Markets Rise Ahead of CPI; Activision, Amazon Stocks Outperform

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Stocks closed higher Tuesday as investors prepared for the latest inflation update and the start of second-quarter earnings season.

But while price action across the major indexes was relatively muted, Activision Blizzard (ATVI) climbed the charts after Microsoft's (MSFT) proposed acquisition of the video game maker cleared a major regulatory hurdle.

Today's gains for the main benchmarks were modest as investors looked ahead to tomorrow morning's release of the June Consumer Price Index (CPI). The Nasdaq Composite added 0.6% to 13,760, the S&P 500 rose 0.7% to 4,439, and the Dow Jones Industrial Average added 0.9% to 34,261.

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Microsoft-Activision merger clears regulatory hurdle

In single-stock news, Activision Blizzard popped 10.0% after a federal judge Tuesday said Microsoft (+0.2%) can proceed with its $69 billion purchase of the Call of Duty maker. The merger has been targeted by the Biden administration on antitrust concerns, with the Federal Trade Commission (FTC) in December suing Microsoft to try and stop the deal. The acquisition is still awaiting regulatory approval in the U.K.

Separately, Microsoft, a Dow stock, also made news by announcing another round of layoffs. While the exact number of job cuts was not disclosed, roughly 300 sales and customer service positions in Washington state were eliminated. In January, MSFT cut 10,000 positions across its global workforce.

Amazon lands on Wells Fargo's "signature picks" list

Amazon.com (AMZN) was another noteworthy mover, gaining 1.3% as the e-commerce site kicked off its annual Amazon Prime Day. The 48-hour sale allows Prime members to get deals on a variety of products.

Additionally, Wells Fargo analyst Ken Gawrelski added AMZN to the research firm's "signature picks" list – a portfolio of 35 high-conviction stock picks. Gawrelski has an Overweight (Buy) rating on AMZN, and expects the stock to benefit from a "multi-year positive revision cycle" in North American retail and "healthy growth resuming at Amazon Web Services" starting in the fourth quarter.

Gawrelski is in good company, too. Of the 54 analysts following AMZN tracked by S&P Global Market Intelligence, 35 say it's a Strong Buy, 16 have it at Buy, two call it a Hold and one has it at Sell. This works out to a Strong Buy recommendation.

PepsiCo, Delta earnings on deck

While second-quarter earnings season unofficially starts Friday with several big banks reporting, there are a pair of notable names on Thursday's earnings calendar, too. Specifically, financial results from both soft drink and snack maker PepsiCo (PEP) and air carrier Delta Air Lines (DAL) will give Wall Street a closer look at consumer spending during a period when inflation eased, even if it still remains well above the Fed's 2% target.

A resilient consumer has helped keep trends "healthy" at PepsiCo's Beverages North America division, says Goldman Sachs analyst Bonnie Herzog. She has a Buy rating on the consumer staples stock.

As for Delta Air Lines, Jefferies analyst Sheila Kahyaoglu says Q2 results "will point to the continued demand strength with pricing firm given continued capacity constraints." The industrial stock "remains our top pick" among airlines thanks in part to "diversified revenue and cash streams."

With over a decade of experience writing about the stock market, Karee Venema is the senior investing editor at Kiplinger.com. She joined the publication in April 2021 after 10 years of working as an investing writer and columnist at a local investment research firm. In her previous role, Karee focused primarily on options trading, as well as technical, fundamental and sentiment analysis.