Dow rises 100 points as investors digest inflation data showing cooling

stocks Cinemark They have fallen more than 30% in recent weeks, according to JPMorgan, but are poised to outperform after the success of “Avatar.” Now is a great time to share.

JPMorgan raised Cinemark to overweight from neutral and maintained a $15 price target, representing a more than 57% upside from where the stock is currently trading. Shares rose 2.5% in premarket trading on the news.

“After the stock’s 31% decline since early December (vs. SPX -3%), we believe the risk/reward is more favorable to view the stock positively,” analyst David Karnowski wrote in a note Thursday.

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– Carmen Reinicke

2023 is just getting started, but some restaurant stocks have posted double-digit gains so far.

Many popular restaurant names in the S&P 1500 have crossed their 50-day moving averages, falling into overbought and, in some cases, overbought territory, according to data compiled by Bespoke Investment Group.

Some of the most overbought names included Bloomin’ Brands, Cheesecake Factory, Dave & Buster’s and Brinker International, each with shares up more than 15%.

Shares of Shake Shack are the biggest gainers of the group, with shares up more than 29% since the start of 2023 after falling nearly 42% in 2022.

Shelter costs, including rent, rose more than expected in the December consumer price index, an area economists are watching closely.

Shelter increased by 0.8% or 7.5% from a year ago. Some economists had expected a 0.6% increase in the shelter, which is 40% of the core CPI. CPI housing costs are known to lag behind actual market data on rents.

“There’s almost no inflation outside of the shelter in this report this month,” said Luke Tilley, chief economist at Wilmington Trust. 27.5% year-on-year in the last three months and they are likely to continue to fall.”

Tilley expects shelter inflation to slow in the next few months. As for the overall CPI, it fell by 0.01% as expected.

Greg Peters, chief investment officer of PGIM Fixed Income, said the rise in shelter inflation is something to watch. He said the market expected a slightly larger decline in headline CPI.

“I still think it’s very good. I think the numbers will continue to go down. The real question is where does it start to level off?” Peters said. “That should be the focus. It’s great that the CPI is coming down mechanically, and there’s some good news in the report. But that doesn’t mean the Fed is getting close enough to its target for comfort. .”

Tilley said he expects 2023 to be different from 2022, where he was surprised by the rise in inflation. “We could very well see a reversal of what happened in 2022 in 2023, with inflation surprising to the downside,” he said.

— Patti Domm

Philadelphia Federal Reserve President Patrick Harker said he thought the central bank could become more relaxed about rate hikes.

“I expect we will raise rates a few more times this year, but in my view, the days of raising them to 75 basis points in one go are certainly over. In my view, a 25 basis point increase would be appropriate. Go ahead,” a central bank official said Friday. he said in his speech in the morning.

“At some point this year, I expect the policy rate to be restrictive enough that we will hold rates to allow monetary policy to do its job,” he said.

The basis point is 0.01 percentage point.

The comments came ahead of a Labor Department report showing the consumer price index fell 0.1% in December and added to some positive inflation readings of late.

Harker is a voting member of the Federal Open Market Committee, which sets rates this year.

– Jeff Cox

All three major indices rose in the first minutes of trading on Thursday as investors continued to digest the CPI data.

At 9:35 in the morning Dow It decreased by 0.1%. The S&P 500 also decreased by 0.1% Nasdaq Composite It lost 0.2%.

All three indices opened at 9:30 AM

– Alex Harring

While headline and core CPI readings for December showed monthly moves of -0.1% and 0.3% respectively, there was wide variation among some internal components.

Let’s take a look at the monthly changes in the main categories:

• Food: +0.3%
• Energy: -4.5%
• New cars: -0.1%
• Second-hand cars and trucks: -2.5%
• Clothing: +0.5%
• Shelter: +0.8%
• Medical services: +0.1%

Shelter inflation is a major area of ​​debate as investors and analysts who think the Fed is too aggressive argue that shelter data is out of date.

– Jesse Pound

Major index futures declined as investors responded to December CPI data that matched economists’ expectations. Here’s how each of the three futures indexes performed in the 30 minutes leading up to and after the data release at 8:30 a.m. ET:

A slight drop in consumer prices in December will not sway the Federal Reserve as it meets to raise rates on January 31 and February 1.

CPI fell 0.01%, as economists expected, and rose 6.5% from a year earlier. Core CPI rose 0.03% as expected.

“Even as markets backed off the Goldilocks scenario in the jobs report, the Fed announced it was doubling down on its pledge to derail inflation because it sees it as a marathon, not a sprint,” said Diane Swonk, chief economist at KPMG. .

Stock futures were higher after the report, while Treasury yields fell. Yield moves inversely to price.

Peter Boockvar, chief investment officer at Bleakley Financial, said: “It was exactly right. They sent the S&P 500 up 50 points yesterday and everybody was hoping for a weak number. It’s as expected. It doesn’t change anything.” “They’ve almost certainly raised interest rates. That’s what people need to focus on longer term.”

Swonk and other economists expect the Fed to raise rates by half a percentage point on February 1. However, the futures market is pricing in a quarter-point increase.

— Patti Domm

In December, the consumer price index fell by 0.1%, in line with Dow Jones estimates. This was the biggest monthly decline since April 2020. Core CPI, which strips out volatile food and energy prices, also met expectations at 0.3%. profit.

For the year, the index rose 6.5%, still well above the Fed’s 2% inflation target.

– Fred Imbert

Great move Bed Bath & Beyond According to Ihor Dusaniwski of S3 Partners, there may not be a short squeeze yet on Wednesday, but it could happen soon.

On Wednesday, the stock rose more than 68% to $3.49 a share. It continued to climb higher in extended trading, rising above $4 per share.

“We may see some near-term short sellers exit their positions and start pocketing their profits in 2022,” Dusaniwsky said.

Bed Bath & Beyond has a short interest of about 52%, according to S3. While entrants may be sitting on losses last month, the stock traded as high as $30 per share in August, meaning others can safely exit a process that could have resulted in bankruptcy.

“The crucial difference between BBBY and other crowded shorts is that there is a certain risk of bankruptcy, which may cause the shorts to hold their position, take some temporary losses, and wait out this rally, waiting for a share price of $0.00 in bankruptcy,” Dusaniwski said. .

– Jesse Pound

Jefferies upgraded Netflix buy without waiting, citing the potential increase in revenue as the streaming giant cracks password exchange. The stock gained 1.3% in premarket trading.

“We are upgrading Netflix to Buy based on what we believe is a well-executed launch strategy. [advertising-based video on demand] password sharing changes will boost revenue and push EBTIDA well above Street estimates, resulting in margin expansion and valuation expansion back toward historical averages,” Jefferies said.

American Airlines Shares rose 3% in premarket trading after the airline raised its profit guidance for the fourth quarter. The company now expects earnings for the quarter to be between $1.12 and $1.17 per share, up from 50 cents to 70 cents previously.

– Fred Imbert

Cleveland-Cliffs Shares rose more than 2% in premarket trading after Morgan Stanley upgraded the steelmaker from equal weight to overweight, citing growth from higher fixed-year steel price contracts.

“We believe the recently announced increase in fixed annual steel price contracts (see here) should allow CLF to weather lower forecast spot steel prices and generate strong FCF returns in the coming years as the company has no major planned capital expenditures,” analyst Carlos said. De Alba wrote in the note.

– Carmen Reinicke

European markets were higher on Thursday as global investors braced for the December reading of US consumer prices.

All over Europe Stoxx 600 The index rose 0.5% in early trade, with telecoms gaining 0.9% as all sectors and major bourses entered positive territory.

stocks Disney Media giant Nike rose 1.5% in after-hours trading after announcing the appointment of Mark Parker as its next chairman.

Disney also said it was opposed to an attempt by activist investor Nelson Peltz to join the board. About two months ago, Peltz’s Trian Fund Management bought a roughly $800 million stake in the company and began looking for a board seat.

– Yun Lee

Andrew Patterson, chief economist at Vanguard, said it may be too early to cheer for the first signs of easing inflation, as service inflation could raise price pressures.

“The main upside risk to core inflation stems from ex-shelter services components,” Patterson said in a note. “Sustained wage growth could keep services inflation warm in 2023. While the recent slowdown in wages is welcome, it does not yet suggest a broader labor market slowdown.”

While goods deflation is a welcome sign, we’ll still need two things to call peak inflation — a slowing labor market and steadily cooling shelter inflation, Patterson said.

– Yun Lee