Nasdaq closes up 2%, Dow adds 400 points as tame inflation data fuels market comeback (2024)

Stocks closed higher on Tuesday, with the Dow Jones Industrial Average advancing more than 400 points after softer-than-expected wholesale inflation data.

The 30-stock Dow added 408 points, or 1.04%, to close at 39,765.64. The Nasdaq Composite gained 2.43% to 17,187.61, while the S&P 500 climbed 1.68% to finish the session at 5,434.43.

— Brian Evans

The S&P 500 and Dow Jones Industrial Average are down 4.3% and 3.9%, respectively, from their all-time highs reached in mid-July, according to FactSet data.

The Nasdaq Composite has farther to go to return to its record highs, having fallen 8.2% from its all-time intraday high reached July 11.

— Scott Schnipper

Low volatility ETFs are living up to their billing in the third quarter.

Several of the biggest funds labeled as "low" or "minimum" volatility are outperforming the broader market in the third quarter and saw smaller declines during the Aug. 5 sell-off.

That includes the iShares MSCI USA Min Vol Factor ETF (USMV), which entered Tuesday up 3.3% in the third quarter. For comparison, the entered the day down 2% for the quarter.

Those aren't the only types of ETFs that are showing promise as a way to reduce portfolio volatility. Some funds that track gold or use options to generate income, like JPMorgan's Equity Premium Income ETF (JEPI) are also outperforming the S&P 500 recently. Read more about the funds on CNBC Pro.

— Jesse Pound

Some weak economic data has appeared to sparked sell-offs in the stock market over the past few weeks, but that doesn't mean that a recession is priced in, according to Goldman Sachs.

Strategist Guillaume Jaisson said in a note to clients Tuesday evening that there are signs of a slowdown in Europe and China in addition to the recent softening in the U.S. labor market, but that the stock market is still positioned optimistically.

"Cyclical stocks have underperformed during the correction, but the US equity market does not appear to be pricing a recession," the note said.

— Jesse Pound

The Federal Reserve's goal for 2% annualized inflation may be a "pipe dream," according to Barry Bannister, chief equity strategist at Stifel.

"When I look at everything, I think 2% for the Fed on an inflation goal is just a pipe dream," he said on CNBC's "Squawk on the Street." "The market, on the break-evens, will eventually adjust to that. And we'll have to add some term premiums, as well, to the 10-year."

Looking at the stock market, he said the could fall to 5,000 by October, a decline of more than 6% from Monday's close. Still, Bannister noted that the broad index would be considered fairly expensive at that level. After it touches 5,000, he said upside may be limited.

"All of these things really don't argue for the overexuberance that we see today," he said.

— Alex Harring

Check out the companies making headlines in midday trading.

• Starbucks,Chipotle Mexican Grill— Starbucks stock shot up 21% after the coffee chainousted CEO Laxman Narasimhaneffective immediately and replaced him with Chipotle CEO Brian Niccol, who will step in Sept 9. Three Wall Street firms alreadyupgraded Starbucks stockafter the news. Shares of Chipotleshed 9%on Niccol's departure.
• Home Depot— The home improvement retailer gained 2%, after falling as much as 4% in the premarket after Home Depotissued lackluster guidancebecause of a cautious consumer. The company expects full-year comparable sales will fall by 3% to 4%, compared with the previous fiscal year. Home Depot had anticipated a roughly 1% decline.
• Dell Technologies— The technology stock popped 6% on the back of aBarclays upgrade to equal weightfrom underweight. The bank said Dell's recent pullback can account for concerns around the durability of demand for artificial intelligence offerings.

Read the full list here.

— Sarah Min

U.S. crude oil is pulling back Tuesday after breaking above $80 per barrel in the previous session on escalating tensions between Iran and Israel.

The U.S. benchmark has held a floor in the lows $70s, but now faces "stubborn overhead resistance" at $84 per barrel, Wolfe Research analyst Rob Ginsberg told clients in a note.

Ginsberg believes U.S. crude can break above $84, and "once out, mid to high $90s isn't crazy."

— Spencer Kimball

More than 100 million Starbucks shares have exchanged hands so far in Tuesday's session, underscoring the high interest in the coffee chain's stock following a leadership change.

As of shortly before 12:30 p.m. ET, more than 108 million shares had been traded. That's already almost 9 times the 30-day average volume of 12.3 million shares — and there's still multiple hours left in the session.

Starbucks shares surged more than 20% in midday trading. The move comes after the announcement that Chipotle CEO Brian Niccol would take the same role at Starbucks, replacing Laxman Narasimhan.

— Alex Harring, Gina Francolla

Home Depot's weak sales outlook on a cautious consumer adds to the likelihood the Federal Reserve can start lowering interest rates, according to Sarat Sethi, portfolio manager at Douglas C. Lane & Associates.

"It's just confirming what we're seeing. We're seeing the consumer slowing down," Sethi told CNBC's "Squawk Box" on Tuesday. The investor noted the worsening consumer pullback cited in other recent corporate results, such as from McDonald's and Starbucks.

"It's confirming what the Fed needs to do, which is basically start cutting rates," Sethi said. "The big question is the Fed going to be cutting rates for the right reason, and hopefully it's more because inflation is coming down, not because our economy really needs more."

Home Depot

Blackstone chief operating officer Jonathan Gray said on "Squawk on the Street" that the U.S. economy has been resilient but there are now signs of slow down.

Gray said that the consumer sector specifically is seeing weakness, but that inflation is coming down, including in rental housing, and that the Federal Reserve could help the economy with rate cuts.

"There's nothing that we see that is fundamentally out of balance, and I do think as this slowdown continues it gives the Fed room to cut to hopefully soften this blow," Gray said.

One area where Gray seemed less optimistic is the office property market, which he said has "more fundamental" issues than the rest of real estate. Blackstone values its global real estate portfolio at roughly $600 billion.

— Jesse Pound

Following this morning's shocking C-suite change at Starbucks, Bank of America writes, "Restaurant folks would say it's the best replacement that Starbucks could have found" in luring Brian Niccol away from Chipotle to be its new CEO. B of A points out that the challenging Starbucks situation is "not his first rodeo fixing an underlying quality business that experienced a brand challenge." Niccol has a proven track record - he "was a success story at Taco Bell" before he joined Chipotle and led that chain out of the E. Coli crisis.

Niccol's stellar performance at Chipotle speaks for itself. Just 9 S&P 500 stocks have done better than Chipotle's 773% gain since Niccol took the helm at the burrito chain in March 2018. That performance was also far better than the 82% jump in McDonald's, the 69% rise in Yum Brands and the mere 35% increase in Starbucks.

Meanwhile, Starbucks' struggling sales over the past year have been well documented. That has propelled the 22% plunge the stock had during CEO Laxman Narasimhan's tenure that began in March 2023. Only 39 S&P 500 companies fared worse than the coffee giant during that time. During that same period, fast-growing coffee chain Dutch Bros. saw flat stock performance, while Chipotle's shares rose 74%.

— Robert Hum

U.S. equities are bouncing back after last week's sell-off, according to Nomura. Macro hedge funds buying into the pullback has helped power the recent rebound; without them, the market would likely have remained soft throughout, said analyst Yosh*taka Suda.

"We think the downside risk posed to U.S. equities by systematic investors is much less serious now than it was before," Suda wrote in a Tuesday note.

To be sure, Suda believes volatility levels will stay elevated due to an uncertain outlook on the U.S. economy until the presidential election in November.

"The event premiums the market assigns to economic indicators also look likely to rise, given the increased uncertainty over the outlook for the US economy," Suda said. "Members of the FOMC are already signaling an emphasis on keeping the US economy healthy, which presumably means that indicators of inflation are seen as less important than before, but even so, the event premium assigned to this week's CPI announcement is fairly high."

— Hakyung Kim

Piper Sandler's technical research team expects the to resume a broadening rally.

"We anticipate the popular market averages will continue to back and fill around their 50-/200-day MAs as volatility remains relatively high," chief market technicianCraig Johnson wrote in a Tuesday note, adding that he expects small to mid-cap stocks to outperform as the market continues to broaden during the latter half of this year.

The firm maintained its S&P 500 year-end target of 5,800.

— Pia Singh

U.S. stocks opened higher on Tuesday following better-than expected wholesale inflation data.

The S&P 500 gained 0.7%, while the Nasdaq Composite advanced 1%. The Dow Jones Industrial Average added 138 points, or 0.3%.

— Brian Evans

Investors got more data that supports the case easier monetary policy down the road.

The producer price index, a gauge of what wholesalers pay for raw goods, rose 0.1% in July. Economists polled by Dow Jones expected PPI to have increased by 0.2% from the prior month. Excluding food and energy, PPI was unchanged — with economists expecting a 0.2%. increase.

— Fred Imbert

Coffee chain Starbucks announced a surprise CEO change on Tuesday morning, bringing in Brian Niccol from Chipotle Mexican Grill.

Niccol will start on Sept. 9, while Laxman Narasimhan is stepping down as Starbucks CEO and board member effective immediately, the release said.

Shares of Starbucks surged 10% in premarket trading after the announcement.

Shares of Starbucks rose Tuesday.

Shares of Chipotle fell on Tuesday.

Check out the companies making headlines before the bell.

Home Depot— Shares fell more than 2% in the premarket after the home improvement retailer warned that sales would be weaker than anticipated in the second half of 2024. The company sees full-year comparable sales to fall by 3% to 4%. Earlier this year, Home Depot guided for a roughly 1% decline.

On Holding— Shares of the athletic apparel company dropped 6.5% after a second-quarter results that missed Wall Street expectations. The company reported earnings of 0.14 Swiss francs per share, or about $0.16, below the StreetAccount estimate of 0.16 Swiss francs. However, revenue of 567.7 million Swiss francs was better than the 562.1 million expected.

Tencent Music Entertainment Group— U.S.-traded shares of the Chinese streaming company fell nearly 7%. The company reported a 1.7% yearly decline in revenue. Monthly active users in the mobile categories also came in below analysts' forecasts.

The full list can be found here.

— Hakyung Kim

Chinese tech company Huawei Technologies is preparing to introduce a new chip for artificial intelligence use, which would challenge Nvidia in China amid U.S. chip export controls on the country, Wall Street Journal reported on Monday.

Huawei told potential clients that its new chip, Ascend 910C, is comparable to Nvidia's H100 graphics processing unit, which isn't directly available in China, the report said. The company has been testing its latest chip in recent weeks and aims to start shipping as soon as October, the Journal reported, citing people familiar with the matter.

— Pia Singh

Shares of Home Depot fell more than 2% in the premarket after the home improvement retailer warned that sales would be weaker than anticipated in the second half of 2024.

The company sees full-year comparable sales to fall by 3% to 4%. Earlier this year, Home Depot guided for a roughly 1% decline.

HD year to date

Economic growth is trending toward recession but not there yet, according to Evercore ISI's chair and head of research Ed Hyman.

The firm's proprietary company survey of volume and prices fell to 47.6 over the past week, near traditional recession readings around 45. On the survey scale, 100 represents strong activity and zero represents weak.

"So we're not there," Hyman said of recession. He noted that state sales tax receipts are "suggesting both growth slowing and inflation cooling."

—Jeff Cox

The retail sales data could be more important this week than the inflation reports, given the revived fears around slowing growth, according to Cameron Dawson, investment chief at NewEdge Wealth.

"Because we think that there's a greater risk for downside to growth than there is a risk for upside to inflation, we think retail sales is actually more important," Dawson told CNBC's "Closing Bell" on Monday.

"If retail sales falls off, then we might know that the labor market could be weaker than maybe some of the headline data suggests," Dawson continued.

To be sure, a surprisingly hot inflation print in either consumer or producer prices could still result in a surge of volatility, particularly in the bond market, she noted.

— Sarah Min

A pair of inflation reports due out over the next two days, on consumer and producer prices, could give an uncertain market some direction.

The July producer price index — a measure of wholesale prices that's set for release Tuesday — is expected to show a monthly gain of 0.2% last month, according to economists surveyed by Dow Jones. That's in line with the previous month's reading.

The consumer price index that's expected out Wednesday is anticipated to show an increase of 0.2% last month, consensus estimates show. That's up from a 0.1% decline in the prior month.

— Sarah Min

U.S. stock futures opened little changed Monday night.

Dow Jones Industrial Average futures rose 26 points, or 0.07%. S&P 500 futures and Nasdaq 100 futures climbed 0.03% and 0.02%, respectively.

— Sarah Min