December 3, 2022

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The Nasdaq and the S&P 500 rose after a softer-than-expected inflation report

Stock futures rose on Tuesday ahead of another US inflation report

The S&P 500 rose on Tuesday after another report indicated that inflation may slow.

The broad market index advanced 0.2%, while the technology Nasdaq Composite advanced 0.8%. Meanwhile, the Dow Jones Industrial Average fell 126 points, or 0.4%.

Major indices traded off their highs and the Dow Jones gave up 450-point gains, after crude oil prices unexpectedly rose. Oil prices jumped in afternoon trade, with West Texas Intermediate crude futures up 2.8% at $88.30 a barrel.

The major averages initially rose after the producer price index, a measure of wholesale inflation, showed an increase of 0.2% for the month of October, Against consensus estimates of a 0.4% increase from the Dow. The report comes after last week’s CPI data showed signs of easing inflationary pressure last month, leading to a sharp rally.

“The PPI reading certainly adds more fuel to the fire for those who feel we may finally be on a downward inflationary trend,” said Mike Lowengart, head of model portfolio creation at Morgan Stanley’s global investment desk. “The market embraced the consumer drop last week and the initial reaction today appears to be the same.”

Ross Mayfield, Baird’s investment strategy analyst, said the story of peak inflation was gaining traction, but the Fed’s pivotal hurdle remains high.

“There will be fear in the central bank given its concerns about credibility and the desire to avoid the mistakes of the 1970s (i.e. stopping and starting the policy that prolonged the wave of inflation),” he said. “But the crumbs are already being put in order to slow down the pace of tightening by 2023.”

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Stocks are higher for the third day in the last four and all major averages are in full swing for monthly gains. The Dow Jones Industrial Average rose 3.2% for the month of November. The S&P and Nasdaq rose 3.6% and 4.1%, respectively.

Elsewhere, retail stocks also lifted investor sentiment. walmart stock jump After the company beat Wall Street earnings and revenue estimates and boosted full-year guidance. Home Depot reported strong results as well but kept the guidance in place for the full year. Its shares rose slightly.

“Retail earnings are off to a good start, and could serve to reinforce the broader narrative of consumer resilience and labor market tightness,” Mayfield said. “Earnings are very important from here… The pace and breadth of the earnings deceleration (or re-acceleration) should define the next phase for stocks.”

Taiwan Semiconductor, Louisiana Pacific and Paramount also jumped after regulatory filings showed Warren Buffett’s Berkshire Hathaway Inc. It bought new positions in the first two, and raised its stake in the last two.

Earnings season continues this week with retail reports from Target, Lowe’s, Bath and Body Works, Macy’s, Kohl’s and Foot Locker on deck.