Stock market today: S&P 500, Nasdaq edge higher after Powell says rate cuts coming 'at some point' this year
US stocks were little changed Wednesday as Federal Reserve Chair Jerome Powell reiterated the Fed will likely cut interest rates this year amid inflation's "bumpy" path downward.
The S&P 500 (^GSPC) rose about 0.1%, while the Dow Jones Industrial Average (^DJI) fell around the same amount. The tech-heavy Nasdaq Composite (^IXIC) rose more than 0.2%, as the major gauges stemmed early-week performances that left stocks in a sea of red.
In a speech at Stanford University on Wednesday, Powell doubled down on his belief that inflation was on a "bumpy" path down to 2%, but that central bank officials expect to lower rates at "some point" this year.
Stocks had drifted away from their strong start to the year as robust economic data undermined hopes for three Fed rate cuts. Investors have scaled back their bets to the point where they expect a smaller, later easing than policymakers have projected.
Stocks reversed losses on Wednesday morning, though, after a reading on prices paid in the services sector hit its lowest level since March 2020, indicating potential future declines in inflation. This data stood in contrast to a similar reading from the manufacturing sector on Monday, which showed inflation pressures were on the rise last month.
In corporate news, Disney (DIS) successfully fended off activist investor Nelson Peltz in his quest to secure board seats at the company, officially ending a highly contested proxy battle that has plagued the entertainment giant and its CEO Bob Iger for months. After winning a shareholder vote to keep its board intact, Disney stock dipped more than 3%.
The results represent a win for Disney in the short term as it ends months of uncertainty and distraction for Iger and the company's management team. But it also means Disney's board will face much more pressure to deliver results as the company attempts to navigate consumers' shift away from traditional cable packages into mostly unprofitable streaming services.
"Trian and Blackwells have added urgency to the turnaround, but not substance," Needham analyst Laura Martin wrote in a note to clients ahead of the results. "DIS will remain under pressure to drive shareholder upside going forward."
Read more here.
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Josh Schafer
Industrials, Energy lead afternoon trade
All three major averages were in the green on Wednesday afternoon.
Inside the S&P 500 (^GSPC), Industrials (XLI) and Energy (XLE) were leading the gains within the index.
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Josh Schafer
Powell: Fed to lower rates this year as inflation follows a 'bumpy' path down to 2%
Federal Reserve Chair Jerome Powell reiterated his stance that the Fed will likely reduce interest rates at some point this year in prepared remarks for a speech at Stanford University.
Yahoo Finance's Jennifer Schonberger reports:
Federal Reserve Chair Jay Powell doubled down Wednesday on his belief that inflation was on a "bumpy" path down to 2% and that central bank officials expect to lower rates at "some point" this year.
Powell also once again asserted that the Fed would maintain its independence during this red-hot election year, noting that its analysis is free from any "personal or political bias."
His comments about the inflation marked the second time in the last week that Powell offered assurances that the overall outlook had not changed much despite some hotter-than-expected readings at the start of the year.
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Josh Schafer
Positive news on the inflation front
After a week headlined by inflation concerns prompted from an increase in prices paid in the manufacturing sector, investors were greeted by more positive news on inflation's path on Wednesday.
Prices paid in the ISM services index fell to 53.4 in March, the lowest level since March 2020.
"The plunge in the prices paid index to the lowest level since the pandemic began, implies that core services ex-housing inflation, aka supercore, will resume falling back toward its pre-pandemic normal rate," Capital Economics deputy chief North America economist Stephen Brown wrote in a note to clients.
He added, "The headline decline was due to falls in the new orders and supplier delivery time components, but the latter is hardly cause for concern at a time when markets are focused on the risk that the Federal Reserve might once again delay its loosening cycle ... On past form, implies PCE core services (ex-housing) inflation will drop to 2%, from 3.4% in February."
Markets noticeably jumped after the release, with all three of the major averages rising after 10 a.m. ET.
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Brian Sozzi
Cosmetics stocks get pounded
Lots to think about after this surprise warning from cosmetics retailer Ulta (ULTA) today.
Shares of Ulta are getting pounded by 14% after CEO Dav Kimbell told JPMorgan analysts during a fireside chat he has seen a "slowdown" in the "total" cosmetics category. The slowdown is a "bit earlier" and a "bit bigger" than we thought, Kimbell added.
The news is hammering shares of e.l.f. Cosmetics (ELF) and Estee Lauder (EL) too.
I find Kimbell's comments interesting in light of the recent trends in Nielsen sales data.
Total retail sales for e.l.f. products were up 29.5% for the four weeks ended March 24, Nielsen's data shows. L'Oreal sales were up 3%, and P&G was up by 5.6%.
Is this an Ulta issue or the sign of a consumer slowdown? Unclear, but I will note this Ulta news squares well with lackluster earnings reports in the past month from Nike (NKE) and Foot Locker (FL).
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Alexandra Canal
Disney's proxy battle finale
Walt Disney Co. (DIS) activist investor Nelson Peltz has fought for a board shake-up at the company for months. Today, investors will find out whether he has won.
The results of a shareholder vote to select board members are expected to be announced at the entertainment giant's annual stockholders meeting on Wednesday. Voting officially closes the day of the meeting, but sources told Reuters enough votes had been cast as of Tuesday evening for Disney to safely defeat Peltz.
Institutional investors Vanguard, BlackRock, and State Street serve as Disney's three largest shareholders. According to the Wall Street Journal, BlackRock has voted in favor of the company's current board. Reuters reported that Vanguard also has voted to back the existing board. The position of State Street is still unknown.
Yahoo Finance confirmed that T. Rowe Price, which holds a smaller position in Disney, has backed the company too. "We are comfortable that management has a viable plan to address the important matters facing the company," a spokesperson for the investment firm said in an email.
It's a critical moment for Disney as the company attempts to navigate consumers' shift away from traditional cable packages into mostly unprofitable streaming services. The company also faces succession questions, with CEO Bob Iger's contract set to expire at the end of 2026.
Peltz, who recently secured the support of influential proxy advisory firm Institutional Shareholder Services (ISS), is seeking board seats for himself and former Disney CFO Jay Rasulo. Peltz's hedge fund Trian Fund Management owns $3 billion of common stock in Disney, which includes the shares owned by former Marvel Entertainment chair Ike Perlmutter.
Peltz is aiming to replace two existing board members: former Mastercard executive Michael Froman and Maria Elena Lagomasino.
Disney, which has received backing from the high-profile proxy firm Glass Lewis, has defended both Froman and Lagomasino, describing the duo as "highly valued and engaged members of the board" in a statement to Yahoo Finance.
The company has said it's made "significant progress" in turning around its business. Some changes have included the implementation of an ad-supported tier for its streaming service Disney+, in addition to price increases on its streaming services and theme parks and password-sharing crackdowns.
Investors have reacted positively to the changes, sending Disney's stock up about 35% this year.
The shareholder meeting is set to take place at 10 a.m. PT/ 1 p.m. ET this afternoon. In the meantime, catch up on what you need to know here.
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Brian Sozzi
The current mood of investors
It's fascinating to see how a tough start to April for markets has gotten investors into a tizzy.
Keep in mind it was just last week we were near record highs for the S&P 500!
To that end, smart insight into the current mood of investors out of JPMorgan's intelligence team today.
Takeaway: Investors are looking for an excuse to take profits.
Says strategist Andrew Tyler:
“Yesterday’s move triggered a number of incoming inquires about whether this is the end of the rally, how worried people should be about markets, and whether the price action foretells something much worse in the economy. I think none of these; the market closed within 1% of its all-time high … set last week. It is possible that we could see a 2-3% pullback but think you need to see either deterioration in the macro story or an earnings season that shows negative sequential growth. Equities remain sensitive to bond volatility, more so than yield levels, which is what we have seen this week with the 10-year yield moving higher by 15 basis points and the S&P 500 selling off less than 1%.”
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Josh Schafer
Fed's Bostic sees Fed cutting in fourth quarter
Federal Reserve Bank of Atlanta president Raphael Bostic told CNBC on Wednesday morning he thinks inflation's bumpier-than-expected path down will likely mean the first Fed interest rate cut won't come until the fourth quarter of 2024.
“I think it will be appropriate for us to start moving down at the end of this year, the fourth quarter,” Bostic said in an interview with CNBC. “If that trajectory slows down in terms of inflation, then we’re going to have to be more patient than I think many have expected.”
Bostic's comments come as recent hot inflation readings have forced investors to push out their hopes of interest rate cuts at the start of the summer. As of Wednesday morning, investors were pricing in a 60% chance the Fed lowers rates at its June meeting. A month ago, investors had priced in a 74% chance, per the CME FedWatch Tool.
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Josh Schafer
Stocks open mixed
US stocks slipped Wednesday morning as investors looked to a coming speech by Federal Reserve Chair Jerome Powell for clues to whether interest rates will stay higher for longer.
S&P 500 (^GSPC) fell about 0.1%, while the Dow Jones Industrial Average (^DJI) teetered on both signs of the flatline. The tech-heavy Nasdaq composite (^IXIC) led declines, down almost 0.4%, after the major gauges closed in a sea of red.
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Tesla gets put into the penalty box by JPMorgan
No burying the lede here.
JPMorgan analyst Ryan Brinkman has cut his price target on Tesla (TSLA) to $115 from $130 this morning, which assumes about 30% downside from current price levels (the stock is already down 33% year to date). The revised price target stems from Brinkman "slashing" his estimates on Tesla after a lackluster deliveries report.
Some numbers of interest from Brinkman's report:
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Sees first quarter EPS of $0.42, down from a prior estimate of $0.69. The current consensus is around $0.60.
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Sees a "large" free cash outflow of $1.3 billion in the first quarter compared to a prior estimate for an inflow of $300 million. Brinkman blames this on Tesla having too much inventory after a disappointing quarter.
What Brinkman says on Tesla's stock:
"While Tesla shares are -59% from their all-time high of $409.97 reached on November 4, 2021 (vs. the S&P 500 +11%), the stock still strikes us as highly expensive, with extraordinary work and tremendous accomplishment unlike the trend in recent quarters required in coming years to grow into even our $115 price target (which at $401 billion market capitalization we nervously note values Tesla as the world’s most valuable automaker, edging out Toyota’s $391 billion), let alone current valuation of $167 per share ($580 billion)."
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Brian Sozzi
Intel opens its books further, and the stock gets hit
Intel (INTC) shares are getting reprogrammed premarket.
Shares are off by 4% as Intel fine-tuned how it reports financials to investors. This was an expected event, but the numbers around the foundry business (a key focus for CEO Pat Gelsinger, as he explained to me on Yahoo Finance Live two weeks ago) probably caught many on the Street by surprise.
Intel said its chip manufacturing business had a $7 billion loss in 2023, larger than the $5.2 billion loss in 2022. Sales fell 31% year over year to $18.9 billion. Breakeven for the business is seen somewhere closer to 2030.
The disclosures will likely restart talk on why Intel is building plants to manufacture chips for others, which is coming at a major cost.
Stifel analyst Ruben Roy offered up the simplest-to-understand analysis on the stock following the disclosures:
“We believe Intel has a difficult road ahead as the company begins a multi-year transition phase which involves high capital intensity and an ambitious design roadmap with expectations to move through five process node transitions in four years. As Intel executes to its plan, competitors such as AMD (AMD) and Nvidia (NVDA) continue to innovate on their respective technology road maps. Intel also faces increased competition from internally-sourced CPU technologies in both the client PC market and the data center market. With this as a backdrop, we see limited upside catalysts to shares in the medium term.”
