while the Nasdaq Composite jumped 1%. The S&P 500 gained 0.8%.
— Fred Imbert
Bitcoin and gold prices moved higher Wednesday morning after the latest CPI report showed inflation rose in April but the increase was slightly smaller than expected.
Meanwhile, the U.S. dollar index fell to as low as 101.305 and is in jeopardy of going negative for the week – which would make it its third negative week in a row.
Bitcoin's correlation to gold has been sitting at historic highs. The cryptocurrency has an inverse relationship with the dollar index.
— Tanaya Macheel, Gina Francolla
Roblox shares declined 8.1% after the company reported higher-than-expected losses per share.
Roblox posted losses of 44 cents per share in the first quarter. Meanwhile, analysts had estimated losses of 40 cents per share, according to Refinitiv data. The company's average bookings per daily active user remained flat year-over-year despite reporting a 23% increase in hours engaged over the same period.
The company's management said that it is now looking to "moderate our rate of investment in headcount and infrastructure thereby generating operating leverage," adding that it also expects to see more bookings processed through credit cards and prepaid cards, "which will also have a positive impact on margins."
— Hakyung Kim
The U.S. consumer price index rose 4.9% in April from the year-earlier period, the Labor Department said Wednesday. Economists polled by Dow Jones expected a 5% year-over-year increase.
— Jeff Cox
Rockwell Automation slid 2.8% in premarket trading on Wednesday following a report that the Biden administration is investing if the infrastructure technology company exposed assets.
The Wall Street Journal reported that the administration is investigating whether the industrial technology company has exposed U.S. military, infrastructure and government assets in a possible cyberattack through one of its facilities in China. The probe is focused on a facility in in Dalian, China, according to the report. But the report noted that there were not any current suggestions of vulnerabilities.
A company spokesperson said there has been no report or indication that practices or protocols have been breached or any products have been intentionally compromised.
The representative also said Rockwell Automation has not been notified by a U.S. agency of any investigation into the company's work in China, adding it would "fully cooperate" if there is one.
— Alex Harring
These are some of the stocks making the biggest premarket moves:
— Alex Harring