- Stocks mixed as markets switch focus from inflation to earnings following December inflation data.
- S&P 500 profits are forecast to rise 22.4% from last year to $431.8 billion in the fourth quarter; JPMorgan, Citigroup and Wells Fargo report Friday.
- Boeing stock surges after Bloomberg reports its 737 MAX will return to service in China later this month.
- Delta Air Lines tops Q4 profit forecast, lifts rival carriers in pre-market trading.
- Intel, Nvidia and AMD see gains after Taiwan Semi forecasts “multi-year industry megatrend”.
Updated At 11:00 am Eastern Time
U.S. stocks traded mixed Thursday as investors looked past yesterday’s inflation surge, the highest in four decades, and re-grouped to focus on the start of the fourth quarter earnings season later this week.
The Dow was given an early Thursday boost, as well, from reports that suggested that Boeing (BA) – Get Boeing Company Report, the benchmark’s heavyweight, will bring its 737 MAX jet back into service in China later this moth.
More broadly, however, stocks are still echoing from yesterday’s inflation data, which showed the headline consumer price index rose 7% from last year, marking the fastest rate of inflation since June of 1982 and effectively cementing the case for a March rate hike – the first of at least three policy moves anticipated by the Federal Reserve before the end of the year.
The CME Group’s FedWatch tool, in fact, is pricing in an 80% chance of a March hike, up from around 31.2% in mid-December.
However, with both the headline and core readings largely meeting Street forecasts, and economists pointing to data suggesting an easing of price pressures over the first half of the year, markets were able to plough through the inflation concern and into a strong finish on Wall Street.
Earnings will take center-stage in the days and weeks ahead, however, as will today’s reading on jobless claims (and its knock-on effect on wage growth) and the December reading for factory gate inflation at 8:30 am Eastern time, which provides some evidence as to how and if companies and pass on price increases to the broader market.
S&P 500 earnings are expected to grow 22.4% from last year to a collective $431.8 billion, lead by energy, materials and industrial companies.
The growth rate is notably slower than the 42.6% pace recorded over the three months ending in September, and could mark the final quarter of double-digit gains as companies fight tougher year-on-year comparisons while grappling with the affects of Delta and Omicron-lead infection waves through the world’s largest economy.
The December reading of producer prices, in fact, showed factory gate inflation rising 8.3% from last year and 0.2% from the previous month, with both tallies coming in softer than Street forecasts.
On Wall Street, the Dow Jones Industrial Average gained 125 points by late morning — thanks in part to the 2.8% jump for Boeing — while the S&P 500 booked a 10 point decline.
The Nasdaq, however, fell 133 points as tech stocks resumed their recent slump after benchmark 10-year Treasury note yields bumped to 1.734% in following a solid, but by no means spectacular, auction of $36 billion auction yesterday.
Ford (F) – Get Ford Motor Company Report shares were a notable early mover, as well, rising following a price target boost from Deutsche Bank and reports that production of Tesla’s (TSLA) – Get Tesla Inc Report new Cybertruck could be delayed until next year.
Airline stocks were on the rise, with American Airlines (AAL) – Get American Airlines Group, Inc. Report jumping 2.5% and United Airlines (UAL) – Get United Airlines Holdings, Inc. Report gaining 4%, after Delta Air Lines (DAL) – Get Delta Air Lines, Inc. Report posted stronger-than-expected fourth quarter earnings but noted that the recent surge in Omicron infections would delay its recovery momentum over the coming months.
In the tech sector, Intel (INTC) – Get Intel Corporation Report, Nvidia (NVDA) – Get NVIDIA Corporation Report and Advanced Micro Devices (AMD) – Get Advanced Micro Devices, Inc. Report reversed earlier gains amid the tech sector sell-off even after Taiwan Semiconductor (TSM) – Get Taiwan Semiconductor Manufacturing Co. Ltd. Report the world’s biggest contract chipmaker and a lead supplier for Apple (AAPL) – Get Apple Inc. Report iPhones, posted record quarterly profits and forecast a record boost in capital spending to meet the surge in global semiconductor demand.
Global oil prices eased, too, as the U.S. dollar moved higher, offsetting an Energy Department report from Wednesday that said domestic crude stockpiles fell by 4.6 million barrels last week, nearly triple the consensus forecast, while inventories at the key Cushing, Okla., delivery hub fell by 300,000 barrels.
WTI futures contracts for February delivery, which are tightly-linked to domestic gasoline prices, were marked 60 cents lower on the session at $81.99 per barrel.
Brent contracts for March, the global pricing benchmark, fell 57 cents to trade at $84.09 per barrel.
In overseas trading Europe’s region-wide Stoxx 600 was marked 0.06% higher in mid-afternoon trading in Frankfurt while the MSCI Asia ex-Japan index gained 0.14% by the close of trading.