Dow drops 100 points after hotter-than-expected January CPI report: Live updates

Even though January’s CPI report showed that inflation is slowing on the year, it likely wasn’t enough to change the Federal Reserve’s course of interest rate hikes, according to Anthony Saglimbene, chief market strategist at Ameriprise.

He said that investors should expect the central bank to continue to raise rates from here, even if it’s not what traders have been hoping for.

“The market still doesn’t buy the idea Mr. Powell and company won’t need to cut rates this year,” he said. “And that’s because investors fear growth may slow considerably by the end of the year and pressure the Fed to ease policy in an effort to help support the economy.”

Still, the “verdict is still out on that outlook,” he said, adding that scenario could add risk for asset prices.

“In a nutshell, the mixed dynamics around rates, monetary policy, and the growth outlook had traders taking a breath last week and moving some of their chips to the side ahead of this week’s January CPI report,” he said.

—Carmen Reinicke

The Federal Reserve is still likely to cut interest rates later this year despite stubbornly high inflation, according to Jeremy Siegel, a finance professor at the University of Pennsylvania’s Wharton School.

Although the consumer price index was up 6.4% on January — far above the Fed’s target rate of 2% — Siegel said that the Fed’s current rate hikes have already impacted prices, noting that it has been only 11 months since the Fed began its course of rate increases.

“Milton Friedman said 12-18 months before you can get any effect on prices,” Siegel said on CNBC’s “Halftime Report” on Tuesday afternoon. “We’ve had a lot of effects on prices in the first 12 months … This is a long process, to be sure. And it’s a process that the Fed has to let go through the market.”

To be sure, the finance professor added that he is less certain about a rate hike following January’s “unbelievable” jobs report.

“I do see a stronger economy than I saw four weeks ago,” said Siegel. “That would mean, more likely that the Fed would not reduce the rate as fast in the second half in the year.

However, he believes that the odds of a rate hike remain more probable than not.

“I still think it is likely. More than 50%, that they will cut. Maybe I thought it was 80%, maybe now I think it’s 50%.

He added, “I don’t think anyone including the Fed knows, because they plan their increases or decreases policy 10–14 days in advance. All the further-out ones are totally data-dependent — on what they see.”

— Hakyung Kim

Philadelphia Federal Reserve President Patrick Harker said Thursday that he thinks the central bank’s efforts to bring down inflation can ease sometime soon.

“In my view, we are not done yet, but we are likely close,” Harker said in prepared remarks for a speech at LaSalle University. “At some point this year, I expect that the policy rate will be restrictive enough that we will hold rates in place and let monetary policy do its work.”

A voting member this year on the rate-setting Federal Open Market Committee, Harker said he thinks inflation will come down considerably this year — to about 3.5%, and then 2.5% in 2024, as gauged by the personal consumption expenditures price index.

—Jeff Cox

These stocks are among those making the biggest moves in midday trading:

• Palantir — The software company’s stock price soared 13%. The action comes a day after Palantir reported it made a profit in the fourth quarter, its first quarter of positive GAAP income, at $31 million. Palantir’s revenue also came in stronger than expected, reporting a year-over-year increase of 18% for the quarter, while its U.S. commercial revenue grew 12%.
• First Solar — Shares of the solar company fell 2.7% after being downgraded by Evercore ISI to in line from outperform. The Wall Street firm said recent tailwinds may already be fully priced into the stock. The firm’s price target implies 6% downside from Monday’s close.  
• Avis Budget — Shares jumped 6.5% after Avis topped expectations in its latest quarterly report. The car rental agency reported adjusted earnings of $10.46 per share, far greater than the forecasted $6.79, according to consensus estimates from Refinitiv. It posted revenues of $2.77 billion, better than the expected $2.69 billion.
• Nvidia — The semiconductor stock added 3.4% after Bank of America raised its price target on the company to $255 per share from $215 and said it is well-positioned to lead the “AI arms-race.”

Click here to see more stocks making midday moves.

— Pia Singh

Bank of America believes Nvidia could be a winner in the generative artificial intelligence space.

Perhaps best known for its use in ChatGPT, generative AI is focused on creating new outputs based on data already understood by the system. The potential of this technology prompted analyst Vivek Arya to reiterate his buy rating and up the price target by $40. The new $255 price target implies the stock could rally 17% from where it closed Monday.

“NVDA’s full-stack of accelerated silicon/systems/software/developers positions it uniquely to lead the nascent generative AI arms-race among global cloud and enterprise customers,” he said in a note to clients Tuesday.

CNBC Pro subscribers can read the full story.

— Alex Harring

Stocks wavered Tuesday following January’s slightly hotter-than-expected CPI report but ultimately slid to trade in the red, reversing gains from earlier in the day.

At midday, the Dow was down more than 320 points, or 0.94%. The S&P 500 and the Nasdaq Composite slipped 0.71% and 0.56%, respectively.

—Carmen Reinicke

Consumer spending has ticked higher to begin the year as Americans remain employed, Bank of America CEO Brian Moynihan told CNBC’s Sara Eisen.

Spending rose 5% to 6% so far this year, a bit higher than in the fourth quarter, Moynihan said Tuesday in an interview. While that is a deceleration from the first quarter of 2022, when spending growth topped 12%, it is evidence of a resilient consumer, the CEO said.

“It’s not going down anymore, it’s not slowing down,” Moynihan said. “Consumers are in pretty good shape. They have money in accounts, they have a capacity to borrow, they’re employed.”

Strong consumer spending is one reason Bank of America economists moved their prediction for the start of a recession further out by one quarter, to the back half of this year or early next year, Moynihan said.

“I think people [are] sort of coalescing around this idea that maybe this thing is not a soft landing, i.e. no recession, but maybe a more mild recession.”

—Hugh Son

Dallas Federal Reserve President Lorie Logan said Tuesday that the central bank needs to be prepared to keep raising interest rates if the economic data warrants.

Logan expressed concern that China’s economic reopening and persistently higher services inflation could necessitate even tighter monetary policy. She also noted services inflation is not coming from Covid-related shortages but rather from an “overheated economy.”

“When inflation repeatedly comes in higher than the forecasts, as it did last year, or when the jobs report comes in with hundreds of thousands more jobs than anyone expected, as happened a couple weeks ago, it is hard to have confidence in any outlook,” she said in remarks prepared for a speech in Prairie View.

“We must remain prepared to continue rate increases for a longer period than previously anticipated, if such a path is necessary to respond to changes in the economic outlook or to offset any undesired easing in conditions,” Logan added.

The remarks did not directly address Tuesday’s consumer price index report for January, which showed inflation running slightly higher than expectations.

Logan is a voting member this year on the rate-setting Federal Open Market Committee.

—Jeff Cox

The yield on the 6-month Treasury notes jumped 8 basis points to 5.02% on Tuesday after the inflation report. The short-duration yield is now on track to close above 5% for the first time since July 2007.

Stocks rose Tuesday, lifting a number of companies to new 52-week highs. Here’s the stocks that reached new highs on the S&P 500:

—Carmen Reinicke, Chris Hayes

First Solar dropped more than 2.5% in Tuesday premarket trading on the back of a downgrade from Evercore ISI.

The firm moved the stock to in-line from outperform. Analyst Sean Morgan did raise the price target by by $7 to $157, but that new target still implies the stock could drop 6.1% from where it closed Monday.

He said in a note to clients that the stock’s biggest tailwinds may already be “largely reflected in the current FSLR share price.” CNBC Pro subscribers can click here to read the full story.

Stocks fell at Monday’s open after the January consumer price index, a measure of inflation, was slightly higher than expected.

The Dow Jones Industrial Average fell 87 points, or 0.26%. The S&P 500 slipped 0.52%, and the Nasdaq Composite ticked 0.80% lower. Treasury yields were also largely flat following the inflation report.

—Carmen Reinicke

Palo Alto Networks gained more than 1% in the premarket after Goldman Sachs initiated coverage of the stock at a buy.

The firm also set a price target of $205, implying upside of 23.3% from Monday’s closing price of $166.31.

“We believe Palo Alto Networks is furthest along in the industry with executing a multi-platform strategy with technology leadership across several product vectors,” analyst Gabriela Borges said in a note to clients Tuesday.

CNBC Pro subscribers can read more about the call and the other cyber stocks she likes here.

The consumer price index, a widely followed inflation metric, rose slightly more than expected last month, thanks in part to rising gas and fuel prices.

The index rose 0.5% month over month, which translated into an annual gain of 6.4%. Economists polled by Dow Jones had been looking for respective increases of 0.4% and 6.2%.

Excluding volatile food and energy, core CPI increased 0.4% monthly and 5.6% from a year ago, against respective estimates of 0.3% and 5.5%.

The December number was also revised to a 0.1% gain. Originally, the BLS reported a 0.1% decline.

Before the number was released, JPMorgan’s trading desk predicted that an annual increase of 6.4% to 6.5% would trigger an S&P 500 loss of about 1.5% on Tuesday.

So far, stock futures were taking the number in stride. The number was better than worst fears of a 6.5% or greater annual increase, an acceleration in inflation that would have triggered an S&P 500 decline of 2.5%, JPMorgan predicted.

— Jeff Cox

Here are the stocks making notable moves before the opening bell:

Palantir — Shares of the software company surged 18% in extended trading after Palantir reported it made a profit in the fourth quarter, the first GAAP profit in the company’s history. Palantir’s revenue also came in stronger than expected.

Restaurant Brands — Shares of the Burger King parent dipped 3% after it reported 72 cents in earnings per share for the fourth quarter, two cents below Wall Street estimates, according to FactSet. Restaurant Brands also announced that chief operating officer Joshua Kobza will become CEO on March 1.

Check out more movers here.

— Jesse Pound

Markets may be getting ahead of themselves in watching for signs of a Fed pause or pivot, according to Peter Boockvar of Bleakley Advisory Group.

“Ahead of CPI, the jobs number a few weeks ago and constant Fed rhetoric since definitely succeeded as of now to convince the Treasury market that the Fed is not done hiking and they will NOT be cutting rates in the back half of this year,” he said in a Tuesday note.

“That of course is how that market feels today and can always change but for now, only the December 2023/January 2024 fed funds futures contract does a rate below 5% show up and barely,” he added. “The peak rate is seen in August at 5.19%.”

In his view, the Fed is probably nearing the end of hikes and investors should shift attention to living with high rates instead of looking at how much higher they will go.

—Carmen Reinicke

Higher drink prices helped Coca-Cola beat revenue expectations for the fourth quarter. Before the bell, the beverage giant reported revenue of $10.13 billion, topping the $10.02 billion expected by Wall Street analysts, according to Refinitiv. Earnings per share came in at 45 cents adjusted, in line with estimates.

Coca-Cola rose nearly 1% in premarket trading.

— Michelle Fox, Amelia Lucas

Bank of America’s Stephen Suttmeier said the broader market action rhymes with that seen during previous secular bull markets.

“We view 1950-1966, 1980-2000 and 2013-present as secular bull markets for the SPX. Each of these bull markets had important 7-year lows: 1957, 1987 and 2020,” the bank’s technical strategist said in a note Monday. “Lows in 1960 and 1990 occurred exactly 36 months after the 1957 and 1987 lows, respectively. … The October 2022 low was 31 months after the March 2020 low.”

The S&P 500 is up more than 15% since reaching a closing low on Oct. 12.

“The secular bull market roadmap suggests that 2022 aligns with 1960 and 1990, which preceded another six and 10 years, respectively, for these prior secular bull markets,” Suttmeier said.

— Fred Imbert, Michael Bloom

Goldman Sachs upgraded Occidental Petroleum to buy from neutral, sending the oil stock up more than 1% in the premarket.

“Our upgrade is not a call on the quarter or 2023 capital spending guidance, where we are modestly above consensus,” Goldman said in a note to clients Tuesday. “Instead, it reflects a view that the current valuation is difficult to reconcile with the quality of the underlying assets and cash flow power through a cycle.”

— Alex Harring