Dow surges as inflation finally cools off

By CNN Business

Updated 7:42 p.m. ET, August 10, 2022
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5:05 p.m. ET, August 10, 2022

The Nasdaq ends worst bear market in 14 years

By CNN Business' Nicole Goodkind

The Nasdaq Composite bid adieu to its worst bear market in over a decade today.

The tech-heavy index gained 2.9% on Wednesday and entered bull territory for the first time in 108 days, ending its longest downswing since 2008, when the index fell 54% and the period lasted 218 trading days, according to Dow Jones Market Data.

A bear market ends when an index rises 20% off of recent lows.

The Nasdaq closed on Wednesday at 12,855, up 20.8% from its recent low in November 2020.

The upward move was bolstered by a strong key inflation report which showed a better-than-expected slowdown for prices in the United States.

Major tech stocks rose on the news, Facebook parent company Meta was up by 5.8% and Netflix was 6% higher.

But it's not all cheery. The Nasdaq is still down 19.9% from its record finish in November 2021.

The S&P 500 also made news on Wednesday, hitting its highest level in three months.

4:12 p.m. ET, August 10, 2022

Closing bell: Markets soar after key inflation report shows slowing price hikes

CNN Business' Nicole Goodkind

US stocks soared higher on Wednesday after a key inflation index showed that annual inflation is slowing, surprising analysts who expected worse news. 

The consumer price index for July rose 8.5% year-over-year, and was flat compared to June. 

The S&P 500 hit its highest level in three months on the news. 

As stocks settle after the trading day, levels might still change slightly.

4:31 p.m. ET, August 10, 2022

Inflation soared quickly, but may take more time to cool off

From CNN Business' Paul R. La Monica

Customers leave a Walmart store on August 4 in Rohnert Park, California.
Customers leave a Walmart store on August 4 in Rohnert Park, California. (Justin Sullivan/Getty Images)

The market is cheering the fact that the rate of consumer price increases edged lower in July. But one market expert said investors need to be patient.

"Inflation went up like an elevator but it will go down like an escalator," Brian Belski, chief investment strategist with BMO Capital Markets, told CNN's Alison Kosik on "Markets Now" Wednesday.

Belski thinks inflation pressures will take time to ebb and that investors shouldn't expect prices to fall as quickly as they soared. That said, he is encouraged by the fact that commodity costs are starting to decline and supply chain issues are abating. That should reduce pressure on consumer prices.

And Belski told Kosik he thinks many investors still haven't factored that into their earnings forecasts. Even though stocks soared in July after a rotten first half of 2022, "People are still too bearish," Belksi said.

He thinks investors will be surprised by good news later this year — and that's a key reason why his year-end target for the S&P 500 is 4,800, nearly 15% above current levels.

But the Federal Reserve still may need to keep aggressively raising rates, despite the slowdown in inflation. Dana Peterson, chief economist with The Conference Board, told Kosik that she thinks a three-quarters of a point rate hike is still likely in September.

What's more, Peterson is also predicting a recession in the next few months. The good news is that she thinks it will be shallow and short-lived. The worst economic numbers will be in the fourth quarter of this year and early 2023, Peterson said. But the downturn will likely only last a few quarters.

12:49 p.m. ET, August 10, 2022

Odds of big rate hike fall, housing stocks soar

From CNN Business' Paul R. La Monica

A 'for sale' sign hangs in front of a home on June 21 in Miami, Florida.
A 'for sale' sign hangs in front of a home on June 21 in Miami, Florida. (Joe Raedle/Getty Images))

The next Federal Reserve meeting is still six weeks away, and a lot more data on inflation, the job market and consumer spending will come out in the meantime. But for what it's worth, investors are now of the mindset that the Fed won't have to raise rates as aggressively as previously thought come September 21.

Before the release of Wednesday morning's CPI report, fed funds futures trading on the CME were indicating that the market was pricing in a 68% chance of another three-quarter point rate hike in September.

But after the better than expected inflation news was released, odds for that big of a hike have fallen to just 37.5%. In other words, Wall Street is now expecting a 62.5% chance that the Fed will raise rates by just a half-point at its next meeting. That's up from odds of only 32% for the smaller increase a day ago.

Looking out further, there are growing expectations that the Fed will be even more relaxed with rate hikes beyond September. Randy Frederick, managing director of trading and derivatives at the Schwab Center for Financial Research, said he thinks the Fed may boost rates by only a quarter of a point at its November meeting, and then hit pause after that.

Hopes of a slower pace of Fed tightening helped fuel the market rally Wednesday. But what's particularly noteworthy is that many of Wall Street's biggest winners are stocks with ties to the housing market.

Builders DR Horton (DHI), Pulte (PHM), NVR (NVR) and Lennar (LEN) soared. So did home products and furnishings manufacturers such as Whirlpool (WHR), Sherwin-Williams (SHW), carpet maker Mohawk (MHK) and plumbing supplies company Masco (MAS).

Investors appear to be betting that housing sales, which had started to cool as prices and mortgage rates climbed, may not fall off a cliff after all if the Fed becomes less aggressive.

12:22 p.m. ET, August 10, 2022

Job market is too hot for a recession, ex-Fed governor says

From CNN Business' Matt Egan

A "now hiring" sign is displayed in a window in Manhattan on July 28 in New York City.
A "now hiring" sign is displayed in a window in Manhattan on July 28 in New York City. (Spencer Platt/Getty Images)

Despite back-to-back quarters of negative GDP, Randall Kroszner, former governor at the Federal Reserve, said he does not believe the US economy is currently in recession nor that the economists at the National Bureau of Economic Research will declare one.

“It’s highly unlikely they would say the US is in recession now given the strength of the jobs market,” he said, adding that the poor GDP reports were largely driven by inventory drawdowns.

Still, Kroszner warns there is a “heightened risk” of recession over the next year or two because the Fed is raising interest rates and fiscal stimulus is unlikely.

“It is possible for the Fed to have a soft-ish landing,” he said. “But that relies on no big negative shocks and everything going right.”

11:54 a.m. ET, August 10, 2022

Way too early to declare victory on inflation, ex-Fed official says

From CNN Business' Matt Egan

A woman shops for groceries at a store on July 29 in Arlington, Virginia.
A woman shops for groceries at a store on July 29 in Arlington, Virginia. (Olivier Douliery/AFP/Getty Images)

Even though inflation cooled off considerably in July, the cost of living remains uncomfortably high and may not get back to normal levels anytime soon.

Randall Kroszner, former governor at the Federal Reserve, told CNN that while inflation has likely peaked, it will take at least a year before inflation returns to the 2% level targeted by the Fed.

“It’s going to take quite some time,” Kroszner said in a phone interview, referring to how long it will take before the Fed’s preferred inflation metric, the personal consumption expenditures (PCE) price index, gets back to 2%.

“Core inflation is still very disturbing for the Fed, dramatically above where the Fed wants it to be,” said Kroszner, now a professor at the University of Chicago Booth School of Business. “It’s too early to give the victory signal because you really have to see core inflation come down. This is one report.”

11:41 a.m. ET, August 10, 2022

Oil stocks tank and cruise lines set sail after CPI

From CNN Business' Paul R. La Monica

Cars parked at Chevron gas station pumps are seen on July 29 in Houston, Texas.
Cars parked at Chevron gas station pumps are seen on July 29 in Houston, Texas. (Brandon Bell/Getty Images)

Investors cheered the news that inflation cooled off a bit in July. But not all traders were happy. Oil stocks, which have been big market winners in 2022 as crude prices soared following Russia's invasion of Ukraine, were notable market losers Wednesday.

Chevron (CVX) was flat, one of just a few notable laggards in the Dow. Merck (MRK) was the only other Dow stock trading lower. (Drug stocks typically hold up better as a defensive hedge against inflation and economic slowdown worries.)

Oil stocks were among the few losers in the S&P 500, too. Schlumberger (SLB), Halliburton (HAL) and Coterra Energy (CTRA) were all in the red Wednesday morning.

Conversely, cruise line stocks led the market on Wednesday. Norwegian (NCLH), Royal Caribbean (RCL) and Carnival (CCL) all rose more than 10%. The three stocks are still down sharply this year, but investors are apparently betting that the worst may be over.

Lower energy costs should boost profits, and consumers may also look to travel more if inflation fears ebb. To that end, casino owner Caesars (CZR) also soared.

11:21 a.m. ET, August 10, 2022

Stocks jump as inflation eases

Nicole Goodkind

US stocks rose after Wednesday's inflation report eased investors' expectations on how quickly the Fed will raise interest rates.

The Dow was up 550 points, or 1.6% mid-morning Wednesday. 

The S&P 500 rose 1.9%. 

The Nasdaq Composite gained 2.5%. 

The headline CPI for July rose 8.5% year-over-year and remained flat from June. Economists had expected prices to increase 8.7% annually and 0.2% between June and July.

10:41 a.m. ET, August 10, 2022

Gaming downturn? Roblox results make investors go oof!

From CNN Business' Paul R. La Monica

(Adobe Stock)
(Adobe Stock)

Recession worries are swirling in the metaverse, too.

Gaming platform Roblox (RBLX) reported a bigger-than-expected loss for the second quarter, news that sent its stock tumbling 9% in the real world Wednesday morning.

Investors are worried about the fact that bookings, a key measure of future revenue, fell 4% in the quarter.

What's more, the company's average bookings per daily active user (ABPDAU) number, which looks at how much money people are spending to buy virtual goods, plunged 21%. In other words, people are keeping a closer watch on how they spend their Robux due to inflation concerns.

Roblox isn't the only video game company that's getting hit by growing fears of a weakening economy. Grand Theft Auto maker Take-Two Interactive (TTWO), which recently bought mobile gaming company Zynga, also disappointed Wall Street with its latest results, The stock fell 4% Tuesday on the news.

Take-Two CEO Strauss Zelnick warned on a conference call with analysts that gamers are becoming more cautious.

"I don't believe the entertainment business is recession proof or even necessarily recession resistant," Zelnick said, adding that "when you have 50% of big bank economists saying we think we might be in a recession in the next quarter or two, my attitude is the market believes we're in a recession right now, and as a consumer-facing company, we are seeing some softness."