Dow climbs more than 200 points after December CPI report shows cooling inflation

With one hour of trading left, the three major indexes remain on pace for daily gains.

The Dow is up 0.7%. The Nasdaq Composite and S&P 500 follow, gaining 0.6% and 0.5%, respectively.

If the Nasdaq closes up, it would be the first five-day rally for the technology-heavy index since July.

— Alex Harring

The cost of financing a home purchase slipped further this week.

The average interest rate on a 30-year fixed-rate mortgage inched down to 6.33%, a decline from the prior week’s average rate of 6.48%, according to data from Freddie Mac. Meanwhile, rates on 15-year loans are averaging 5.52%, slipping from last week’s average level of 5.73%.

Though the rates on these loans are ticking lower, they are still high compared to where they 12 months ago – before the Federal Reserve began its rate hiking campaign in earnest. A year ago, the average rate on a 30-year mortgage was 3.45%, and it averaged 2.62% on 15-year loans.

— Darla Mercado

Advancers held a clear advantage over decliners Thursday, as the major U.S. stock benchmarks rallied following the latest inflation data report.

More than 2,100 New York Stock Exchange-listed names traded higher, while just 786 declined, according to FactSet. In other words, advancers led decliners roughly 3-1.

— Fred Imbert

Eight of 11 S&P 500 sectors traded up Thursday.

Energy led the way gaining 2.1%. Real estate and communication services came in at the second and third best performers, each up 0.9%.

On the other hand, consumer staples was on track for the worst daily performance, dipping 0.6%. Health care and utilities were the other two in the red, each shedding 0.2%.

— Alex Harring

These are the stocks making the biggest midday moves:

Check out our full list for further details and more big movers.

— Tanaya Macheel

After a topsy-turvy morning, stocks traded up.

The Dow traded up 290 points, or 0.8%. At its highest, the 30-stock index advanced 0.9%. It traded down as much as 0.5% as investors initially responded to the CPI data.

The S&P 500 was up 0.5%. That’s close to its largest gain of the day at 0.6% and far from the low, at which point the broad index slipped 0.8%.

The Nasdaq Composite gained about 0.5%, fractionally off session highs. At its lowest point, the index lost 1.2%.

— Alex Harring

With the CPI in line with economists’ expectations, investors will now turn to Fed speakers with events on Thursday and Friday for insights into future interest rate moves, according to Huw Roberts, head of analytics at Quant Insight.

Richmond Fed President Tom Barkin is the only speaker who has yet to start their comments Thursday. He’ll be at a financial forecasting event held by the Virginia Bankers Association and Virginia Chamber of Commerce. His remarks are scheduled to start at 12:40 p.m.

Here’s who’s on the docket for Friday:

• Boston Fed President Susan Collins, who will deliver opening remarks at 9 a.m. at the Boston Fed’s “Housing, Place, and Flexible Work: The Future of the New England Economy” conference
• Minneapolis Fed President Neel Kashkari, who will speak on economic challenges facing the manufacturing sector at 10 a.m.
• Philadelphia Fed President Patrick Harker, who’s set to discuss 2023 economic trends in Philadelphia at 10:20 a.m.

On Wednesday, Collins told the New York Times she was leaning toward a 0.25% interest rate hike at the next meeting.

— Alex Harring, Betsy Spring

Bernstein is maintaining its underperform rating on shares of electric vehicle maker Tesla, even as the Inflation Reduction Act is set to offer tax credits for clean vehicles.

“While the interim rules are clearly positive for demand, the prevailing uncertainty around EV subsidies is not optimal,” wrote Neil Beveridge in a Thursday note. “With significant order backlog and demand largely dictated by supply, it is unclear how stimulative interim rules might be. Moreover, rebates are credits to tax returns (>1 year away).”

In addition, the initial classification of Tesla’s Model Y as an automobile even though it has at least five seats was a negative surprise, he said.

“US Model Y today accounts for ~50% of US sales and 23% of global sales. 80%+ of Model Y units are 5-seaters, which will not qualify for EV credits unless Tesla lowers price or consumers spend an incremental $3000 for the 7-seater,” said Beveridge.

Tesla’s SR Model 3 will initially qualify for the discount, but it makes up only 15% of U.S. sales and about 7% globally. The company’s battery manufacturing should qualify for production credits but may have to share with Panasonic.

“We are more torn on TSLA’s stock, given its recent pullback. On one hand, the stock is now trading at close to our 2050 DCF (~ $120/share) and investor sentiment is horrible,” said Beveridge. “That said, we believe that many investors underestimate the magnitude of the demand challenges Tesla is facing, and that 2023/24 numbers could materially reset.”

He is also worried about the potential for broader market pressure, higher rates and slower consumer spending weighing on the stock.

—Carmen Reinicke

Evercore ISI downgraded Hewlett Packard Enterprise to in line from outperform on Wednesday.

Among the reasons the Wall Street firm cited were moderating IT spending and tighter budgets this year, as well as server revenues moderating from its double-digit momentum last year.

“We think 2023 is evenly balanced between a relatively optimistic full year guide (supported by a healthy backlog) and macro uncertainty impacting IT spend as well as AUP growth moderating (servers in particular),” analyst Amit Daryanani wrote in a note.

Shares ended 2022 slightly higher and are up nearly 4% so far this year.

Shares of Cinemark have shed more than 30% in recent weeks but are poised to outperform following the success of “Avatar,” according to JPMorgan. That makes now a great time to snap up shares.

JPMorgan upgraded Cinemark to overweight from neutral and kept its $15 price target, which implies a more than 57% upside from where the stock currently trades. Shares rose 2.5% in premarket trading on the news.

“Following a 31% decline in shares since the beginning of December (vs. SPX -3%), we believe the risk/reward is more favorable to take a positive view on the stock,” wrote analyst David Karnovsky in a Thursday note.

CNBC Pro subscribers can read more here.

—Carmen Reinicke

2023 is just kicking off, but some restaurant stocks have already posted double-digit year to date increases.

Many popular restaurant names in the S&P 1500 have broken past their 50-day moving averages, settling into overbought, and, in some cases, extreme overbought territory, according to data compiled by Bespoke Investment Group.

Some overbought names include Bloomin’ Brands, Cheesecake Factory, Dave & Buster’s and Brinker International, with shares up more than 15% each.

Shake Shack shares have risen the most among the group of stocks, with shares surging more 29% since the start of 2023 after falling about 42% in 2022.

Shelter costs, which includes rent, jumped more than expected in the December consumer price index, and that is an area economists are watching closely.

Shelter rose 0.8%, or 7.5% from a year ago. Some economists had expected a gain of 0.6% in shelter, which accounts for 40% of core CPI. The shelter costs in CPI are known to lag the actual market data on rentals.

“In this single month-over-month report, there is almost no inflation outside of shelter,” said Wilmington Trust chief economist Luke Tilley “Goods prices are collapsing mostly because of motor vehicles and computers and laptops and technology. Used vehicle prices are down 27.5% at annualized rate over the past three months, and they’re likely to keep falling.”

Tilley expects shelter inflation to slow in the next couple of months. As for overall CPI, it fell by 0.01% as expected.

Greg Peters, co-chief investment officer of PGIM Fixed income, said the increase in shelter inflation is something to watch. He said the market had expected a slightly larger decline in headline CPI.

“I still think it’s largely fine. I think numbers will continue to come down. The real question is where does it start to level out?” said Peters. “That’s the piece of it that should be the point of focus. It’s great that CPI mechanically is coming down, and there’s some good news in the report. But that doesn’t mean the Fed gets close enough to its target that they get comfortable.”

Tilley said he expects 2023 will be unlike 2022, where inflation surprised to the upside. “We very well could see in 2023 the reverse of what happened in 2022 with inflation surprising to the downside,” he said.

–Patti Domm

Philadelphia Federal Reserve President Patrick Harker said he thinks the central bank can ease back further on interest rate increases.

“I expect that we will raise rates a few more times this year, though, to my mind, the days of us raising them 75 basis points at a time have surely passed. In my view, hikes of 25 basis points will be appropriate going forward,” the central bank official said in a speech Thursday morning.

“At some point this year, I expect that the policy rate will be restrictive enough that we will hold rates in place…