S&P 500 falls as Wall Avenue takes a breather after its finest week since June

Traders looking ahead to this week’s inflation data, Vital Knowledge says

It’s been a somewhat quite market session, following the sharp gains seen last week on the back of a lighter-than-expected consumer price index report. Those numbers sent the major averages rallying and bond yields sliding.

Now, investors are looking being Monday’s news items in anticipation of the producer price index report, which is slated for release Tuesday, according to Adam Crisafulli of Vital Knowledge.

“Waller’s remarks aren’t having an enormous impact on markets, and investors expect his peers to echo the same sentiments in the coming days,” he said. “Rather than parsing every Fed utterance, the focus is overwhelming on the inflation data due out this week to see whether yields can extend their decline.”

— Fred Imbert, Michael Bloom

Health care sector leading S&P 500, Dow higher

A slew of health care names outperformed Monday and pushed the S&P 500 and Dow Jones Industrial Average higher.

Health Technology was the top performing sector for the Dow, boosted by shares of Merck and Johnson & Johnson, which surged 3.6% and 2.2%, respectively.

Health care was also a major performer for the S&P 500, with the sector up 1.24% at midday. Moderna was the biggest mover, gaining more than 6% after positive news about its latest coronavirus booster vaccine. Biogen also helped the index gain, increasing more than 5% after competitor Roche’s Alzheimer’s drug failed in two final-phase tests.

Shares of Pfizer, AbbVie and Vertex Pharmaceuticals also gained.

—Carmen Reinicke

Oatly, Hasbro making the biggest moves midday

A few stocks stood out Monday because of the large midday moves they made. The biggest slumps came from consumer names Oatly and Hasbro. Amazon also fell on a report it would lay off employees, becoming the latest big tech name to do so.

  • Oatly – Shares of the oat-based drinks maker tumbled 11% after the company reported a larger-than-expected quarterly loss and revenue that fell short of consensus. Oatly cited China Covid restrictions, production challenges and a stronger U.S. dollar for the weakness in its performance
  • Hasbro – Shares dropped nearly 9% after Bank of America said the toy company was harming one of its best brands, the “Magic: The Gathering” card game. The firm noted the company was rolling out too many new card sets and raising production too much in an attempt to capitalize on demand, but it’s turning off retailers and consumers.
  • Amazon – Amazon fell 1.4% following a report that it plans to lay off about 10,000 employees as soon as this week. The cuts would be the largest in the company’s history, and would primarily affect Amazon’s devices organization, retail division and human resources, according to The New York Times.

Read more here.

—Carmen Reinicke

AMD gets two upgrades, price target increases

Advanced Micro Devices got upgrades from Baird and UBS Monday.

Baird moved the company to outperform and upped the price target to $100, which implies a nearly 40% upside, after it rolled out a new product that the firm said has been well received.

UBS, meanwhile, saw indicators such as inventory momentum and the stock’s performance versus its sector moving in the right direction for a rally. It gave the stock a buy and raised the target to $95.

The stock was up 3.5% in trading Monday. It’s lost 48.3% this year.

CNBC Pro subscribers can read the full story here.

— Alex Harring

S&P 500 struggling below key retracement level

The S&P 500 struggled Monday to break above 3,998.51, a key Fibonacci retracement level, to start the week. The moves come as the market tries to build on its strong performance from last week, with the S&P 500 posting a weekly gain of 5.9%.

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Mike Wilson says stocks could make new low in early 2023

Morgan Stanley chief U.S. equity strategist Mike Wilson does not believe the bear market is over and said the S&P 500 could hit a new low early next year.

“We remain highly convicted that 2023 bottom up consensus earnings are materially too high,” Wilson said in a note to clients on Monday.

Check out more of Wilson’s 2023 outlook on CNBC Pro.

— Jesse Pound

Stocks off lows of session on Brainard comments

The S&P 500 rebounded off its lows and Treasury yields eased from their highs a bit late morning after Federal Reserve Vice Chair Lael Brainard said it may “soon” be appropriate to slow the pace of interest rate hikes, in a conversation with Bloomberg News.

The S&P 500 was last just down 0.1% after being off by more than 0.7% at one point Monday. The 10-year Treasury yield was 5 basis points higher to 3.878% after trading as high as about 3.90% earlier.

“I think what’s really important to emphasize is we’ve done a lot but we have additional work to do both on raising rates and sustaining restraint to bring inflation down to 2% over time,” Brainard added.

—John Melloy, Jeff Cox

Amazon shares fall on report the company will lay off thousands of employees

Amazon fell about 2% following a report that it plans to lay off about 10,000 employees as soon as this week.

The cuts would be the largest in the company’s history, and would primarily impact Amazon’s devices organization, retail division and human resources, according to the report. The reported layoffs would represent less than 1% of Amazon’s global workforce and 3% of its corporate employees.

— Ashley Capoot, Tanaya Macheel

Morgan Stanley says the earnings boost banks get from higher interest rates is fading

Big U.S. banks will benefit as the Federal Reserve continues to raise interest rates to fight inflation, but that boost is fading, according to Morgan Stanley analysts led by Betsy Graseck.

Lenders typically enjoy fatter margins in a rising-rate environment as they charge borrowers higher rates for loans, while raising the rates they pay to depositors more slowly. But increasing funding costs and moves by corporate officers to purchase longer-duration securities in the third quarter has made the industry less sensitive to higher rates, Graseck said Monday in a research note.

That means the incremental benefit to 2023 earnings from a 50-basis point rate increase has fallen in the third quarter from the previous period for nearly all the banks in her coverage universe, Graseck wrote.

While the median bank would’ve seen a 2.5% pop to 2023 EPS from a half-point rate increase previously, it would now post a 1.5% increase, Morgan Stanley said, citing the companies’ third-quarter regulatory filings. Investors expect the Fed to hike interest rates at the central bank’s December meeting.

Still, the biggest beneficiaries to higher rates include Bank of America and Silvergate Capital, Graseck wrote. Bank of America in particular has been named by many analysts as a pick for its ability to grow earnings as rates rise.

—Hugh Son

S&P 500 has lost its valuation appeal again, RBC’s Calvasina says

Last week’s better than expected CPI print “emboldened the bulls,” said RBC Capital Markets head of U.S. equity strategy Lori Calvasina said in a Monday note.

While that’s generally constructive for equities as it signals the Fed may stop hiking interest rates sooner rather than later, there are a few caveats.

“One thing we don’t like is that the S&P 500 has lost its valuation appeal again,” said Calvasina. “Following last week’s bounce, S&P 500 P/Es are near average on consensus EPS and a bit above average on RBC’s EPS forecasts – not frothy but lacking the appeal we had started to see around the October lows.”

She also doesn’t like the potential for the Fed to turn hawkish again and say they plan to keep financial conditions tight. That rhetoric, even in the context of a debate between hawks and doves, “likely adds to stock market volatility in the months ahead,” she said.

While cooling inflation is a good thing, what it means for U.S. equities broadly is a bit more complicated.

“The main thing we’ve been communicating to investors on this point lately is that moderating inflation is a headwind for S&P 500 EPS due to its correlation with revenues, but should still allow for some modest P/E expansion in the year ahead based on our analysis of the relationship between interest rates, inflation, and S&P 500 P/Es dating back to the 1970s,” she said.

“Moderating inflation seems likely to be accompanied by lower US equity exposure, but higher levels of inflation relative to recent history may serve to prop that positioning up if that is what ends up occurring,” she added.

—Carmen Reinicke

Megacap tech lost their mojo, Goldman’s Kostin says

Megacap technology stocks, which had led the last decade-long bull market, might have lost their mojo, according to David Kostin, Goldman Sachs’ head of U.S. equity strategy.

The characteristic most associated with Big Tech stocks – superior sales growth – has vanished, at least for this year, the strategist said. Aggregate sales growth for Apple, Alphabet, Amazon and Microsoft is forecast to rise by 8% this year, well below the 13% growth expected for the S&P 500, the bank noted.

The four stocks now comprise 18% of S&P 500’s market cap, down from a high of 22%, Goldman noted.

— Yun Li

Stocks open lower after S&P 500 posts best week in nearly five months

Stocks opened lower Monday after the S&P 500 posted its biggest weekly gain since June on the back of easing inflation data.

The Dow Jones Industrial Average fell 50 points, or 0.2%. The S&P 500 declined 0.3%, and the Nasdaq Composite slid by 0.6%.

— Tanaya Macheel

Bank of America removes Amazon from list of best investments

Bank of America removed e-commerce giant Amazon from its list of best investment ideas.

The list, called US 1, pulls top picks from stocks rated buys by the firm. Amazon still holds that rating, the firm noted.

Amazon and others in the technology sector have slid this year as investors rotated out of growth stocks. The company has also felt broader retail changes, with consumers shifting spending to services from goods or pulling back all together amid inflationary challenges.

The stock is down 1.3% in the pre-market and has lost 39.5% since the start of this year. Last month, the company said it missed expectations for third-quarter revenue and issued weak fourth-quarter guidance.

Microsoft, Qualcomm and PayPal were among tech stocks that remained on the list.

— Alex Harring, Michael Bloom

Oatly, Hasbro, Advanced Micro Devices among stocks making the biggest moves premarket

These are some of the companies moving before the bell Monday:

  • Hasbro — The toy maker’s stock slid 6% in the premarket following a double-downgrade to “underperform” from “buy” at Bank of America.
  • Oatly — Shares of the oat-based drinks maker tumbled 10.6% in the premarket after the company reported a larger-than-expected quarterly loss and revenue that fell short of consensus.
  • Advanced Micro Devices — The chip maker’s stock rose 3.5% in early trading after receiving upgrades at both Baird and UBS, who cited positive industry cyclical trends and strong demand for AMD’s Genoa chip by data center equipment manufacturers.

Check out the full list of stocks making the biggest moves here.

— Peter Schacknow, Tanaya Macheel

Stocks are still in a bear market rally and bitcoin could fall as low as $13,900, says Fairlead’s Katie Stockton

As traders get ready for a new trading week, after last week the S&P 500 notched its best week since June, Katie Stockton, a technical analyst and founder of Fairlead Strategies reminds investors that it’s still a bear market rally.

“We have all the short-term gauges are pointing higher and long term gauges still point lower,” she told CNBC’s “Squawk Box” Monday. “There’s not a lot of breakouts with this move.”

“What we’ve had here is a macro shift that’s driven this relief rally,” she added. “It was really similar to what happened over the summertime, where we saw the S&P 500 peak in mid-August. The 10-year Treasury yields had been correcting ahead of that peak for several weeks. We’re probably in store for something similar this time around, where the S&P 500 will peak on the back of a short-term low in Treasury yields – and I don’t think we’ve had that low yet.”

As stocks posted a winning week, cryptocurrencies crashed. Stockton said there’s a major breakdown that would be confirmed if bitcoin closes below $18,300 this week, with the next support level after that being below $13,900. She added that while it’s easy to make a case for that breakdown now, there are signs of downside exhaustion “we haven’t seen in some time.”

Those signs “would support a rebound of nine weeks or so for cryptocurrencies,” she said. “Whether that allows bitcoin to avoid its confirmed breakdown we’re not sure, but it would be a welcome relief rally and selling opportunity.”

— Tanaya Macheel

Bank of America cuts Tesla price objectives, saying EV recovery won’t happen in 2023

Bank of America has trimmed its Tesla price objectives citing ongoing issues for the electric automaker industry, including supply chain woes that will hinder any recovery.

“Once again the can has been kicked down the road: supply chains are still constrained (and it is not just semis), and broad based commentary indicates recovery is increasingly a 2023+ event,” wrote John Murphy in a Monday note.

While companies have started seeing some benefits from easing material prices and supplier recoveries, volumes are still under pressure, meaning that a real recovery might not even happen in 2024.

“Piling on to the semis issue is a patchwork of other supplier disruptions (labor shortages key sticking point), which may exacerbate the already tight supply,” he wrote. “As a result, the strength of new vehicle pricing may prove more resilient even though used vehicle pricing has come under pressure in ’22.”

The firm trimmed its price target for Tesla to $275 from $325, implying a roughly 41% upside on the neutral-rated stock.

—Carmen Reinicke

Citi downgrades Bank of America after seeing little upside due to already-high valuation

Citi is warning Bank of America has little room to grow even though it’s a defensive pick amid economic volatility. Analyst Keith Horowitz downgraded the bank stock, citing its premium valuation that will make seeing a notable upside difficult.

“BAC is a high quality franchise that is executing well and may be a good defensive holding in light of upcoming economic and market uncertainty given BAC’s good deposit franchise and lower credit risk,” he said. “While we believe the stock can do well on a relative basis in the event of a pullback, we don’t see much upside on an absolute basis as the stock is currently trading below the average on our implied cost of equity metric, reflecting a premium valuation and leaving little room for multiple expansion.”

CNBC Pro subscribers can read more about this downgrade here.

— Alex Harring

Fed’s Waller’s message to markets: Rates endpoint is ‘still a ways out there’

Fed Governor Chirstopher Waller said that, while the central bank could raise rates at a slower pace next month, this shouldn’t be interpreted as a softening sign in its fight to bring down inflation.

“Quit paying attention to the pace and start paying attention to where the endpoint is going to be. Until we get inflation down, that endpoint is still a ways out there,” Waller said Sunday.

Earlier this month, the Fed raised rates by 75 basis points to their highest level since 2008.

— Fred Imbert

The U.S. and China should ‘stop this Cold War,’ economist Jeffrey Sachs says

The U.S.-China relationship is the “world’s most important bilateral” one, and it is fraught with tension — but Washington can change that, according to Jeffrey Sachs, professor at Columbia University.

“I think the U.S. should start by saying we want to have normal relations. We’re not trying to stop the Chinese economy,” he said.

His comments come hours before a face-to-face meeting between U.S. President Joe Biden and Chinese leader Xi Jinping in Bali, Indonesia, where the G-20 Summit is set to take place.

“It’s been too much sound bites in each direction and a lot of tension and, to my mind, too much U.S. unilateralism, rather than bilateral negotiation and diplomacy,” he added.

“The U.S. and China should ease up, stop this friction, stop this Cold War for the benefit of both of the economies and for the rest of the world,” Sachs said.

— Abigail Ng

Analyst says expectations for the Xi-Biden summit are ‘not very high’

Expectations for Biden-Xi talks at G-20 are 'not very high,' says analyst

Observers are not expecting much progress from the bilateral summit between U.S. President Joe Biden and Chinese leader Xi Jinping, according to Economist Impact, the policy and insights arm of The Economist Group.

“Expectations are not very high,” Andrew Staples, Asia-Pacific director of Economist Impact, told CNBC’s Martin Soong, highlighting Russia’s invasion of Ukraine as a focal point of simmering tensions between the Washington and Beijing.

“China has been unfortunately … somewhat ambivalent about [the war in Ukraine] when it comes to President Putin,” he said, adding that China’s stance is “damaging the global economy.”

“There’s a lot of concern from the business community globally that this geopolitical tension is impacting negatively.”

—Jihye Lee

Bitcoin falls below $16,000 to lowest since Nov. 2020 as FTX saga continues

CNBC Pro: UBS says disinflation is on the way — and shares 8 global stocks to play it

Swiss bank UBS has forecasted a “sharp” disinflation in 2023.

It said weak growth alongside “mechanical” indicators, such as easing supply chain bottlenecks and rising goods inventories, would see prices fall next year.

The investment bank screened for stocks that would benefit from such an environment.

CNBC Pro subscribers can read more about their forecasts, and eight stocks we’ve highlighted from their list.

— Ganesh Rao

CNBC Pro: One retail stock just hit an all-time high — and Bank of America thinks it’s got further to go

This year’s bear market has wiped trillions of dollars in market cap off the stock market, but a few stocks have outperformed significantly during this period.

Bank of America identified three retail stocks that bucked the trend, and says one remains a buy.

Pro subscribers can read more here.

— Zavier Ong

Cathie Wood says the Fed could risk a repeat of 1929 depression

Ark Invest’s Cathie Wood once again urged the Federal Reserve to pivot from its aggressive rate-hike cycle, she said in a series of tweets Saturday.

The central bank could be pushing the economy into a serious downturn like the Great Depression if the Fed continues to ignore deflationary signals, Wood said.

“We would not be surprised to see broad-based inflation turn negative in 2023,” Wood said. 

The innovation investor believes the U.S. economy echoes the Roaring Twenties with inflation easing and technological forces on the rise.

— Yun Li

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