Today’s stock market: Stocks lag behind CPI but bounce back to post gains

VaselineSeptember 11, 2024

0 3 minutes read

Today’s stock market: Stocks lag behind CPI but bounce back to post gains

Stocks sold off sharply in early trading after a mixed August inflation report appeared to wipe out a jumbo-sized rate. But a surge in mega-cap tech names helped the stock rally by the end of the session.

Wednesday began with trepidation as traders and investors were particularly keen to see August consumer price index (CPI).which was released before the opening bell.

Market participants expect the Federal Open Market Committee (FOMC) to cut interest rates from a 23-year high at the Fed’s next meeting. The question is whether the central bank will cut the short-term federal funds rate by 25 basis points (a quarter of a percentage point) or by 50 basis points (0.50%).

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After Wednesday’s economic news, a quarter-point cut is the odds-on favorite. The August CPI rose 0.2% on a monthly basis, according to the report Bureau of Labor Statisticswhich matched economists’ estimates. However, the core CPI, which excludes volatile food and energy costs and is considered a better gauge of future prices, rose 0.3 percent. That beat expectations for a 0.2 percent rise and made markets somewhat jittery.

“The economy is in the driver’s seat, not the Fed,” wrote Scott Helfstein, chief investment strategist at Global X. “It’s a good thing. Stabilizing prices, a solid market and strong corporate performance set the stage for another market advance as the Fed moves to lower rates.”

Helfstein added that a 25 basis point rate cut in September “is the most likely outcome.”

By the end of the session, interest-rate traders assigned the central bank an 87 percent chance it would cut the federal funds rate by a quarter point at its next confab, up from 66 percent a day ago, according to CME Group . FedWatch tool. The odds of a half-point cut fell to 13% from 34% the previous day.

“Equity players pushed to sell following the CPI release as they worry the Fed may be slow to provide relief,” writes José Torres, senior economist at Interactive brokers. “However, stock market bulls should favor a slow, controlled vertical walk on the monetary policy ladder, rather than a quick, turbulent roll south to the lower stories.”

The bottom line? Anxious recalibrations of rate cut bets sparked a rally in tech stocks and consumer discretionary stocks, while consumer staples, energy and financials sold off. At the closing bell, blue chip Dow Jones Industrial Average rose 0.3% to 40,861, while overall S&P 500 rose 1.1% to 5,554. Heavy technology Nasdaq Composite rose 2.2% to 17,395.

Actions in motion

Bank of America ( BAC ) shares fell 0.7% after Warren Buffett Berkshire Hathaway (BRK.B) revealed another big sale of his position in the banking giant.

Regulatory files showed that Berkshire Hathaway sold about 5.8 million Bank of America shares, with the sale price ranging from $39.29 to $39.67 per share. The sale started on September 6th and lasted until September 10th.

In total, Berkshire Hathaway sold about 174.7 million shares of BAC during that time frame for about $7.2 billion, for a total of 858.2 million shares. That knocks Bank of America into the third-largest position in Berkshire Hathaway’s stock portfolio, with financial stocks now perched behind. Apple (AAPL) and American Express (AXP). Before the stock sales, Bank of America was Buffett’s second largest holding.

Dave & Buster’s Entertainment (PLAY) rose 4.7% after the restaurant and gaming company reported mixed earnings results for its second quarter, although it saw positive growth on both the top and bottom lines.

Dave & Buster’s shares are down more than 45% for the year to date, but Wall Street is bullish on consumer discretionary stocks.

Conformable S&P Global Market Intelligencethe average analyst price target for PLAY is $52.71, giving the stock implied upside of nearly 80% from current levels. Furthermore, the consensus recommendation is Buy.

With sales down, GameStop is selling more stock

GameStop (GME) stock fell 12% after The video game retailer reported mixed results for his second term.. and unveiled a market offering of up to 20 million shares from its common stock.

When a company announces a stock offering, it often results in a drop in its stock price due to dilution concerns. A stock offering increases the number of shares available on the market and reduces the ownership percentage of existing shareholders. Dilution also has a negative impact on a company’s earnings per share because there are more shares outstanding.

A stock offering can also cause concern because it shows that the company needs additional capital and is willing to dilute existing shareholders to raise it.

GameStop also announced an acceleration of its store closing plans.

VaselineSeptember 11, 2024

0 3 minutes read

Vaseline

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