An unexpectedly strong retail sales report weighed on the major benchmarks in early trading Wednesday, though the three indexes flipped higher by the close. Investors also sifted through an onslaught of 13F filings released overnight, which included a surprisingly quick turnaround for one of Warren Buffett's portfolio picks.
While Tuesday's inflation data showed consumer prices moderated more slowly than expected in January, today's retail sales report suggested consumer spending was strong last month. Specifically, the Commerce Department said retail sales rose a seasonally adjusted 3% from December to January. Spending at bars and restaurants was 7.2% higher – the biggest monthly increase since March 2021 – while auto sales were up 5.9%. On an annual basis, retail sales jumped 6.4%.
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"The American consumer went on a shopping spree in January. The consumer still has money saved and will continue to spend it as long as the labor market remains robust," says Edward Moya, senior market strategist at currency data provider OANDA. "The U.S. economy is looking like it will have a solid first quarter and recession doubts are getting some vindication here. The data-dependent Fed is seeing its case for more ongoing rate increases get bolstered after both inflation accelerated and as retail sales rebound sharply in January."
Meanwhile, following yesterday's release of fourth-quarter 13F filings, many investors were focused on which stocks Warren Buffett is buying and selling. Most notably, Berkshire Hathaway (BRK.B) – Buffett's holding company – drastically reduced its stake in Taiwan Semiconductor Manufacturing (TSM) in Q4 after initiating the position in the third quarter. This sent TSM down 5.3% today, dragging several semiconductor stocks like Advanced Micro Devices (AMD, -0.9%) and Micron Technology (MU, -0.4%) down with it.
As for the major indexes, the Nasdaq Composite closed up 0.9% at 12,070, the S&P 500 gained 0.3% to 4,147, and the Dow Jones Industrial Average added 0.1% to 34,128.
The best tech stocks to buy
The Nasdaq's outperformance today came courtesy of a few well-received earnings reports, namely vacation rental company Airbnb (ABNB, +13.4%), video game firm Roblox (RBLX, +26.4%) and AI lending stock Upstart (UPST, +28.1%). But while today's price action extends a recent run higher from 2022's most beaten-down area of the market, uncertainty remains – especially following last week's surprisingly strong jobs report and this morning's impressive retail sales data.
"The resiliency of the consumer is another sign that areas of the economy remain robust even amid talks of a recession," says Mike Loewengart, head of model portfolio construction at Morgan Stanley. "Expect some volatility in the near-term as investors mull over the Fed's next steps and what, if anything, could lead it to cut rates in the calendar year."
Still, for investors looking to play the hot hand of the market, there are plenty of ideas, including those found among the best growth stocks and the best tech stocks to buy now.
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