Stocks advanced Tuesday following Federal Reserve Chair Jerome Powell's comments indicating inflation has started easing.
The Dow Jones Industrial Average added 265.67 points, or 0.78%, to finish at 34,156.69. The S&P 500 added 1.29%, to close at 4,164.00 points. The Nasdaq Composite posted the biggest daily gain, climbing 1.9% to end at 12,113.79.
The major indexes ricocheted during and shortly after his remarks in a midday conversation at The Economic Club of Washington, D.C. At one point, the Dow gained more than 275 points, while the S&P 500 and Nasdaq Composite each traded up more than 1%. Those gains came as investors cheered Powell's comments on disinflation, hoping they indicated the central bank could continue slowing on its interest rate hike campaign.
"The disinflationary process, the process of getting inflation down, has begun and it's begun in the goods sector," Powell said. "But it has a long way to go. These are the very early stages of disinflation."
Powell said later in the discussion that the Fed could be forced to hike more aggressively, which could have briefly spooked investors. The three major indexes turned briefly negative after initially popping on Powell's remarks before settling in the green.
"The reality is we're going to react to the data," Powell said. "So if we continue to get, for example, strong labor market reports or higher inflation reports, it may well be the case that we have to do more and raise rates more than is priced in."
His Tuesday comments follow Powell's press conference last week after the Fed raised interest rates, where he said that the central bank believes it's making solid progress in bringing down inflation. Those comments were viewed as dovish by investors and set off a rally in stocks.
"The market's doing the best that it can to try to discount two very different scenarios, both of which are really driven by what the Fed is going to do," said Dave Grecsek, managing director of investment strategy and research at Aspiriant. "The scenario is we get a recession or do we not, and it's highly dependent, in the market's eyes, on how quickly the Fed nears the end of its rate hike campaign."
The three major indexes finished Tuesday in the green after bouncing around for much of the day as investors digested comments from Fed Chair Jerome Powell.
The technology-heavy Nasdaq Composite led the way, adding 1.9%. The S&P 500 and Dow followed, gaining 1.3% and 0.8%, respectively.
— Alex Harring
Meta Platforms is making strides in the ongoing battle to return time spent back to its Instagram platform, and take share from TikTok, according to UBS.
"Commentary on the 4Q EPS call around short-form video engagement supports prior indications that META is taking share in this space (we flagged here) and we estimate that every 10% reduction in the 18 minute spent gap in FY22 between Instagram and TikTok represents a 1.4ppts tailwind to consolidated revenue growth," said analyst Lloyd Walmsley in a Monday note to clients.
While it could take time to mend this gap, and the company's Reels product may note attain profitability until the end of 2023 or early 2024, data shows that Meta is making significant progress, Walmsley said.
That's evident in the fact that global time spent in January for Instagram rose 5% year over year, while declining 6.4% year over year for TikTok.
— Samantha Subin
There's been an increase in mentions of artificial intelligence (AI) during earnings calls from a few megacap technology companies, according to Ark Invest.
Notably, Alphabet, Meta and Microsoft all experienced a jump in the mentioning of the advanced technology on their fourth-quarter earnings calls over the past few weeks, the firm said.
The successful launch of chatbot operated by Microsoft-backed OpenAI ignited a craze in the space. Google on Tuesday announced a new conversational AI technology it will open up to public testing called Bard.
— Yun Li
After ricocheting as investors digested Federal Reserve Chair Jerome Powell, the three major indexes remained in the green — but off highs — heading into the final hour of trading.
The Dow traded up 204 points, or 0.6%. The 30-stock index was able to recover from a 256 points loss earlier in the session, but cooled off its session high of 278 points up.
The S&P 500 advanced 1.1%. During the session, it traded as low as 0.6% down and as high as 1.3% up.
And the technology-heavy Nasdaq Composite, which market observers predicted could be especially sensitive to Powell's statement given growth stocks' relationship to interest rates, was up 1.5%. It dipped as low as 0.4% in the red and as high as 1.8% in the green earlier in the session.
— Alex Harring
Stocks bounced around as investors followed Federal Reserve Chair Jerome Powell's latest comments on inflation, making 'something of a round trip,' according to Seth Carpenter, global chief economist at Morgan Stanley.
"I think if people came into it looking for a hawkish reset after the jobs report, they didn't get it initially," Carpenter said Tuesday on CNBC's "The Exchange."
"He came through, he continued to be measured the way he was at the press conference saying, 'Look, we take it very seriously. We have a … significant way to go in order to bring inflation down.' And so, I think the market ended up getting back to perhaps roughly where it started," he added.
The S&P 500 ticked higher through afternoon trading Tuesday. The broader market index initially popped following Powell's comments on declining inflation, and then cooled, before turning up again.
— Sarah Min
The major indexes turned red as investors continued digesting Fed Chair Jerome Powell's remarks.
The Dow traded down around 230 points, or 0.7%, after gaining more than 275 points mid-conversation.
The S&P 500 and Nasdaq Composite were in the red 0.4% and 0.3%, respectively, despite trading in the green during his conversation. At session highs, the S&P 500 and Nasdaq Composite were up 1.3% and 1.8%, respectively.
— Alex Harring
Federal Reserve Chairman Jerome Powell cautioned Wednesday that surprisingly strong economic data like last week's jobs report could push the central bank into raising interest rates more than markets expect.
"The reality is we're going to react to the data," he said during an appearance at the Economic Club of Washington, D.C. "So if we continue to get, for example, strong labor market reports or higher inflation reports, it may well be the case that we have do more and raise rates more than is priced in."
Markets currently expect the Fed to raise rates a quarter percentage point each at the March and May meetings, then pause and possibly cut before the end of the year.
—Jeff Cox
Federal Reserve Chair Jerome Powell has used the term "disinflation" numerous times to reporters this week, saying that we're in the "early stages of disinflation" and that the "disinflationary process" of tamping down inflation with ongoing rate hikes is underway.
In today's remarks, Powell clarified the term and said: "I would call it declining inflation too."
— Pia Singh
Federal Reserve Chairman Jerome Powell said the central bank cannot shield the U.S. economy if Congress fails to act to raise the $31.4 trillion debt ceiling.
The nation hit its statutory debt limit last month, but Republican lawmakers have held off on raising the limit in order to push for spending cuts. So far, Treasury Secretary Janet Yellen has been able to take steps to avoid default, and buy extra time.
In comments at an event in Washington, D.C. Tuesday, Powell said there is only one way to resolve the issue.
"This is something that Congress has to do," he said.
The U.S. has never defaulted on its debt, and officials say doing so would have a severe economic and financial impact.
—Christina Cheddar Berk
Federal Reserve Chair Jerome Powell said he's seeing disinflation in the goods sector, and expects to see it in the housing services sector. However, he's not seeing it in the services sector just yet.
"There is 56% of the economy, which is the rest of the services sector. It's the biggest part, obviously, and we're not seeing disinflation there yet. And that's going to take some time," Powell said during an event at the Economic Club in Washington, D.C..
"We need to be patient, and we think we're going to need to keep rates at a restrictive level for a period of time before that comes down," Powell said.
— Sarah Min
The process of getting inflation down has begun, but has a long way to go, Federal Reserve Chair Jerome Powell said.
"These are the very early stages of disinflation," he said.
It has begun in the goods sector, but the services sector - except for housing services - is not showing any signs of disinflation yet, Powell said. The process will take some time, he added.
"It's not going to be, we don't think, smooth. It is probably going to be bumpy and so we think that we're need to do further rate increases, as we said, and we think we'll need to hold policy at a restricted level for a period of time," Powell said.
— Michelle Fox
The Dow turned positive and traded up 180 points after declining as much as 186 points earlier in the session as Fed Chair Jerome Powell spoke.
The S&P 500 and Nasdaq Composite also gained steam, with each trading up more than 1% mid-speech.
Powell said early in the speech that the disinflationary process has begun but still has a long way to go.
"The disinflationary process, the process of getting inflation down, has begun and it's begun in the goods sector," Powell said. "But it has a long way to go. These are the very early stages of disinflation."
— Alex Harring
Shares of Zoom Video surged nearly 8% midday after the company announced plans to cut about 1,300 employees, or 15% of its workforce. The stock is up more than 24% so far this year.
CEO Eric Yuan wrote in a blog post shared to the company's website that as the world continues to adjust to life after the pandemic, the company needs to adapt to the "uncertainty of the global economy" as well as "its effect on our customers." Read more here.
— Pia Singh, Ashley Capoot
These stocks are among those making the biggest moves in midday trading:
Click here to see more stocks making midday moves.
— Pia Singh
Energy performed the best of the 11 S&P 500 sectors on Tuesday, up 1.9%.
Here's where the remaining 10 stand, in order from best to worst:
— Alex Harring
Shares of Royal Caribbean popped more than 2% on Tuesday after the cruise operator posted its fourth-quarter results.
The company reported a per-share loss of $1.12, narrower than the loss of $1.34 per share anticipated by analysts, according to Refinitiv. However, revenue came up short of expectations, with the company posting $2.60 billion, compared to the $2.61 billion estimated by analysts.
Beneath the surface, the outlook seems rosy for Royal Caribbean, however. The company gave guidance on 2023 per-share earnings of $3.00 to $3.60, excluding items. The company's results also put to rest any concerns investors may have had about softening bookings, with gross revenue totaling $2.6 billion compared to $982 million in the prior year. Booking volumes during the fourth quarter of 2022 were also higher than the corresponding period in 2019 – before the pandemic put the brakes on travel.
The company has also been able to raise prices, Royal Caribbean Group CEO Jason T. Liberty said on the earnings call with analysts Tuesday morning. "We're able to raise prices across these different products and really not seeing a pullback from the consumer as we continue to do so," he said, according to a transcript on FactSet.
China cruising is also emerging as a 2024 opportunity, but two impediments have emerged, according to Michael Bayley, CEO of Royal Caribbean International. "One of them is that there's still a ban technically on cruising and group travel in China," he said on the analyst call. "And also, there's a requirement from the Japanese that Chinese tourist have to test and potentially could be quarantined." He added that the company expects both conditions to "drop away at some point during this first half."
—Darla Mercado, Seema Mody
Lockheed Martin can return to growth this year as the outlook for the defense sector strengthens, providing a "meaningful" opportunity for earnings to surprise to the upside, according to Credit Suisse.
Analyst Scott Deuschle upgraded the arms company to outperform from underperform. Deuschle also raised his target price to $510 from $427, which implies shares could rise 11% from the stock's closing price on Monday.
"LMT has now reported three consecutive quarters with book-bill>1.0x, with [trailing 12 months] book:bill accelerating to 1.08x in Q3 and hitting 1.22x in Q4. We view this acceleration as a powerful signal that the rationale for our prior rating no longer holds," Deuschle wrote Monday in a note to clients.
CNBC Pro subscribers can read more about his upgrade here.
— Hakyung Kim
Those looking to see if investors find Fed Chair Jerome Powell's remarks scheduled for Tuesday afternoon more hawkish or dovish should watch the Nasdaq Composite, according to Devon Drew, CEO of DFD Partners.
Drew said the technology-heavy index will likely move depending on how Powell's remarks are received because it is comprised of mainly high-growth stocks.
Growth stocks are typically more sensitive to interest rate hikes, he said, so investors who take Powell's comments to indicate more rate hikes to come, or for longer, will likely sell off. On the other hand, Drew said investors will likely increase exposure to Nasdaq components if they believe Powell indicated lower interest rates could be on the horizon.
"Long-duration stocks and higher rates — they just don't jive," he said in an interview with CNBC.
The Nasdaq Composite has fluctuated between trading above and below the flatline Tuesday.
— Alex Harring
Longtime investor Ron Baron, who runs one of the best-performing mutual funds, said he's standing by his growth darlings, unfazed by the volatility in the stock market, especially in the tech sector.
"I'm not really worried about the stock market," Baron said on CNBC's "Squawk Box" Tuesday. "I don't worry about the market. I don't worry about the economy."
The veteran investor said he's seeing unprecedented demand for Tesla's vehicles, predicting the stock to skyrocket to $1,500 by 2030. Elon Musk's Tesla has a 30% portfolio weighting in Baron's fund, the biggest holding in the portfolio.
— Yun Li
Two stocks in the S&P 500 hit new highs not seen in over a year on Tuesday, while another two reached new lows.
TransDigm Group, an aerospace and defense company that went public in 2006, is at an all-time high. And financial technology company Fiserv notched a high the stock hasn't traded at since September 2021.
On the other hand, Centene and CVS Health traded at lows not seen since November and October of 2021, respectively.
— Alex Harring, Chris Hayes