Stocks close lower, Dow sheds 400 points after another hot inflation report raises rate hike fears: Live updates

Stocks sold off sharply in the final minutes of trading Thursday, sending the Dow to a fresh daily low. All three indexes ended the day lower.

The Dow Jones Industrial Average shed 431 points, or 1.26%. The S&P 500 dipped 1.38% and the Nasdaq-Composite fell 1.78%. Microsoft and Disney contributed the most to the Dow’s decline, down more than 2% each.

—Carmen Reinicke

The economic backdrop will weigh on certain market sectors more than others, according to a Tuesday note by Goldman Sachs.

A slew of economic data Thursday seems to be bringing back recession fears among investors, including the decline in the Philly Fed index, poor momentum in the U.S. housing market, higher than expected PPI and stronger than anticipated retail sales.

These “suggest that the fight against high inflation is still ongoing and there still remains more work for the Fed that has to be done,” the note said.

“And on the back of this, the 10-Year US Treasury yields are climbing — now at 3.85% — 30 bps higher from a month ago — putting further pressure on some of the longer duration and growth sectors like Consumer Discretionary and Information Technology.”

—Carmen Reinicke

Stocks were still down heading into the final hour of trading Thursday as investors mulled hotter-than-expected inflation reports and an unexpected dip in initial jobless claims.

The Dow Jones Industrial Average shed 138 points, or 0.40%. The S&P 500 dipped 0.43% and the Nasdaq-Composite fell 0.52%. Microsoft, Disney and Amgen contributed the most to the Dow’s decline, down more than 1% each.

Energy and consumer sectors led the Dow lower, offset slightly by gains in technology and health services. Transportation was the biggest laggard on the S&P 500 for the day as railroad stocks fell.

—Carmen Reinicke

JPMorgan’s JEPI ETF and its 11% yield have been a hot topic for investors, but it is not the only income ETF seeing strong inflows.

CNBC Pro took a look at some of the newer funds and strategy groups that are gaining momentum, including international dividend funds.

Read more about what’s next for income ETFs here.

— Jesse Pound

St. Louis Federal Reserve President James Bullard said Thursday that he pushed for a higher interest rate increase at the last meeting and could see a more aggressive move ahead.

The policymaker said he advocated for a half percentage point rate increase at the Jan. 31-Feb. 1 Fed meeting and said he wouldn’t rule out pushing for one at the March session.

“I was an advocate for a 50-basis-point hike and I argued that we should get to the level of rates the committee viewed as sufficiently restrictive as soon as we could,” Bullard said during a speech in Tennessee, according to Reuters.

Cleveland Fed President Loretta Mester also said Thursday she wanted a higher increase than the quarter-point approved by the Federal Open Market Committee. Neither Mester nor Bullard vote this year on the FOMC.

Bullard added that he sees the larger economic trend moving toward disinflation, despite recent high readings for inflation.

“In part due to front-loaded Fed policy during 2022, market-based measures of inflation expectations are now relatively low,” Bullard said.

“Continued policy rate increases can help lock in a disinflationary trend during 2023, even with ongoing growth and strong labor markets, by keeping inflation expectations low,” he added.

The comments come despite separate data releases this week showing that both consumer and producer prices increased more than expected in January. Bullard acknowledged that inflation is still too high, but said higher interest rates will keep it in check despite continued economic growth and a robust labor market.

“These factors may combine to make 2023 a disinflationary year,” Bullard said.

—Jeff Cox

Analog Devices still has room to grow after a solid fourth quarter and a hot start to the year for its stock, according to Bank of America.

Analyst Vivek Arya hiked his price target on the semiconductor company to $230 per share from $215, saying in a note to clients that Analog Devices is a “best-in-class share gainer.”

“ADI should be able to sustain profitability growth in an industry downturn. More importantly, with capital intensity peaking likely at 8%-9% and coming down over time, we see a path to 40%+ FCF margins, well above analog peer [Texas Instruments],” Arya wrote.

Shares of Analog Devices were last down 0.8% for the day but are still up more than 18% in 2023.

— Jesse Pound

— Hakyung Kim

BTIG chief market technician Jonathan Krinsky thinks the stock market could be at a turning point, noting that “nearly every meaningful catalyst (NFP, FOMC, CPI, retail sales, etc.) has resulted in dip buyers stepping in.”

“When it feels like the market is unable to trade lower on a sustained basis, that is usually near a turning point. The question now becomes: is today that turn?” he said, noting that the S&P 500 is back above 4,100 and could close above its 20-day moving average for the first time in more than a month.

— Fred Imbert, Michael Bloom

The newest models tend to rule the electric vehicle world, according to Bernstein analyst Toni Sacconaghi. And he said that could be bad news for Tesla.

Sacconaghi noted that 60% of the best-selling EV models in 2019 failed to grow volume in their fourth year. On top of that, 80% of the top sellers were launched within the last three years.

The market share for EVs typically peaks within the first two years.

Those statistics don’t bode well for Tesla, as he does not expect the company to have a new high-volume offering before 2025. And it could be especially tough for the industry leader as more competitors enter the market in the coming years.

“The latest is the greatest in EVs,” he said in a note to clients Thursday. “And that’s the near-term challenge for Tesla.”

Sacconaghi has an underperform rating on the stock and expects shares to fall 30% over the next year.

— Alex Harring

Here are three stocks making headlines during midday trading.

• Twilio — Shares jumped 19% after Twilio beat revenue expectations in its most recent quarter. The communications firm posted revenue of $1.02 billion, slightly better than the Refinitiv consensus estimate of $1 billion.
• Roku — Roku shares gained more than 17% after the streaming device company reported a smaller-than-expected loss in its latest quarter, as well as greater revenue than analysts polled by Refinitiv were expecting.
• Tripadvisor — Shares of the travel platform dropped 7.5%. In its earnings report earlier this week, the company beat expectations for earnings and revenue but to expect EBITDA to come in flat year over year in 2023 despite a nearly 20% increase seen in 2022. Bernstein downgraded the stock to market perform from outperform following its earnings call, noting the strategic plan unveiled was “more defensive than offensive.”

Check out more movers here.

— Sarah Min

Two stocks on the Dow remained in the green amid the indexes nearly 200-point slide Thursday.

Shares of Apple inched higher, up 0.4%. Cisco Systems gained 5.75%, helping to offset some of the broader index losses during the day. The stock surged after beating earnings estimates and boosting its full-year guidance.

—Carmen Reinicke

The WisdomTree Cloud Computing Fund is down more than 2% on Thursday and on pace for its first negative day in four.

Major moves in a few key stocks included in the fund are weighing on the performance. Shares of Toast, Shopify, Amplitude and RingCentral are all down more than 10%. In addition, Toast and RingCentral are on track for their worst days since Feb. 2022 and March 2020, respectively.

On the flipside, shares of Twilio and Fastly are both up more than 10% today, curbing losses in the ETF. On the week, the fund is still up 4.5% and on pace for its fifth positive week in six.

—Carmen Reinicke

The January producer price index report, a measure of inflation, come in higher than expected on Thursday, sending equities lower.

It may signal though that the worst is behind the U.S. in terms of bringing inflation down, according to John Lynch, chief investment officer for Comerica Wealth Management.

“Today’s wholesale inflation data, when coupled with the CPI report, suggests that the easy battles against price pressures have been won,” Lynch wrote Thursday. “We believe the move from ~9.0% to ~6.0% will prove to be much less challenging than the journey from ~6.0% to ~3.0%.”

Still, because of the reports, the Federal Reserve will remain steadfast and keep policy tighter for longer than equity markets have been pricing in since October, he said.

“We look for higher rates to pressure P/E multiples and we continue to position portfolios for value over growth, with active strategies likely to outperform passive indexes in the months and quarters ahead,” he said.

—Carmen Reinicke

Deutsche Bank reiterated its hold rating on NVIDIA shares, saying that secular themes overshadow the AI computing company’s muted fundamentals. 

Analyst Ross Seymore said that NVIDIA’s growth outlook remains unclear — particularly its fast-growing AI GPU accelerator business — given the recent cautious guides from INTC and AMD.

“Overall, clearly NVDA shares have benefited from renewed enthusiasm surrounding AI compute,” Seymore wrote in a Thursday note. “Nevertheless, we believe the shares remain fully valued at current levels.” 

The firm set its price target for the company at $170, implying a 25.3% downside from Wednesday’s closing price.

— Hakyung Kim

Piper Sandler upgraded Baker Hughes to overweight from neutral, citing the improving visibility within the company’s industrial and energy technology business.

“There are some drags on IET margins in ’23, but w/ volume/mix, cost synergies, along w/ supply chain and product design improvements, there’s the potential for IET EBITDA margins to expand into the 20% realm by ’25/’26,” analyst Luke Lemoine wrote in a note Wednesday.

While liquified natural gas orders will naturally step down over the coming years, IET orders can remain in at least the $10 billion to $11 billion range over the next few years, he said.

Lemoine also hiked his price target on the stock to $43 per share from $34, implying nearly 34% upside from Wednesday’s close. Baker Hughes shares are up about 10% year to date.

— Michelle Fox

Deutsche Bank doesn’t think Activision Blizzard needs a potential purchase from Microsoft to generate returns.

Analyst Benjamin Soff upgraded the gaming stock to buy from hold and raised his price target by $7 to $90. His target share price implies the share price could rise 15.1% from where it ended Wednesday’s session.

“We remain cautious on the regulatory approval process for Microsoft’s acquisition of Activision due to the increased scrutiny over big tech by regulators across the US, UK and Europe,” Soff said in a note to clients Thursday. “However, we believe that Activision is well positioned on a standalone basis, and that its well capitalized balance sheet can support attractive shareholder returns.”

He added that the company’s strong brands has helped it buck consumer spending and mobile gaming slides.

CNBC Pro subscribers can read the full story.

— Alex Harring

Canaccord Genuity is bullish on Generac as the company’s business challenges begin resolving.

Analyst George Gianarikas upgraded the stock to buy from hold and raised his price target by $71 to $175. His new price target implies an upside of 29.4% from Wednesday’s close.

The upgrade comes after the company’s most recent earnings report, which Gianarikas said marked the end to a tough year but also showed signs of improvements within the business. CNBC Pro subscribers can read the full story here.

— Alex Harring

Stubbornly high January consumer prices and much stronger-than-expected January retail sales have done zilch for the price of gold this week.

April gold futures are off 1.4% week-to-date, their third straight weekly decline.

As a result, the VanEck Gold Miners ETF (GDX) is down almost 3% WTD, on pace for its fifth straight weekly loss (the longest since last July).

Individual miner moves are more pronounced still: Hecla (HL) is lower by more than 10% WTD, on pace for its fourth straight weekly loss and the worst week since last August (coincidentally when the S&P 500 ended its last little bear market rally).

Equinox, AngloGold, B2Gold and Kinross are down by more than 6% each this week.

— Scott Schnipper, Gina Francolla

Initial claims for unemployment benefits dipped 1,000 to 194,000 for the week ended Feb. 11, the Labor Department said on Thursday. Economists polled by Dow Jones had forecast jobless claims at 200,000.

The number from the prior week was revised to 195,000 from 196,000, according to the Labor Department.

The labor market has remained resilient even amid the Federal Reserve’s series of interest rate hikes.

— Yun Li

The producer price index, an inflation indicator that tracks wholesale prices, rose 0.7% in January, topping a Dow Jones consensus forecast for a 0.4% increase.

This is the latest inflation report this week to come in above expectations. On Tuesday, the Labor Department said the consumer price index — a widely followed inflation gauge — rose 0.5% last month. That surpassed a consensus estimate of 0.4%.

— Jeff Cox

Even as the Federal Reserve is poised to continue hiking interest rates and keep them high to stave off stubborn inflation, markets have held up.

That’s likely due to solid earnings, according to Nicholas Colas, co-founder of DataTrek Research.

“The only explanation that makes sense to us for this conundrum of ‘bad’ news and stable markets is that US corporate earnings power remains resilient,” Colas wrote. “Yes, Q4 financial reporting season has been disappointing in terms of revenue/earnings beat percentages and amounts. But … The S&P 500 is still expected to earn $53.34/share.”

Before the pandemic in 2018-2019, S&P 500 earnings were $161.56 per share and $163.13 per share respectively, which averages to $40.59 per share per quarter. The S&P 400 traded around 3,000 for most of the second half of 2019, closing at 3,231 on earnings hope for 2020, Colas said.

“Q4 2022’s ‘bad’ earnings of $55.34/share are almost the same as what analysts expect over Q1 and Q2 2023 (average of $53.39/share),” he added. “This current earnings run rate, while admittedly stagnant, is still 31.4 percent higher than the 2018–2019 quarterly average of $40.59/share.”

Given this, it makes sense that the S&P 500 is some 38% higher than much of 2019, even amid higher rates that should cut into valuations. And, if today’s $53 earnings per share is the low point of S&P 500 earnings, it makes sense that equities are pushing past higher interest rates, per the report.

“Takeaway: The old trader’s saying that ‘you trade the market you have, not the one you think makes sense’ is especially true today,” said Colas. “The market we have wants to focus on corporate earnings and is confident still-rising interest rates will not cause a recession that damages fundamental earnings power.”

—Carmen Reinicke

Hasbro reported a stronger-than-expected quarterly profit, sending the stock up more than 1% in the premarket.

The toy maker earned $1.31 per share, beating a Refinitiv consensus estimate of $1.29 per share. The company’s revenue of $1.686 billion matched estimates.

“We delivered our first billion-dollar brand in Magic: The Gathering and another record year at Wizards of the Coast and Digital Gaming, we grew key investment areas including licensing and direct to consumer, and we improved adjusted operating profit margin,” CEO Chris Cocks said in a statement.

— Fred Imbert

Tripadvisor shares fell more than 2% after Bernstein downgraded the travel company to market perform from outperform, citing concern over its turnaround plan.

“This is going to be a steady multi-year roll-out and the end result seems more defensive than offensive with the aim of ‘long term steady profitable growth’, which is largely inline with the consensus view and below our previous expectations,” Bernstein said.

— Alex Harring

Roku shares jumped about 11% in extended trading Wednesday after the streaming device company posted a narrower-than-expected loss and beat analysts’ sales expectations in its latest quarter.

The firm reported a loss of $1.70 per share, better than the forecasted $1.73 per share from analysts polled by Refinitiv. Roku posted $867 million in revenue, greater than the consensus estimate of $802 million.

— Sarah Min

There could be some strength in this stock rally, according to Victoria Greene, chief investment officer at G Squared Private Wealth.

“It’s ignoring the bond market, it’s ignoring the Fed, it’s ignoring fundamentals and it’s ignoring some of the economic data. All it’s focused on is rising on technicals,” Greene said Wednesday on CNBC’s “Closing Bell: Overtime.”

“And this does happen — early innings of a bull market, you always see the market run without any fundamental reason why,” she continued.

The investor made her remarks following a positive day for the major averages. Traders shook off a stronger-than-expected January retail sales report that could point to further tightening from the Federal Reserve. According to Greene, that suggests the rally “does have some legs.”

“The Fed is saying that they’re going to be hawkish, but the technicals are saying this rally is in, and I really don’t think we’re going to retest those October lows anymore, because we’ve hit some really important technical supports,” Greene said.

— Sarah Min

The Russell 2000, the small cap benchmark, jumped 1.09% during regular trading on Wednesday, notching its third positive day in four – and outperforming the three major averages.

The index is also on track for a 2.2% jump week to date.

Personal finance site NerdWallet propelled the index, jumping an eye-popping 26% during the trading session. The company posted its latest quarterly results on Tuesday, beating analysts’ estimates on the top and bottom lines, according to FactSet. Guidance for first-quarter revenue also came in higher than Wall Street expected.

Crypto names also buoyed the Russell 2000, with Silvergate Capital adding 28% and Marathon Digital gaining more than 18%. The crypto stocks surged alongside an 8% jump in bitcoin. The flagship cryptocurrency hit a high of $24,288, the highest level since Aug. 17.

–Darla Mercado, Gina Francolla

Investors are keeping an eye out for another inflation report: January’s producer price index. The data will be issued Thursday at 8:30 a.m. ET.

The producer price index measures the prices paid by wholesalers. Economists polled by Dow Jones anticipate that the metric gained 0.4% in January. Back in December, the index slipped by 0.5% for the month. Excluding volatile food and energy prices, economists predict that the PPI gained 0.3% in January, compared to December’s gain of 0.1%.

The PPI report should give investors further context around inflation, as well as a sense of how the Federal Reserve might chart the way forward for its rate-hiking campaign. Indeed, the consumer price index for January came in hotter than expected, while retail sales for that month smashed expectations.

–Darla Mercado, Jeff Cox