Dow gains nearly 200 points, Nasdaq on pace for 4th day of gains as Wall Street awaits inflation data

What’s driving markets

U.S. stocks saw modest gains Wednesday with traders eyeing 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 out 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 high inflation is slain.

And 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.

The S&P 500 index bounced off its 100-day moving average and finished Tuesday’s session above its 50-DM, taking its gain for the year to 3%, a four-week high.

The uptick comes after Wall Street’s benchmark fell nearly 20% during 2022 in response to the Federal Reserve raising its policy interest rate by 425 basis points, from zero in March, as it strived to tackle four-decade-high inflation.

“With the first 6 trading days of 2023 behind us, the S&P 500 is off to a solid start with an over 2% gains,” wrote Tom Lee, head of research at FS Insight, in a note to clients.

“We have a lot of clients telling us they are being ‘paid to wait’ because they are earning 4% on their cash. 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.
  ICHR,
  -5.71%
  tumbled 7.1% 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.
  PROK,
  -1.20%
  lost 4.9% 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.
  ETON,
  +13.05%
   rose about 13% Wednesday 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.
  BBBY,
  +51.24%
  skyrocketing 57% and shares of AMC Entertainment Holdings
  AMC,
  +17.36%
  rising 18.8%.

—Jamie Chisholm contributed to this article.