Wall Street stocks jumped Monday, as upbeat Chinese data and comments from Treasury Secretary Janet Yellen fueled hopes for the health of the world's two biggest economies.
The S&P 500 (^GSPC) rose about 0.7%, while the Dow Jones Industrial Average (^DJI) popped around 0.3%. The tech-heavy Nasdaq Composite (^IXIC) put on more than 1% amid solid gains for Tesla (TSLA) after a Morgan Stanley upgrade.
The three major gauges were looking to shake off a losing week that saw tech stocks stutter as Apple (AAPL) suffered a two-day slump, though the iPhone maker's stock was continuing to recover ahead of its highly anticipated fall event on Tuesday.
Another positive was the surge in Tesla's shares, up a whopping 10%. Morgan Stanley analysts said the EV maker's Dojo supercomputer could add as much as $500 billion to the company's market value through faster adoption of robotaxis and network services.
This week, the focus also turns to Consumer Price Index inflation data due for release on Wednesday, a key input for investors trying to assess whether the Federal Reserve will ease up on interest rate hikes at its September meeting.
Yellen on Sunday said she is "feeling very good" about the chance the US will avoid a recession while still reining in consumer price increases, a key factor in the Fed debate.
Meanwhile, fresh Chinese inflation and other data raised hopes the Asian powerhouse's economy could finally be on the mend after its struggles to recover niggled at investors.
Elsewhere in Asia, Governor Kazuo Ueda said the Bank of Japan could put an end to keeping interest rates negative once the achievement of its 2% inflation target is in sight. That signals possible interest rate hikes at a central bank that has long stuck with ultra-loose policy.
Stocks start week higher
Stocks kicked off the first full week of trading in September on a high-note as investors awaited Wednesday's key inflation print and Tuesday's expected Apple iPhone announcement.
Tesla (TSLA) helped push the Nasdaq higher as the electric-vehicle maker's stock rose as much as 10% following bullish sentiment on Wall Street surrounding Tesla's AI plans. The move marked Tesla's best single day performance since January.
Lower-income spending remains resilient despite slowdown fears
Credit card delinquencies were on the rise during the second quarter as investors continue to watch for signs of a consumer slowdown.
But Goldman Sachs economics team dug into the corporate results of 26 retailers and found spending might not be slowing where one might expect as pressures mount on American wallets.
"Perhaps surprisingly, we find that the lower-income consumer is outperforming," Goldman Sachs senior economist Spencer Hill wrote in a note on Sunday night.
Goldman Sachs split their the consumer data into three categories based on the median income of customers. Based on company data and their own internal research, Goldman found stores with lower-income consumers (those with household incomes from $62,000 to $85,000) saw same-store sales increase 5.6% compared to last year in the most recent quarter. Those stores include the likes of Walmart (WMT), dollar store chains Dollar General (DG) , Dollar Tree (DLTR) and Five Below (FIVE) as well as Ross Stores (ROST).
On the other end, retailers with higher-income consumers (median income between $96,000 to $128,000) saw same-store sales decline 2.2%. Those stores included Bloomingdale's (M), RH (RH), Lululemon (LULU) and Nordstrom (JWN).
Apple stock tends to drift higher Into iPhone events, then drops
No matter how you slice and dice Apple stock returns around the company's landmark iPhone event, it's a sell-the-news affair.
The above chart tracks Apple's stock return on the one day each year when a new iPhone is introduced, going back to the inception of the iPhone in 2007. This year's event is set for Tuesday.
As seen in the green line in the above chart, Apple stock tends to float higher in overnight and pre-market trading -- somewhat reminiscent of FOMC drift before a Fed meeting. But it's risk-off into the close.
The original iPhone was introduced in 2007 at the June Apple Worldwide Developers Conference, which would serve as the forum of choice for the next few generations of iPhones.
A few years later in 2011, Apple presented the iPhone 4 in October. But in subsequent years, the event landed in September with the exception of the 2020 pandemic year.
September performance for Apple has always been quite dismal -- long before the iPhone was a glint in Steve Job's eye. A $1,000 investment only in the month of September beginning in the first full year of trading in 1981 would be worth roughly $80 today -- a 92% decline.
For investors hoping to ride the October wave that has delivered a 750% return over the last four decades, consider that August is typically a banner month as well -- but not this year, when Apple stock lost 4.4%.
Trending tickers on Monday afternoon
Tesla (TSLA) led the Yahoo Finance trending tickers page on Monday as shares of the electric-vehicle maker rose nearly 10%. In a research note titled "Unlocking Tesla's AI mojo," Morgan Stanley analyst Adam Jonas upgraded Tesla to Overweight from Equal Weight and boosted his price target to $400 from $250. Jonas noted the biggest value driver for Tesla from here on out will be "software and services revenue."
Shares of RTX (RTX) sank more than 7% after the company disclosed an engine manufacturing flaw is expected to weigh on its profits by about $3 billion this quarter.
Meanwhile, cannabis stocks continued their trek higher as optimism about Marijuana being rescheduled as a lower-risk drug builds. Canopy Growth Corporation (CGC) rose more than 50% on Monday, and Aurora Cannabis (ACB) popped nearly 70%.
Disney and Charter announce a deal to end media blackout
As part of the deal, the Disney+ Basic ad-supported offering will be provided to Charter customers who purchase the Spectrum TV Select package at no additional cost, "as part of a wholesale arrangement."
Additionally, ESPN+ will be provided to Spectrum TV Select Plus subscribers at no additional cost. The ESPN flagship direct-to-consumer service will also be made available at no extra cost to Spectrum TV Select subscribers when it launches.
Charter had pushed for the services to be available for free to its customers, a key sticking point in the negotiations. A stalemate between the two companies over the issue led Disney to pull its owned and operated channels including ESPN and ABC off Charter Spectrum cable systems in late August
In a joint statement, Disney CEO Bob Iger and Charter CEO Chris Winfrey said: "This deal recognizes both the continued value of linear television and the growing popularity of streaming services while addressing the evolving needs of our consumers."
Charter stock popped nearly 4% on the news.
Stocks in the green in afternoon trade
Stocks remained higher through the morning session on Monday as investors await key market moving data later this week including an inflation report and Apple's launch of the iPhone 15.
Disney, Charter reach deal to end carriage dispute: Report
Both Disney and Charter shares climbed more than 2% following the news. Other media companies including Paramount Global (PARA) and Warner Bros. Discovery (WBD) also climbed higher, up 4% and 5%, respectively.
Disney pulled its owned and operated channels including ESPN and ABC off Charter Spectrum cable systems in late August as the two hit a stalemate over whether Disney should give Charter subscribers free access to its ad-supported streaming services as part of the telecom giant's cable packages.
The blackout has already impacted a slew of high-profile sporting events including the US Open and arrived on the heels of the NFL's debut — upping the pressure for both sides to make a deal.
Stocks might not be pricing the interest rate path correctly, strategist says
More interest rate hikes remain on the table for the Federal Reserve, and that's not priced into the stock market, according to Oppenheimer's chief investment strategist John Stoltzfus.
"We persist in suggesting that investors curb their enthusiasm for a long rate pause or even a rate cut and instead right size expectations," Stoltzfus wrote in a note to clients on Monday.
Stoltzfus made no mention of moving down his year-end target for the S&P 500 of 4,900 but noted inflation is still sitting far off the Federal Reserve's goal. Expectations are for the latest reading from the Consumer Prices Index to show headline inflation rose 3.6% over the prior year in August, an increase from the 3.2% rise seen in July.
On a "core" basis, which strips out the volatile food and energy categories, CPI is forecast to rise 4.3% over last year in August, a slowdown from the 4.7% increase seen in July.
The Federal Reserve most closely tracks core inflation and its preferred gauge, the Personal Consumption Expenditures Index (PCE), showed prices rose 4.2% in July, up from 4.1% in June.
"In our view even as the Fed appears to be nearing an end to the current rate hike cycle the stickiness evidenced in food, services, energy and other prices warrants the Fed remaining vigilant along with a potential for one more hike this year and perhaps another next year," Stoltzfus wrote.
The sticky nature of inflation doesn't have economists nor market participants overly worried about a September hike. As of Monday morning, markets had priced in a 93% chance that the Fed holds interest rates steady at the conclusion of its Sept. 19-20 meeting, according to data from the CME Group. When looking ahead further, markets are pricing in a 39% chance the Fed hikes in May, a roughly six percentage point increase from a week ago.
Wednesday's CPI report will be the last inflation data for the Federal Reserve ahead of its meeting next week.
AI could be the next catalyst for Tesla stock
Tesla (TSLA) stock popped more than 6% on Monday as a prominent Wall Street analyst stirred up excitement about the artificial intelligence prospects for the electric vehicle maker.
In a research note titled "Unlocking Tesla's AI mojo," Morgan Stanley analyst Adam Jonas upgraded Tesla to Overweight from Equal Weight and boosted his price target to $400 from $250.
"Investors have long debated whether Tesla is an auto company or a tech company," Jonas wrote. "We believe it's both, but see the biggest value driver from here being software and services revenue. The same forces that have driven AWS to reach 70% of AMZN total EBIT can work at Tesla, in our view, opening up new addressable markets that extend well beyond selling vehicles at a fixed price."
Jonas had previously downgraded Tesla in June amid its stock surge saying that investors needed to "wake up" from the AI-fueled dream. But now, Jonas is homing in on Dojo, Tesla's custom supercomputing system that trains its full self-driving model. Dojo could add "up to" $500 billion to Tesla's enterprise value, per Jonas, through faster adoption rate in mobility (meaning robotaxis) and network services.
"Dojo is the key to unlocking Tesla's double-flywheel effect – integrating and accelerating the synergies between Tesla's Core Auto Flywheel and Tesla's SAAS Flywheel... accelerating time to market and expanding the addressable market," Jonas wrote.
Stocks higher to start the week
Stocks opened in the green on Monday as investors awaited key inflation data set for release later in the week.