Major indexes were mixed in afternoon trading Wednesday after a closely watched government report on consumer prices showed that the annual rate of inflation fell in July to a three-year low.
The S&P 500 and Dow Jones Industrial Average were up 0.4% and 0.7%, respectively, while the Nasdaq Composite slipped 0.1%. The indexes rose sharply on Tuesday, led by a rally for tech stocks, after a better-than-expected report on wholesale prices reinforced expectations that the Federal Reserve will start cutting its benchmark lending rate soon. The S&P 500 and Nasdaq are riding four-session winning streaks.
The inflation report released Wednesday provided further confirmation that price pressures are under control, which should add to the Fed’s confidence that policy easing is appropriate. Fed officials have said the benchmark fed funds rate could be cut as soon as September if inflation continues moving toward the central bank’s 2% annual target.
The latest report showed that the consumer price index increased 0.2% over the month of July, which was in line with economists’ expectations. The annual rate of inflation fell to 2.9% last month, marking the first time since March 2021 that it came in below 3%.
The yield on 10-year Treasurys, which is sensitive to expectations around what the Fed will do, was down slightly to 3.83% Wednesday morning, near its lowest level in a week.
Mega-cap tech stocks, which have been on a volatile ride over the past several weeks, were mixed in afternoon trading. AI investor favorite Nvidia (NVDA), Microsoft (MSFT) and Apple (AAPL) gained, while Amazon (AMZN), Meta Platforms (META) and Alphabet (GOOGL) fell. Alphabet was down 3% following reports that the Department of Justice is considering a breakup of Google amid antitrust concerns.
Kellanova (K) shares were the big gainer on the S&P 500, rising nearly 8%, on news that privately held candy giant Mars has reached a deal to buy the maker of Pop-Tarts and Pringles for $36 billion.
Gold futures were down about 1% at $2,490 after trading near record highs earlier in the day, while Bitcoin dropped to below $59,000 from near $62,000 early in the day.
Should Investors Buy the Chipotle Dip?
16 minutes ago
The 7.5% fall Chipotle (CMG) shares took Tuesday following the news that CEO Brian Niccol will leave for the top job at Starbucks (SBUX) puts the stock in a good position for investors to buy, according to analysts.
Patrick T. Fallon / Bloomberg / Getty Images
Wedbush analysts upgraded the stock and lifted their price target to $58 from $54 for Chipotle Wednesday, citing the chain’s “compelling growth drivers.” Meanwhile, analysts from Raymond James and Baird said Tuesday that the news provides a near-term negative for the stock, but an executive shakeup doesn’t change existing growth factors like sales momentum that have lifted recent earnings reports.
“While we await further details on who will be permanent CEO, this pullback could create an attractive buying opportunity as we believe the company’s strong sales momentum (positive traffic), operations (throughput, automation), and long-term unit growth opportunity remains firmly intact,” Raymond James analyst Brian Vaccaro wrote.
The chain still has an experienced executive team in place after Niccol departs, and is poised to “sustain market share gains in a more challenging macro backdrop for restaurants,” Wedbush analysts wrote.
Chipotle has been able to weather the recent pullback on restaurant spending thanks to a strong value proposition compared to some of its fast food competitors, analysts have said in recent months. Strong sales have helped Chipotle withstand the industry’s recent pivot to emphasizing value.
Chipotle shares were down 0.4% at $51.50 in recent trading.
Annual Inflation Slips to Lowest Level Since 2021
1 hr 51 min ago
Consumer price data released Wednesday provided the latest indication that the Federal Reserve’s policy of high interest rates is working, albeit slowly, to bring inflation down to the central bank’s target of 2% annually.
The latest data followed another encouraging report Tuesday on producer prices, reinforcing the idea that the Fed will start cutting its benchmark fed funds rate at the next policy meeting, in September.
The question that’s on the mind of most investors and economists is: how deep will the cut be? The rate is currently at a range of 5.25% to 5.50%, its highest level since 2001, and concerns have risen in the past several weeks that failure to cut rates aggressively could spur a significant weakening of the economy.
Traders are pricing in about a 42% chance the Fed will cut the benchmark rate by half a point in September, according to the CME Group’s FedWatch tool, which forecasts rate movements based on fed funds futures trading data. At the beginning of last week, after a worse-than-expected jobs report for July spurred fears of a recession, traders were pricing in a near-100% chance that the Fed would make a half-point cut.
Could the DOJ Break Up Google
3 hr 19 min ago
The Department of Justice is reportedly considering breaking up Alphabet’s Google (GOOGL) following a federal court’s decision that the tech giant maintains an illegal monopoly over the search market, though analysts said it’s an unlikely outcome.
Some of the other options the DOJ is considering include making Google share more data with rivals, and other measures to avoid giving Google an unfair edge over competitors, Bloomberg reported, citing anonymous sources close to the matter.
David Paul Morris / Bloomberg / Getty Images
Breaking up Google would be “a stretch,” Wedbush analysts said, adding the case could potentially be tied up in the court system for years before reaching a final outcome. Google has already said it plans to appeal the ruling.
The analysts said that if Google’s appeal is unsuccessful, the most likely outcomes could include fines, forced changes in Google’s distribution agreements with Apple (AAPL) and others to offer Google as the default search option. This could benefit competitors like Microsoft’s (MSFT) Bing or OpenAI’s recently announced SearchGPT, and affect companies involved in the distribution agreements like Apple.
Alphabet shares were down 3% recently and were among the big decliners on the S&P 500.
Starbucks Slumps After Tuesday’s CEO Change-Fueled Surge
4 hr 36 min ago
Starbucks (SBUX) shares were among the main decliners on the S&P 500 early Wednesday after surging 25% yesterday on news it had appointed Chipotle Mexican Grill (CMG) CEO Brian Niccol as its new chief executive.
The company’s share price has confirmed a double bottom, a chart pattern that signals a reversal from a prior down move to a new uptrend.
Despite the bullish technicals, the relative strength index, indicates overbought conditions, with a reading above the 70 threshold, increasing the chances for short-term profit-taking.
Starbucks shares may find support around $90 and $83, but encounter resistance near $98 and $107.50.
The stock was down 3.5% at $92.56 in recent trading.
Read the full technical analysis here.
Kellanova Shares Surge on $36 Billion Deal With Mars
6 hr 7 min ago
Candy giant Mars has agreed to acquire Pop-Tarts and Pringles maker Kellanova (K) for $83.50 per share, or a total enterprise value of $35.9 billion, in what would be the biggest M&A transaction this year.
The purchase by Mars, which makes M&M’s and Skittles, was earlier reported to be imminent by The Wall Street Journal, which along with Reuters flagged the potential transaction earlier this month.
According to data provider Dealogic, it would be the biggest M&A transaction this year and the largest deal in the food space since Heinz acquired Kraft Foods in 2015.
Tiffany Hagler-Geard / Bloomberg via Getty Images
News of the deal sent Kellanova’s shares up more than 7% in premarket trading.
Stock Futures Linked to Major Indexes Little Changed
7 hr 12 min ago
Futures tied to the Dow Jones Industrial Average were down less than 0.1%.
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S&P 500 futures were up less than 0.1%.
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Nasdaq 100 futures were up less than 0.1%.
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