Stocks rose sharply on Wednesday after a key inflation reading showed a better-than-expected slowdown for rising prices.
The Dow Jones Industrial Average jumped 535.10 points, or 1.63%, to close at 33,309.51. The S&P 500 gained 2.13% to 4,210.24, its highest level since early May. The Nasdaq Composite rose 2.89% to 12,854.80 for its best close since late April.
The headline consumer price index for July rose 8.5% year over year and was flat compared with June. Economists surveyed by Dow Jones were expecting increases of 8.7% and 0.2%, respectively.
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Core inflation, which strips out volatile food and energy prices, also saw a smaller-than-expected increase.
The Federal Reserve will weigh the report, along with other key economic data, ahead of its September meeting, where it is slated to hike interest rates again.
"The deceleration in the Consumer Price Index for July is likely a big relief for the Federal Reserve, especially since the Fed insisted that inflation was transitory, which was incorrect. ... If we continue to see declining inflation prints, the Federal Reserve may start to slow the pace of monetary tightening," said Nancy Davis, founder of Quadratic Capital Management.
Major tech stocks outpaced the broader market on Wednesday, with Facebook parent Meta rising 5.8% and Netflix gaining more than 6%. Salesforce was one of the best performers in the Dow, climbing 3.5%.
Disney stock pops on earnings beat, price hike
Shares of Disney surged more than 5% after hours when the company reported earnings that beat Wall Street estimates on both the top and bottom lines, with strong spending at theme parks. In addition, total subscriptions to Disney+ rose to 152.1 million during the quarter, higher than the forecast estimate of 147 million.
The company also announced that it would raise the prices of Disney+ without ads, while slotting its new ad-supported tier at $7.99 per month.
Stocks close near highs of the session
The major averages closed near their session highs, with the Dow up 535 points, or 1.6%. The S&P 500 gained 2.1% and the Nasdaq Composite rose 2.9%.
The small-cap Russell 2000 soared nearly 3%.
Volatility Index quiet into the close
The Cboe Volatility Index is holding below 20 in the final minutes of trading. This would be the first time in 90 days it has closed below that level. Since 1990, that would be the 10th longest such streak, according to Bespoke Investment Group.
Final hour of trading begins
With about an hour left in Wednesday's trading session, the Dow is holding onto a rally of more than 400 points. The S&P 500 and Nasdaq Composite are having even better days, raising 1.8% and 2.5%, respectively.
Small caps are also having a banner day, with the Russell 2000 up 2.7%.
Bank of America names Meta a best idea
Meta is a best investment idea, according to Bank of America.
The investment bank added the Facebook-parent company to its "US 1" list, a managed collection of 30 to 40 long-term investment picks, while removing Google-parent Alphabet. Shares of Meta are up 5.7%.
Some on Wall Street believe in the company's long-term story, even as shares dropped nearly 50% this year. Check out the story on CNBC Pro.
— Sarah Min
Recession fears are calmed, for now
The combination of a strong jobs report and slowing inflation in July means the debate about whether the U.S. economy is in a recession can be put on the backburner, according to a prominent economist.
"The whole recession narrative really needs to be put on a shelf for now," said Aneta Markowska, chief economist at Jefferies. "I think it's going to shifting to a stronger-for-longer narrative, which is really supported by a reversal in inflation."
Markowska projects that U.S. GDP will grow at a 3% rate in the third quarter, but said the U.S. is likely to have a recession in 2023.
— Jesse Pound, Jeff Cox
Dow surges 500 points
The Dow Jones Industrial Average surged more than 500 points following a better-than-expected inflation report which lifted stocks, especially in technology and banks. Salesforce, Goldman Sachs, JPMorgan, Apple and Microsoft were among the top earners in the index.
At the same time, the S&P 500 gained 2.03% and the Nasdaq increased 2.73%.
- Carmen Reinicke
Goldman, Citi pop as bank stocks outperform
Bank stocks are outperforming on Wednesday, even as the July CPI report appeared to spark a move lower for interest rates.
Shares of Goldman Sachs and Citigroup have gained more than 3% each. JPMorgan Chase and Wells Fargo have popped more than 2% apiece.
Smaller banks are also holding their own, with the SPDR S&P Regional Banking ETF gaining 2.6%.
This morning, Piper Sandler listed small banks that could be smart bets during a recession. Check out the list on CNBC Pro.
Roblox, Sweetgreen trim losses
The broad market rally is helping to stem the losses for two stocks with disappointing quarterly reports.
Shares of Roblox and Sweetgreen were down 5% and 4.6%, respectively, in midday trading. Both stocks were down more than 10% in extended trading on Tuesday evening.
Volatility index falls below 20
The Cboe Volatility Index dropped below 20 on Wednesday and is now trading at its lowest levels since April.
The index is based on the expected volatility implied by the options market. It is sometimes called Wall Street's "fear gauge," and tends to spike when investors are more uncertain about the future.
— Jesse Pound
CPI data shows promise but 'one month doesn't make a trend,' Independent Advisor Alliance's Zaccarelli says
While one month of slowing price increases signals that inflation is moving in the right direction, more data is needed to show a continuous trend, said Chris Zaccarelli, chief investment officer at the Independent Advisor Alliance.
"One month doesn't make a trend, but at least headline is coming down and core stopped going up," he wrote. "If we see future months' data showing a decrease in inflation, then it will help markets see the end of the tunnel in terms of rate hikes."
— Samantha Subin
Market taking comfort in latest CPI reading, Commonwealth's Brian Price says
Commonwealth Financial Network's Brian Price said the market is taking this latest CPI report as a welcome sign that inflation may be peaking.
"The market seems to be taking comfort in the fact that we're seemingly past peak inflation and we should continue to see declines in the second half of the year," the firm's head of investment management said. "It looks like the odds of another 75 basis point hike by the Fed have dipped significantly in the wake of this report and we could only see a 50 basis point hike at the next meeting. If energy prices continue to fall, then I expect that we'll see inflationary data coming down in future months."
"This dynamic should support risk assets and we will likely see long term interest rates fall as well," he added.
S&P 500 rises to the highest since May
The S&P 500's surge Wednesday took it to levels not seen since early May as the comeback rally reaches new heights. The benchmark is now up 15% from its mid-June low as investors bet inflation is peaking and the Federal Reserve will eventually slow its intensity of rate hikes.
After tumbling into a bear market, the S&P 500 has now cut its losses for 2022 to 12%. The index is 13% off its all-time high reached in January.
Stocks open sharply higher
The Dow opened higher by more than 400 points, while the Nasdaq Composite jumped more than 2%.
The rally is broad, with only energy stocks struggling.
Treasury yields tumble after CPI report
Treasury yields dropped on Wednesday as a highly anticipated inflation figure came in flat compared with the previous month.
The inflation report suggested to some that price pressures might have peaked, which could spark speculations that the Federal Reserve could conduct a smaller interest-rate hike next month.
"Overall, incremental confirmation that the Fed's efforts to combat consumer price increases have been successful," Ian Lyngen, BMO's head of U.S. rates, said in a note. "The combination of NFP and CPI for July leave the 75 bp vs. 50 bp Sept hike debate alive and well."
— Yun Li
Cramer says we've hit peak inflation
Wednesday's July CPI report, which showed price increases slow, is a sign that the economy has hit peak inflation, according to Jim Cramer.
"We obviously had peak inflation," he told CNBC's "Squawk Box" on Wednesday, noting that energy, travel and prices at the pump have continued to come down.
Cramer added that the recent hike from the Federal Reserve is likely the central bank's best attempt to get surging prices under control.
Moving ahead, Cramer expects the central bank to hike rates again come September but likely by 50 basis points compared to the long-anticipated 75 basis point move.
"I think what matters here is that these are the numbers that Powell wanted," he said.
— Samantha Subin
Risk on move in tech in the premarket
The CPI report showing slowing inflation gave investors the green light to buy technology shares beaten-up this year on concern over the impact of rising interest rates on growth companies.
Tesla was higher by 4% in premarket trading. Amazon and Meta gained 3%.
Even chip stocks, besieged by negative earnings warnings in the sector this week, were rebounding in early trading. Nvidia and AMD were up more than 3% apiece.
Another big Fed hike is not off the table, Swonk says
Good news in the CPI report appears to have lowered the market odds of a three-quarters-of-a-percentage-point Fed hike in September, but some still believe the central bank will remain aggressive.
"I still think the Federal Reserve is on for 75 basis points….They need to see much more improvement than this sustained, especially in the core. We could be looking at slower moves by the end of the year," said Diane Swonk , chief economist KPMG.
Core CPI, which the Fed traditionally focuses on, is still well above the central bank's 2% target.
—Jesse Pound, Patti Domm
CPI is flat for the month and stocks like it
Stock futures ripped higher and bond yields tumbled after the much-anticipated consumer prices report for July was much better than feared.
Prices rose 8.5% in July on an annual basis, a slowing pace from June. Month to month, inflation was flat as energy prices broadly declined 4.6% and gasoline fell 7.7%. That offset a 1.1% monthly gain in food prices and a 0.5% increase in shelter costs. Economists surveyed by Dow Jones were expecting headline CPI to increase 8.7% on an annual basis and 0.2% monthly.
Excluding volatile food and energy prices, so-called core CPI rose 5.9% annually and 0.3% monthly, compared to respective estimates of 6.1% and 0.5%.
—John Melloy, Jeff Cox
Futures jump after CPI report
Investors cheered a cooler-than-expected inflation report, with Dow futures jumping 400 points. The Nasdaq 100 futures gained more than 2%, which means the tech-heavy Nasdaq Composite could erase its losses from Tuesday when the market options.
In the bond market, Treasury yields fell after the report.
Futures higher ahead of CPI report
Shortly before the CPI report, futures have built on their morning gains.
Futures for the Dow Jones Industrial Average rose 101 points, or 0.3%. S&P 500 futures gained 0.4% and Nasdaq 100 futures climbed 0.5%.
Inverted yield curve will 'flinch,' Novogratz says
Galaxy Digital CEO Michael Novogratz said on "Squawk Box" that he was watching the Treasury yield curve as a key indicator of what could happen next for markets.
"The most fascinating thing is the 2-10s steepener," Novogratz said. "The curve has flattened to negative-50 basis points between 2s and 10s. You go back  years, only one time in the 70s did it get through that. At one point, that's going to flinch, and I think that will be the big inflection point."
A basis point is equal to 0.01 percentage points.
When the 2-year Treasury yield trades above the 10-year yield, many on Wall Street see that as strong recession indicator. On Wednesday, the the 2-year yield was trading at 3.278%, while the 10-year was at 2.803%.
Novogratz said that he believes investors are overconfident in a future pivot from the Federal Reserve, which could be one of the reasons for long-term rates trading below short-term rates.
Goldman Sachs cuts gold forecast
Goldman Sachs has cut its gold forecast, saying it overestimated how much recession fears would drive prices.
The firm now sees gold averaging $1850/toz over the next three months, before increasing slightly to $1,950/toz for the remainder of the year.
The new forecasts are down from a prior 12-month outlook of $2,500/toz. The firm said it came to that target after looking at how gold traded over the last 20 years, noting that recession risks around tightening cycles was previously a more important driver than real rates.
"While we expected nominal rates to increase on the back of Fed hikes we did not expect inflation expectations to fall so much after failure of the transitory narrative and high persistent inflation surprises," Goldman wrote in a note to clients.
"The main conclusion is that in the current environment of tightening policy and persistent recession concerns the tactical direction of gold will be determined by shifts in Fed priority function between inflation fight and growth support," the firm added.
U.S. gold futures traded at $1,811.40/oz on Wednesday.
— Pippa Stevens
Market may be overbought ahead of CPI
The recent market rally could put stocks at risk of a pullback from Wednesday's CPI reading, according to BTIG technical strategist Jonathan Krinsky.
The strategist said in a note to clients on Tuesday evening that stocks have made some counterintuitive moves after CPI reports this year, with positioning ahead of the report seeming to be a key factor in how the market reacts.
"At the end of the day nobody knows what the number will be or how the market will react to that number, but from our perspective things are coming in pretty overbought which leaves room for the market to move lower post the number," Krinsky wrote.
— Jesse Pound
Elon Musk sells Tesla shares
Elon Musk sold shares of Tesla worth roughly $6.88 billion — despite earlier this year saying he has "no further TSLA sales planned."
The Tesla CEO sold 7.92 million shares of the electric vehicle company, according to a succession of financial filings on Tuesday night. The SEC filings showed that the transactions occurred between Aug. 5 and 9. Tesla had its annual shareholder meeting on Aug. 4.
Earlier this year, Musk took to social media to say that he does not plan to sell Tesla shares after April 28. The billionaire investor is currently embroiled in a legal battle with Twitter, which he had agreed to buy for about $44 billion.
Shares of Tesla are up 2% in Wednesday premarket trading; Twitter is up 4%.
— Sarah Min
European stocks mixed ahead of key U.S. inflation print
European markets were mixed on Wednesday morning as global investors awaited the key U.S. inflation print.
The pan-European Stoxx 600 was roughly flat by late morning. Travel and leisure stocks climbed 1.3% while health care stocks dropped 0.8%.
On the data front in Europe, German final July consumer price inflation came in at 7.5% year-on-year and 0.9% monthly, official figures revealed Wednesday, roughly in line with expectations.
Earnings remain a key driver of individual share price movement in Europe. Ahold Delhaize, ABN AMRO, E.On, TUI Group, Metro, Deliveroo, Prudential and Aviva were among the major companies reporting before the bell on Wednesday.
- Elliot Smith
China's consumer prices hit a two-year high, as pork prices bounce back
China's consumer price index in July reached a two-year high as pork prices rebounded, according to official data released Wednesday.
The prices of pork rose by 20.2% in July from a year ago, marking the first increase since September 2020, according to data from Wind Information.
Additionally, prices of pork posted their largest month-on-month surge on record — up by 25.6%. Agricultural products analyst at Nanhua Futures, Bian Shuyang, said in a statement that the reluctance of farmers to sell — in hopes of getting higher prices in the future — contributed to the pork price surge.
Bian added that live hog producers are now operating at a profit, indicating there is more supply to come. Two upcoming Chinese holidays in September and October will help support consumer demand for pork, he said.
Nevertheless, Wednesday's inflation data continued to reflect lackluster demand in China's economy.
The consumer price index rose by 2.7% in July, missing expectations for a 2.9% increase, according to analysts polled by Reuters. In addition, despite the summer holidays, the tourism price component rose by only 0.5% in July from a year ago.
— Lee Ying Shan and Evelyn Cheng
Goldman, BoFA and Barclays name their top consumer stocks
Market watchers are looking to July's inflation report — slated to be released later today — for clues on what the Federal Reserve will do next at its September meeting.
Ahead of the report's release, CNBC Pro scoured through Wall Street research to identify what investment banks are watching for signs of consumer weakness, and their advice on how investors should position in this environment.
Find out more about what the consumer-related stocks that analysts at Goldman Sachs, Bank of America and Barclays are loving.
— Zavier Ong
Regional Fed presidents scheduled to speak tomorrow
In addition to Wednesday's consumer price index report, markets will also digest Fedspeak from two regional bank presidents. They may give further insight as to the central bank's course forward and the size of future rate hikes, especially at the September meeting.
Charles Evans, president of the Federal Reserve Bank of Chicago, will speak Wednesday at 11:00 am ET at Drake University in Des Moines, Iowa.
Later, Minneapolis Fed President Neel Kashkari will speak on a panel about stagflation at the Aspen Economic Strategy Group.
Key CPI report may show inflation has cooled
The July inflation report may show that prices have cooled - at least, that's what economists and investors are hoping.
Economists estimate for the July report is that the consumer price index increased only 0.2%, less than the 1.3% it jumped in June, according to Dow Jones. That would bring the year-over-year pace of consumer inflation in July to 8.7%, less than the 9.1% seen in June.
If the reading is lower than it was last month, it may show that we're past peak inflation and beginning to trend in the right direction. That will inform how aggressively the Federal Reserve hikes rates going forward.
Coinbase, Roblox slump in after hours trading
Shares of Coinbase and Roblox are making some of the biggest moves in after hours trading Tuesday after reporting earnings that failed to meet Wall Street's expectations.
Coinbase slipped more than 5% after reporting earnings showing a larger-than-expected loss during the quarter, and the company missed revenue estimates.
Roblox plunged more than 16% after missing on earnings and revenue. In addition, the company also reported only 52.2 million average daily active users, down from the 54.1 million it reported in the previous quarter.