Josh Schafer
Stock market today: S&P 500, Nasdaq edge higher after Powell says rate cuts coming 'at some point' this year
Contents
- Industrials, Energy lead afternoon trade
- Powell: Fed to lower rates this year as inflation follows a 'bumpy' path down to 2%
- Positive news on the inflation front
- Cosmetics stocks get pounded
- Disney's proxy battle finale
- The current mood of investors
- Fed's Bostic sees Fed cutting in fourth quarter
- Stocks open mixed
- Tesla gets put into the penalty box by JPMorgan
- Intel opens its books further, and the stock gets hit
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.
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:
Sees first quarter EPS of $0.42, down from a prior estimate of $0.69. The current consensus is around $0.60.
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)."