Another encouraging reading on inflation and some bad-news-is-good-news retail sales data helped stocks open higher Wednesday, with the main indexes building on Tuesday's blowout gains.
The economic reports are just the latest to confirm that the Federal Reserve's aggressive interest rate hikes are doing what is needed to slow the economy and bring inflation down.
The Bureau of Labor Statistics this morning said the October Producer Price Index (PPI), which measures what businesses are charging suppliers for goods, fell 0.5% month-over-month. This was the biggest decline since April 2020, and came in well below September's 0.4% increase. Core PPI, which excludes volatile food and energy prices, also improved, rising 0.1% vs September's 0.3% gain.
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"A powerful one-two combination of data pointing to softening inflation is continuing to support investor sentiment and a strong equity rally with Producer Price data this morning showing weaker-than-expected price increases among wholesalers," says José Torres, senior economist at Interactive Brokers. "The data follows yesterday's release of the Consumer Price Index, which showed no month-over-month change."
Retail sales fall less than expected in October
Also on Wednesday's economic calendar were retail sales, which fell 0.1% from September to October. This marked the first monthly decline since March, though it was narrower than economists were anticipating.
"The resumption of student loan repayments definitely had an adverse impact, as a portion of wages was allocated to debt service vs consumption," Torres says. However, as the economist notes, investors are taking the results of this report as "disinflationary rather than contractionary."
Indeed, the Dow Jones Industrial Average ended today up 0.5% to 34,991, while the S&P 500 gained 0.2% to 4,502, and the Nasdaq Composite added 0.07% to 14,103.
Target soars after reporting a surprise Q3 profit
In single-stock news, Target (TGT) stock soared nearly 18% (17.8%, to be exact) after the major retailer disclosed earnings. The company reported third-quarter earnings of $2.10 per share vs expectations for a per-share loss of $1.47, and said same-store sales came in better than anticipated. This helped offset weaker-than-expected revenue of $25.0 billion.
Sirius XM Holdings (SIRI) was another notable mover, jumping 6.1% after a regulatory filing revealed the satellite radio company was among the stocks Warren Buffett bought and sold in the third quarter. Specifically, Buffett & Co. bought 9.7 million SIRI shares over the three-month period.
Still, the SIRI position is minimal compared to other massive holdings such as Apple (AAPL, +0.3%), which accounts for half of Buffett's Berkshire Hathaway equity portfolio.
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