S&P 500, Nasdaq, Dow ride high Monday as markets await new CPI data

4:13 pm: Microsoft shares gain on Morgan Stanley (NYSE:MS) upgrade

The Dow closed Monday up 377 points, 1.1%, at 34,256, the Nasdaq Composite added 174 points, 1.5%, to 11,892 and the S&P 500 jumped 47 points, 1.1%, to 4,137. The small-cap-centric Russell 2000 improved 20 points, 1.1%, to 1,939.

Investors are hoping Tuesday’s Consumer Price Index Data won’t dampen what was a great start to the week for the benchmarks. 

“The Goldilocks-like mix of industrial production recovery and falling inflation we expect this quarter has helped boost risk appetite and equities,” said Ray Farris of Credit Suisse in a Monday note, as reported by CNBC.

Among those leading the way was Microsoft Corporation (NASDAQ:MSFT), shares of which climbed more than 3% to $271.32 after Morgan Stanley analysts reiterated an “Outperform” rating for the stock.

12:05 pm: Stocks rally following worst weekly performance of 2023

US stocks were higher in noon trading ahead of tomorrow’s consumer price index (CPI) report for January.

At midday, the Dow rose 286 points to 34,155, while the S&P 500 added 38 points at 4,128 and the tech-heavy Nasdaq gained 160 points to 11,878.    

“The market is starting to sense that the very comforting disinflation story is more complex than we’d like it to be,” Allianz Mohamed El-Erian chief economic advisor said.  

Notable movers included shares of Sorrento Therapeutics (NASDAQ:SRNE), Inc, which plunged more than 50% after the drug maker filed for Chapter 11 bankruptcy protection in Texas.

9.35am: Subdued start to the week

US stocks have edged modestly higher at the open amid cautious trading ahead of tomorrow’s key inflation reading.

Just after the bell, the Dow Jones Industrial Average had added 57 points or 0.2% at 33,926 points, the S&P 500 was up 9 points or 0.2% at 4,099 points, and the Nasdaq Composite was up 41 points or 0.4% at 11,758 points.

TickMill Group market analyst Patrick Munnelly noted that investors were hoping tomorrow’s US inflation print supported the trend of retreating inflationary pressures.

“However, Friday’s reports of revisions to past CPI data and elevated consumer inflation expectations have investors nervous regarding a potential upside surprise to tomorrow’s number,” he said. 

“A hotter number tomorrow would likely spark another rapid repricing in interest rate yields and a markdown for global equities.”

Munnelly also noted that geo-political risk remained on the radar.

“With the US shooting down a fourth flying object believed to have potential surveillance capabilities, China has now indicated its intention to carry out a similar termination of an object in its airspace, stating that US surveillance balloons have trespassed into Chinese airspace over 10 times since January 2022,” he said.

6.30am: All eyes on tomorrow’s CPI reading

Wall Street is expected to open mixed following the worst week for US equities so far in 2023 and as investors prepare for an inflation report that will play a pivotal role in the Federal Reserve’s monetary policy decisions this year.  

Futures for the Dow Jones Industrial Average fell 0.1% in Monday’s pre-market trading, while those for the broader S&P 500 index gained 0.1% and contracts for the Nasdaq-100 added 0.4%.

US indices ended mixed on Friday as companies continued to report quarterly earnings and after a revision to last year’s Consumer Price Index (CPI) inflation readings showed the trend in core CPI hasn’t fallen as much as expected. An uptick in used car prices may also result in higher-than-expected CPI inflation for January. 

The Dow closed 0.5% up at 33,869 and the S&P 500 inched 0.2% higher to 4,090, but the Nasdaq slipped 0.6% to 11,718 for its first negative week of the year.

“US equities recorded their worst week since the year started,” commented Ipek Ozkardeskaya, senior analyst at Swissquote Bank. “Hawkish comments from many Federal Reserve (Fed) members hammers sentiment, as stress mounts before the much-important US CPI data due Tuesday.” 

The CPI is expected to show headline inflation for January eased to 6.2% from the 6.5% annual increase registered in December. Headline inflation is expected to show a month-over-month rise of 0.5%.

Core inflation, which excludes volatile food and energy prices, is expected to slow to an annual rate of 5.4%, down from 5.7% in December

“If US inflation hasn’t eased or eased enough, or God forbid, ticked unexpectedly higher on yearly basis, we could rapidly see the post-NFP (non-farm payroll) optimism, and the pricing on the goldilocks scenario to leave its place to fear and chaos,” Ozkardeskaya added. 

Mounting pessimism that the Fed still has some way to go before peak interest rates are reached is taking a toll on Wall Street, added James Hughes, chief market analyst at Scope Markets

“There’s concern that with the improving outlooks for growth, the FOMC can’t afford to ease off too quickly here, although the inflation data that’s due for release on Tuesday plus the retail sales data on Wednesday could well provide some useful insight as to just how strong demand is,” Hughes said.

“Earnings season continues but releases in the coming hours are fairly low key, but this picks up as the week progresses with highlights set to include Airbnb (NASDAQ:ABNB) and Coca-Cola tomorrow, then Kraft Heinz on Wednesday,” he added.