Dow, S&P 500 end higher, Nasdaq books longest win streak in four months ahead of inflation data

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U.S. stocks closed higher on Wednesday, with Nasdaq Composite logging its longest win streak since September, as the market built on a positive start to 2023. Traders also looked ahead to Thursday’s inflation report to help gauge the size of the Federal Reserve’s next interest rate hike in February.

How stock indexes traded

  • The S&P 500   rose 50.36 points, or 1.3%, to end at 3,969.61
  • The Dow Jones Industrial Average  gained 268.91 points, or 0.8%, ending at 33,973.01
  • The Nasdaq Composite  gained 189.04 points, or 1.8%, to finish at 10,931.67

On Tuesday, the Dow Jones Industrial Average rose 186 points, or 0.56%, to 33704; the S&P 500 increased 27 points, or 0.7%, to 3919; and the Nasdaq Composite gained 107 points, or 1.01%, to 10743.

What drove markets

U.S. stocks finished with gains on Wednesday as traders eyed looming inflation data which is due out Thursday morning. Economists polled by Dow Jones expect December’s inflation report will show headline inflation remains unchanged from the previous month, or 6.5% year over year. The core price measure that strips out volatile food and fuel costs, is expected to rise 0.3% from November, or 5.7% year over year. 

See: Why Thursday’s U.S. CPI report might kill stock market’s hope of inflation melting away

Investors will be looking for more evidence that inflation, which touched 9.1% in June and dipped to 7.1% in November, is continuing to slip and may allow the Federal Reserve to ease monetary policy soon.

“It’s been pretty clear for several months now that goods inflation is slowing,” said Scott Ladner, chief investment officer at Horizon Investments. “The services side of inflation is really where everyone’s gonna be focused on,” according to Ladner.

“Anything from any data we can get out of the services side of the month-over-month inflation is where we’re going to be making an assessment,” Ladner told MarketWatch in a phone interview.

Robert Conzo, CEO and managing director of The Wealth Alliance, thinks stock-market investors are “micromanaging a data set” and trying their best to pull a trend out of it.

“We’re starting to see a downward trend in inflation, especially the year-over-year numbers, and when that trend becomes clear, the Fed is gonna take his foot off the gas a bit, and the market is going to be happy,” he said via phone on Wednesday.

Still, Fed officials remain resolute in stressing they are prepared to err on the hawkish side to ensure at end to high inflation.

To that point, there will be a slew of Fed members making comments on Thursday to accompany the CPI numbers. These include Philly Fed President Patrick Harker, St. Louis Fed President James Bullard and Richmond Fed President Tom Barkin.

Boston Fed President Susan Collins said Wednesday that she’s leaning toward a quarter-point interest rate increase at the central bank’s next 2-day meeting, which kicks off later this month and spills over into February, though she said it is still “very data-dependent.”

The S&P 500 index marked its highest close in a month on Thursday, but also a gain for the year of 3.4%, according to Dow Jones Market Data.

The uptick for the index comes after Wall Street’s benchmark fell nearly 20% in 2022 in response to the Fed already raising its policy interest rate by 425 basis points, from zero in March, as it looked to tackle inflation that reached its highest in four decades.

“We have a lot of clients telling us they are being ‘paid to wait’ because they are earning 4% on their cash,” wrote Tom Lee, head of research at FS Insight, in a note to clients. “This is true, but we think the mood of these investors will change when the S&P 500 gains 4% (this month?). Because, this will suddenly highlight the opportunity cost of owning cash (which takes 1 year to earn 4%) whereas S&P 500 could be on track to gain +25% or more,” Lee added.

Companies in focus

  • Shares of Ichor Holdings Inc. finished 3.1% lower Wednesday, after the semiconductor equipment maker warned of a revenue miss for the fourth quarter, as well as for the first quarter.
  • Shares of ProKidney Corp. lost 0.3% Wednesday, despite that the company said preliminary data from a Phase 2 study found that the company’s investigational renal autologous cell therapy treatment can delay the need for dialysis in some patients with chronic kidney disease.
  • Shares of Eton Pharmaceuticals Inc.  rose 13.9% after the company said its experimental treatment for alcohol poisoning is being reviewed by the Food and Drug Administration.
  • Meme stocks jumped on Wednesday with shares of Bed Bath & Beyond Inc. skyrocketing 68.6% and shares of AMC Entertainment Holdings rising 21.2%.

—Jamie Chisholm contributed to this article.

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