Stocks opened lower Tuesday as market participants took some profits following Monday's monstrous rally. However, the main indexes ended well off their session lows.
The Nasdaq Composite rallied 2.2% to start the week, easily outpacing the still-noteworthy gains of 1.2% for the S&P 500 and 0.6% for the Dow Jones Industrial Average.
Sparking Monday's surge was a rebound in the Magnificent 7 stocks. The majority of these mega-cap stocks continued to climb today, with Nvidia (NVDA, +1.7%) once again leading the way. Apple (AAPL, -0.2%), however, resumed its recent slide, while Tesla (TSLA) slid 2.3% after the electric vehicle maker lowered the driving-range estimates across its models after new government testing rules took effect.
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Juniper jumps on Hewlett Packard buyout buzz
Elsewhere in the tech sector, Juniper Networks (JNPR) surged 21.8% after a Wall Street Journal report indicated Hewlett Packard Enterprise (HPE) is nearing a deal to buy the router maker for $13 billion. In addition to making communication services equipment, Juniper also manages Mist AI, a platform it created that combines "artificial intelligence, machine learning and data science techniques to optimize user experiences and simplify operations."
HPE, meanwhile, plunged 8.9% on the news. "We think investors would question the strategic rationale underlying this large of a platform acquisition," says Wells Fargo analyst Aaron Rakers, adding that he expects the company to emphasize how it plans to leverage Mist AI.
As for the main indexes, today's moves were more modest than what was seen Monday. The Nasdaq eked out a 0.1% gain to 14,857, while the S&P 500 (-0.2%) and the Dow (-0.4%) both closed lower.
CPI, earnings season in focus
Investors could be growing more cautious ahead of this week's key inflation update and the start of fourth-quarter earnings season.
The Consumer Price Index (CPI) for December will be released ahead of Thursday's open. "Given the mixed picture from the December employment report, this week's inflation data will be crucial in terms of shaping the Fed's messaging coming out of the January 31 meeting," says Brett Ryan, senior U.S. economist at Deutsche Bank.
The economist expects headline CPI to arrive at 3.3% on an annual basis, helped by a modest decline in gas prices last month. Core CPI, which excludes volatile food and energy prices, should land at 3.9%, according to Ryan. The November CPI report showed headline and core inflation at 3.1% and 4.0%, respectively.
Meanwhile, Q4 earnings season kicks off Friday, with several big banks set to report. "Top-of-mind is the Federal Reserve's rate cycle moving from an expected rate hike to a rate cut regime and its effect on lenders and borrowers," says CFRA Research analyst Kenneth Leon.
Leon singles out JPMorgan Chase (JPM, -0.8%) and Morgan Stanley (MS, -1.6%) as having "the best chance to deliver better-than-expected performance in 2024." JPMorgan is on Friday's earnings calendar, while Morgan Stanley reports ahead of next Tuesday's open.
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