Stocks rise as investors embrace optimistic inflation data

January 26, 2024

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Stocks bounced back Friday afternoon following looking past a gloomy outlook from Intel and embracing a key inflation reading seen as influential in the timing of an interest rate cut.

The S&P 500 (^GSPC) rose 0.2% after a winning Thursday saw the benchmark close at another record high. The Dow Jones Industrial Average (^DJI) increased 0.3% or about 130 points, while the tech-heavy Nasdaq Composite (^IXIC) edged up 0.1%

Techs lagged behind the other indexes after Intel’s (INTC) first quarter outlook fell well short of Wall Street expectations, somewhat denting the AI-fueled hopes that have helped lift stocks to record highs. Intel shares 10% during afternoon trading, with peers AMD (AMD) and Nvidia (NVDA) also taking a slight knock.

The release of the PCE index for December painted a rosy inflation picture for investors, however. “Core” PCE, the inflation gauge commonly known as the Fed’s preferred measure, fell below 3% on an annual basis, the slowest rate of growth since March 2021.

That number, combined with a hotter-than-expected early estimate on fourth quarter US GDP, could further the notion that the US economy is headed for a “soft landing.”

Central bankers will huddle next week for their first policy meeting of the year. They are widely expected to keep interest rates steady. But the latest string of positive economic data will likely prompt them to begin cutting rates later this year, perhaps as early as March.

At the same time, investors will parsed Friday’s batch of earnings for more insight into the health of corporate America and the economy. Colgate-Palmolive (CL) was a highlight, posting strong fourth-quarter results attributed to its Latin American consumer markets. Visa (V) gave a tepid revenue-growth forecast with some analysts pointing to a slowdown in US payments volume growth that faded heading into the new year, which could indicate an economic slowdown.

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Fri, January 26, 2024 at 6:00 PM GMT+1

Elon Musk’s AI start-up seeks to raise up to $6 billion: report

Elon Musk is ramping up his efforts to develop AI technology outside of his all-electric car company.

According to a new report in the Financial Times published on Friday, Musk’s artificial intelligence start-up xAI is in talks to raise up to $6 billion at a proposed valuation of $20 billion.

The fundraising effort comes as much of the tech industry scrambles to rapidly develop new generative AI tools and claim market share in a nascent field that’s believed to revolutionize economic life.

The startup has courted investors around the world in recent weeks, including family offices in Hong Kong according to the report, which cites people familiar with the matter. But raising money in a territory that is increasingly controlled by Beijing could present regulatory issues, the report noted, as Washington seeks to heightens export controls to limit China’s ability to develop advanced technologies.

The report comes as Musk has pushed Tesla to award him greater control over the company by boosting his stake or granting him a new class of super-voting shares. Musk has said that he is uncomfortable helping Tesla become a leader in AI without having greater influence over company decisions. He has threatened to take his vision for the development of AI and robotics outside the company if his request for greater influence is not granted.
Fri, January 26, 2024 at 5:41 PM GMT+1

Stocks trending in morning trading

Here are some of the stocks leading Yahoo Finance’s trending tickers page during morning trading on Friday:

Intel (INTC): Shares of the chipmaker fell more than 10% Friday morning following the release of first-quarter guidance that fell below Wall Street expectations. The selling ramped up despite the company showing an all-around fourth-quarter 2023 earnings beat — posting revenue of $15.4 billion and adjusted earnings of $0.54 per share.

American Express: (AXP): The financial services company rose 8% Friday after reporting revenue of $15.8 billion, up more than 11% from the same period last year, but slightly missing estimates of $15.9 billion. CEO Stephen Squeri told Yahoo Finance Live that the devaluations of the Argentine peso was partly to blame for the miss.

Spirit Airlines (SAVE): Shares sank as much as 17% on Friday morning after JetBlue (JBLU) told the low-cost carrier that it may seek to terminate its merger agreement. JetBlue shares rose more than 2% following the warning, in which the airline cited certain conditions required by the pact which may not be met.

Visa (V): The payment card services company shed 1% after the company posted its first-quarter earnings, revealed an earnings beat with $8.6 billion in revenue versus an expected $8.57 billion, marking a year-over-year gain of nearly 9% gain year-over-year. Some analysts pointed to forward guidance as a reason for the stock drop. US payments volume growth faded over the quarter, in what could indicate an economic slowdown.
Fri, January 26, 2024 at 4:53 PM GMT+1

Moderating inflation reinforces Fed rate cutting story of ‘not if but when’

The Fed’s ongoing public debate about when to begin an easing cycle intensified further Friday after the central bank’s preferred inflation gauge moved below 3% for the first time since March 2021, before the start of the aggressive rate-hiking campaign.

The Personal Consumption Expenditures (PCE) index grew 2.6% year over year in December, in line with last month’s print. “Core” PCE, which excludes the volatile food and energy categories, grew 2.9%, down from 3.2% from the month prior and below the 3.0% economists surveyed by Bloomberg had expected.

Expectations remain that the Fed will be discussing “when — not if” to start lowering rates at its upcoming meeting policy meeting, said Quincy Krosby, Chief Global Strategist for LPL Financial.

The market had broadly anticipated that the first rate cut would arrive in March. But a number of Fed officials have pumped the brakes on that narrative. They’ve doubling down on their data-driven strategy, forgoing a momentous decision to start easing rates in favor of waiting for more confirmation that inflation has been thoroughly tamed.

Although inflationary pressures continue to normalize with ‘core’ numbers inching ever closer to the Fed’s 2% target, the Fed will continue to monitor the effect of stronger consumer spending coupled with the promise of fiscal stimulus on igniting a bout of inflation,” Krosby said.

As of Friday morning traders were anticipating a 47% chance that the Fed will lower rates at the March meeting. That figure rises to nearly 90% for the probability of a cut in May.
Fri, January 26, 2024 at 4:00 PM GMT+1

Spirit stock sinks after JetBlue warns merger agreement may end on Sunday

Spirit Airlines (SAVE) shares sank as much as 17% on Friday morning after JetBlue (JBLU) told the low-cost carrier that its merger agreement may be terminable on Jan. 28.

JetBlue shares rose more than 2% following the warning, in which the airline cited certain conditions required by the pact which may not be met. The Long Island City, N.Y.-based company said it continues to evaluate its options under the agreement.

The development lowers the probability that Spirit Airlines’ $3.8 billion sale to JetBlue (JBLU) will go through since a court ruling last week blocked the merger over antitrust concerns.

Both companies have since filed to appeal the federal judge’s ruling.

On Friday morning Spirit pushed back against JetBlue’s warning, stating “there is no basis” for terminating the merger agreement. The airline said it will continue to abide by the pact and “expects JetBlue to do the same.”
Fri, January 26, 2024 at 3:37 PM GMT+1

Stocks mixed in morning trading

Stocks were mixed Friday morning after a gloomy outlook from Intel (INTC) and as investors digested the latest optimistic inflation reading and what it could mean for the timing of the Fed’s first interest rate cut of the cycle.

The S&P 500 (^GSPC) rose 0.1% after a winning Thursday saw the benchmark close at another record high. The Dow Jones Industrial Average (^DJI) was virtually unchanged, while the tech-heavy Nasdaq Composite (^IXIC) sank 0.2%