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Stocks rise, Nasdaq gains for third straight day despite red-hot inflation report

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U.S. stocks moved slightly higher Wednesday after a key inflation report showed a historic gain but largely matched expectations.

The S&P 500 added roughly 0.28% to 4,726.35, and the Nasdaq Composite rose 0.23% to 15,188.39 for its third straight positive day. The Dow Jones Industrial Average, which shuffled between modest gains and losses through the session, finished with a gain of 38.3 points, or 0.11%, at 36,290.32.

The moves come after the December reading for the consumer price index, a gauge of prices across a broad spectrum of goods, showed a gain of 7% year over year. That is the biggest jump since 1982, but was in line with expectations from economists surveyed by Dow Jones. The monthly increase was slightly hotter than expected.

However, interest rates already moved sharply higher in the first week of 2022, sparking a sell-off in tech stocks. That suggests the hot inflation report, and future tightening by the Federal Reserve, may be at least partially priced in to the market.

“We’ve been saying for a while that we didn’t expect the peak in one-year inflation numbers until early 2022 and further supply chain disruptions from the omicron variant strengthen that case. But the more important question right now is the exact timing of when inflation might start to slow, since ultimately that will likely determine how aggressive the Federal Reserve … will be,” LPL Financial asset allocation strategist Barry Gilbert said in a note.

Stocks tied to economic growth were some of the stronger performers, with chemical company Mosaic rising 3.8% and Freeport-McMoRan jumping 5%. Software giant Microsoft and Google-parent Alphabet each added about 1%, while Tesla gained nearly 4%.

On the downside, Biogen shares tumbled 6.7% following news that Medicare will only cover the cost for the company’s Alzheimer’s drug Aduhelm for patients with early-stage symptoms who are enrolled in clinical trials. Health care was a weak spot for the market overall, with Merck and Amgen both weighing on the Dow.

Wednesday’s moves continued a bounce-back week for equities, with tech stocks in particular clawing back sharp losses from the first week of the year that were accompanied by a jump in interest rates. Last week’s decline brought parts of the market close to key technical levels closely watched by Wall Street pros.

“The Nasdaq went down and bounced off of the moving 200-day moving average on Monday, and that’s kind of been where this rally sort of began,” said Randy Frederick, managing director of trading and derivatives at the Schwab Center for Financial Research.

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Bond yields, which spiked to start 2022, appear to have stabilized, with the 10-year Treasury yield slipping to 1.73% on Wednesday after topping the 1.8% level earlier in the week.

Though CPI is not the Federal Reserve’s primary inflation gauge, policymakers are watching a variety of measures as they embark on the first stages to tightening the most accommodative policy measures in the central bank’s history. Fed Chairman Jerome Powell told Senate lawmakers Tuesday that he expects interest rate increases this year along with the end of the monthly bond-buying program in March and a reduction in asset holdings.

Meanwhile, big banks will kick off the fourth-quarter earnings season on Friday. JPMorgan Chase, Citigroup and Wells Fargo are slated to release quarterly results before the bell.

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BUSINESS

Stock futures fall ahead of a big week of retail earnings

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Stock futures fell early on Monday after a week of steep losses that ended on a high note, and ahead of a big earnings week for retailers.

Futures tied to the Dow Jones Industrial Average slipped by 31 points, or 0.1%, while S&P 500 futures fell 0.47%. Nasdaq 100 futures were down 0.71%.

On Friday, the Dow rose 466.36 points, or 1.47%, while the S&P 500 climbed 2.39%. The Nasdaq Composite jumped 3.82% and posted its strongest one-day gain since November 2020. Still, all three averages posted losing weeks.

The gains came as investors went into relief rally mode to cap off a bad week for stocks in which the S&P 500 nearly descended into bear market territory.

It remains to be seen, however, how long the rally will last or how much further stocks have to fall before this year’s downtrend bottoms.

“Given the history of bear markets, coupled with the fact that the Fed has just begun its rate hike cycle and would like to see financial conditions continue to tighten so that demand pulls back further, this rally will most likely weaken,” said Quincy Krosby, chief equity strategist for LPL Financial.

Still, some investors and analysts say, whether or not the bottom is in, there are good buying opportunities at the market’s current lows.

“I’m not calling the bottom here, but there’s some opportunity here to dollar cost average,” said Sylvia Jablonski, CEO and chief investment officer at Defiance ETFs, told CNBC. “If you’re sitting on a bunch of cash, you’re locking in losses because of inflation. Investing in equities or asset classes that you believe in… it is the lesser evil. The selling fatigue will wane, the market will reset. It’s unlikely the Dow and the S&P are going to be in correction territory six months to a year from now.”

Retail earnings season kicks off this week with several big-box retailers set to report results for the first quarter, including Walmart, Target and Home Depot. Elsewhere, Deere is also on deck, along with a handful of technology companies.

Investors will also have their eye on retail sales data this week, which could give them insight into how retailers are managing inflation, which remains near 40-year highs.

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Nigeria issues new guidelines on cryptocurrencies 

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The Nigerian government has released new guidelines aimed at protecting investors in digital assets as trades in cryptocurrencies get boost in Africa’s most populous nation.

The rules issued by the Securities and Exchange Commission (SEC) offers more clarity on trading in cryptocurrencies, it was learnt.

The rules cover “issuance, offering platforms and custody of digital assets” for virtual technologies, according to a statement on its website.

This is coming amidst controversy over the acceptability of cryptocurrencies in Nigerian financial ecosystem.

Despite order by the Central Bank of Nigeria (CBN) to commercial banks to stop transactions in cryptocurrencies, Nigeria is said to account for the largest volume of cryptocurrency transactions outside the U.S., as data from Paxful, a Bitcoin marketplace reveals.

Experts however believe this would go a long way in boosting trading in cryptocurrencies which is gaining global traction.

The new rules cover the issuance of digital assets as securities, the registration of platforms and digital asset custodians, exchanges and virtual assets service providers.

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BUSINESS

Apple is no longer the world’s most valuable company

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Oil giant Saudi Aramco on Wednesday surpassed Apple as the world’s most valuable firm.

Aramco’s market valuation was just under $2.43 trillion on Wednesday, according to FactSet, which converted its market cap to dollars. Apple, which fell more than 5% during trading in the U.S. on Wednesday, is now worth $2.37 trillion.

Energy stocks and prices have been rising as investors sell off equities in several industries, including technology, on fears of a deteriorating economic environment. Apple has fallen nearly 20% since its $182.94 peak on Jan. 4.

The move is mostly symbolic, but it shows how markets are shifting as the global economy grapples with rising interest rates, inflation, and supply chain problems.

Aramco stock is up over 27% so far in 2022. In March, the oil giant reported that its full-year profit last year more than doubled due to soaring oil prices.

Apple passed Saudi Aramco to become the world’s most valuable publicly traded company in 2020.

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