Wall Street stocks continued their rally on Wednesday with investors embracing the idea that abruptly cooling inflation will put interest rate hikes on ice.
The Dow Jones Industrial Average (^DJI) led gains, rising about 0.5%. The benchmark S&P 500 (^GSPC) rose about 0.2%, while the Nasdaq Composite (^IXIC) barely finished above the flat line. The Dow has now risen four straight days and is at its highest levels since Aug. 14.
Meanwhile, cryptocurrencies also extended their recent rally. The world's largest cryptocurrency, bitcoin (BTC-USD), rose more than 6% to above $37,000 per coin.
In commodities, oil prices fell with West Texas Intermediate (CL=F) hitting $76.51 per barrel while Brent Crude (BZ=F) fell to just below $81 a barrel.
The jump in stocks was juiced by the surprise easing in US price pressures, which spurred bets the Federal Reserve will keep rates steady and could start cutting them early next year. Data out Wednesday reiterated this narrative as October wholesale prices saw the largest monthly decline in two and a half years.
Meanwhile, October's retail sales report revealed the first monthly decline in sales since March, though the 0.1% drop still topped Wall Street's estimates.
Shares in Target (TGT) surged more than 16% after its third quarter earnings clobbered estimates. The big box retailer pointed to the resilience of the US consumer in the face of higher borrowing costs.
Stocks closed higher on Wednesday, extending Tuesday’s rally sparked by cooler-than-expected inflation data that has investors increasingly confident the Federal Reserve is likely done raising interest rates.
The Dow Jones Industrial Average (^DJI) led gains, rising about 0.5%. The benchmark S&P 500 (^GSPC) rose about 0.2% while the Nasdaq Composite (^IXIC) barely finished above the flat line. The Dow has now risen four straight days and is at its highest levels since Aug. 14.
We’ve been tracking the correlation between Treasury yields and stocks for weeks. There’s been a pretty clear pattern: If yields rise, stocks fall.
Recent work from Julian Emanuel at Evercore ISI shows this correlation in graph form below.
But interestingly, that’s not playing out in the market today. A day after a massive rally in stocks came and yields collapsed, both bond yields and the major averages are higher on Wednesday.
The 10-year Treasury yield (^TNX) is up 9 basis points to 4.53% while the 30-year Treasury yield (^TYX) is up 7 basis points to 4.69%.
Meanwhile, the Dow Jones Industrial Average (^DJI) leads gains, rising about 0.5%. The benchmark S&P 500 (^GSPC) is up about 0.2%. The Nasdaq Composite (^IXIC) is clinging to gains of about 0.1%.
A big meeting is expected on Wednesday night between Chinese President Xi Jinping and US corporate leaders.
Yahoo Finance’s Akiko Fujita and Ben Werschkul have the details:
Xi Jinping is having dinner Wednesday night with American CEOs at a time of rising US skepticism about China’s tighter business controls and concerns about that country’s slowing economy.
It was a much different story eight years ago, the last time Xi held court with American executives on US soil.
In 2015, American CEOs flocked to see the Chinese president while downplaying concerns about China’s state control of its economy, which was then churning out a 7% GDP growth rate.
That trip included a tour of Microsoft’s (MSFT) campus and a picture of Xi standing next to several rows of executives lining up to meet him, from Amazon’s (AMZN) then-CEO Jeff Bezos to Meta (META) CEO Mark Zuckerberg to Apple (AAPL) CEO Tim Cook.
Zuckerberg, who was eager at the time to reverse Facebook’s ban in China, greeted Xi first and spoke in Mandarin, according to reports from that trip. “Did you feel the room shake?” Cook was even quoted as saying about Xi’s entrance.
But this week — with Facebook still banned in China and Zuckerberg himself recovering from an ACL tear — the Meta head is steering clear of the Asia-Pacific Economic Cooperation (APEC) summit in the San Francisco Bay Area. He is one of several leaders not planning to meet with Xi after years of tenser relations with China.
“At that time, in 2015, we were a lot more optimistic,” said Stanford professor Herbert Lin, adding that there had been a hope then that China would eventually be integrated into a larger global economic system.
Lin said companies were well aware of the risks in previous eras but simply calculated they couldn’t pass up the Chinese market.
Now, “that belief is now a lot more shaky.”
Ongoing geopolitical issues between the US and Chinese governments may only exacerbate the tensions in the coming years as Xi tries to simultaneously staunch the outflow of capital from the country while maintaining rigid political controls. Foreign direct investment in his nation turned negative in new data released this month.
The US-China Business Council’s annual member survey released in September found that “geopolitics is the single largest issue weighing down business sentiment” alongside concerns about China’s domestic policies.
Target (TGT) led the Yahoo Finance trending tickers page on Wednesday as the retailer surged more than 17% following its earnings release earlier in the day. Target’s sales came in roughly in line with Wall Street’s expectations but better-than-expected margins and profits helped push the stock higher.
Intel (INTC) shares were up more than 3% as semiconductors came into focus amid a new chip launch from Microsoft (MSFT). Intel stock was pacing for its highest close since July 2022.
Chinese e-commerce plays Alibaba (BABA) and JD.Com (JD) were both higher after JD.com reported sales higher than analysts had expected. JD.com shares were up more than 8% while Alibaba shares popped 3% on the news. Alibaba is set to release results before the bell on Thursday.
Meanwhile, TJX (TJX) shares slipped more than 2% despite the company raising its full-year sales guidance.
Semiconductor stocks are headed lower Wednesday afternoon after Microsoft (MSFT) launched its first custom AI-powered chip.
Nvidia (NVDA), AMD (AMD), and Taiwan Semiconductor (TSM) all traded lower on the news. Nvidia had been nearing a record win streak prior to the announcement.
Yahoo Finance’s Dan Howley has more on Microsoft’s chip:
At its Ignite conference Wednesday, the company said the chip, called the Maia 100, is the first in its planned Azure Maia AI accelerator series. In addition to the Maia 100, the tech giant also unveiled its first custom Arm-based (ARM) Azure Cobalt central processing unit for general purpose cloud computing.
With the two chips, Microsoft is now on par with rivals Google (GOOG, GOOGL) and Amazon (AMZN), which have also developed their own custom chips to run their competing cloud platforms. The company says the chip will be used for both cloud-based training and inferencing for AI models. Training is the process through which a company sets up an AI model, and inferencing is when it rolls the model out for use in the wild.
“Software is our core strength, but frankly, we are a systems company,” Microsoft’s Rani Borkar, corporate vice president for Azure hardware systems and infrastructure, said in a statement.
All three of the major averages were in the green Wednesday afternoon.
The Dow Jones Industrial Average (^DJI) led gains, rising about 0.4%. The Nasdaq Composite (^IXIC) and benchmark S&P 500 (^GSPC) were both higher by about 0.3%.
Financials (XLF) have gained nearly 0.8%, leading the 11 sectors, as the second day of the rally in bank stocks continues.
Below is a look at how some of the largest bank stocks are performing courtesy of the YFinteractive.
Sirius XM Holdings (SIRI) jumped as much as 12% on Wednesday after Warren Buffett’s Berkshire Hathaway (BRK-A, BRK-B) updated its holdings to reveal it purchased a new stake in the media company.
According to Berkshire’s 13F report, which discloses its holdings, the company purchased nearly 9.7 million shares with a market value of about $43.8 million in its September quarter.
Shares of Sirius have struggled so far this year, down about 10% compared to the S&P 500’s (^GSPC) 17% gain over that same time period.
The update comes as Buffett, often referred to as the “Oracle of Omaha,” sold off his holdings in other companies, including General Motors (GM), Johnson & Johnson (JNJ), Procter and Gamble (PG), Mondelez (MZ), Celanese (CE), UPS (UPS), and Activision Blizzard, which completed its merger with Microsoft in October.
He also trimmed his stake in Amazon (AMZN) by about 5% and his stake in Chevron (CVX) by more than 10%.
In addition to Sirius, the billionaire also made an investment in the publicly traded holding company that owns the Atlanta Braves Major League Baseball club and the Battery Atlanta.
He purchased 223.6 million shares worth nearly $8 million, according to the filing.
Atlanta Braves Holdings (BATRA), which was spun off from Liberty Media in July, reported third quarter profit of $272 million, up 11% year-over-year amid higher in-game attendance.
Shares were up more than 2% in late morning trading.
Stocks are soaring this year with the S&P 500 up more than 17%.
That could weigh on the upside seen in the benchmark average during 2024, according to Goldman Sachs. The firm sees the S&P 500 closing 2024 at 4700, about a 5% rise from current levels and below the average 8% return typically seen in election years.
“Our macro forecasts imply a benign outcome for equities, but the current starting point will limit the potential appreciation for the benchmark US equity index in 2024,” Goldman Sachs chief US equity strategist David Kostin wrote in the firm’s 2024 outlook released on Wednesday.
Goldman’s economics team has been bullish on the economy and still sees just a 15% chance of a recession in 2024. But the equity strategy team feels the 2.1% GDP growth expected for 2024 is already “reflected” in stock prices. Goldman nods to improved margins but doesn’t see substantial margin expansion, which would typically be good for company profits, coming in 2024. And, largely, it sees the market properly pricing stocks as of now.
In fact, Goldman sees the majority of the upside in the S&P 500 concentrated in the back half of the year, in line with its call for Fed rate cuts to come in the fourth quarter of 2024.
“Resilient economic growth in the beginning of the year will force the market to push back its current pricing that Fed cuts will begin in 2Q, and US election uncertainty will suppress risk appetite,” Kostin wrote. “Later in the year, the first Fed cut and resolution of election uncertainty will lift US equity prices.”
Target (TGT) stock is having its best day since 2019 with shares up more than 17% after reporting earnings on Wednesday morning.
Yahoo Finance’s Brian Sozzi reports:
It could have been worse, and it’s not like Wall Street was expecting much anyway.
In a nutshell, that’s Target’s third quarter earnings on Wednesday morning.
After almost two years of brutal results at the hands of execution missteps, rising retail theft and increasingly cautious consumer sentiments, Target clobbered lowered analyst estimates for sales, margins and earnings.
On a call with reporters, Target chairman and CEO Brian Cornell pointed to a “resilient” consumer managing to endure numerous financial headwinds from student loan repayments to nagging inflation.
But the caution on the call — and in Target’s holiday quarter EPS guidance — was palpable.
“In our research, themes like uncertainty, caution and management of budgets are top of mind,” said Cornell. “Consumers are still bringing up pressures like higher interest rates, increased credit card debt, and reduced savings rates have left them with less discretionary income, forcing them to make trade offs.”
Added Cornell, “For example, we see more consumers delaying purchases until the last moment, such as guests who previously bought sweatshirts or denim in August or September, but are now waiting until the weather turns cold.”
Below are the key metrics from Target’s report.
Net sales: -4.3% year over year to $25 billion, vs. estimates for $24.9 billion
Gross profit margin: 27.4% vs. 24.7% a year ago, vs. estimates for 26.6%
Diluted EPS: +36% year over year to $2.10, vs. estimates for $1.47 (guidance: $1.20 to $1.60)
Comparable sales: -4.9% year over year (last year it rose 2.7%):
Digital comparable sales: -6%
Store comparable sales: -4.6%
Inventory fell 14% from the prior year, led by a 19% reduction in the stock of discretionary categories like apparel and home goods.
The stock market rally continued on Wednesday as economic data once again showed investors that inflation is cooling while economic growth slows down.
The Dow Jones Industrial Average (^DJI), Nasdaq Composite (^IXIC), and benchmark S&P 500 (^GSPC) all rose more than 0.3%.
Meanwhile, after tumbling on Tuesday, the 10-year Treasury yield (^TNX) ticked higher Wednesday morning to 4.52%.