Stock market today: Dow ends higher amid bets inflation cooled further in December

By Yasin Ebrahim

Investing.com -- The Dow racked up gains Wednesday, as investors increased bullish bets on stocks on optimism that data due Thursday will show a further slowdown in inflation.

The Dow Jones Industrial Average gained 0.80%, or 268 points, the Nasdaq Composite climbed 1.8%, and the S&P 500 climbed 1.3%.

Following recent data pointing to cooling inflation including easing wage pressures seen in the December jobs report, investors are “looking for further news showing inflation is headed lower in the CPI data,” Wells Fargo said in a note ahead of the consumer price index report due Thursday.

Economists are expecting that the consumer price index to ease to 6.5% in December year-on-year from 7.1%, supported by lower car prices, oil prices, and rent prices.

Expectations for further signs of easing inflation pressures have buoyed expectations for a less hawkish Fed.

Consumer discretionary stocks led the gains in the broader market as Amazon (NASDAQ:AMZN) and Tesla (NASDAQ:TSLA) racked up gains, with the latter announcing plans to expand its electric vehicle factory in Texas. The move comes in the wake of demand worries after Tesla recently cut prices on EVs in China, a key market for the EV maker.

Travel and hospitality stocks also boosted consumer stocks, with Expedia (NASDAQ:EXPE) rallying nearly 5% after Oppenheimer upgraded the travel company to outperform from perform as “customer services efficiency improvements and successful cost cutting execution,” are expecting to boost margins.

Alphabet (NASDAQ:GOOGL) and Microsoft (NASDAQ:MSFT), meanwhile, ended the day up 3% and led big tech higher. Microsoft’s reported interest in investing in artificial intelligence start-up OpenAI continues to spur optimism on Wall Street.

“With ChatGPT being one of the most innovative AI technologies seen in the industry, MSFT is clearly being aggressive on this front and not going to be left behind on what could be a potential game changing AI investment,” Wedbush said in a note.

Airlines stocks were also in focus after the Federal Aviation Authority lifted a halt on domestic flights following an overnight outage of a system used to send safety and flight information to pilots. More than 8,200 flights have been delayed, and over 1,200 flights were canceled, according to flight-tracking service FlightAware.

The climb on Wall Street comes just as banks - including Bank of America Corp (NYSE:BAC), Citigroup (NYSE:C), JPMorgan Chase & Co (NYSE:JPM), and Wells Fargo (NYSE:WFC) - are set to kick off the quarterly earnings season in earnest on Friday.

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Ahead of quarterly earnings, investors have lowered their expectations on earnings amid concerns about rising costs, but this could potentially lessen the likelihood of negative surprises.

The estimated earnings decline in Q4 for the S&P 500 is 4.1%, and earnings estimates for 2023  fell by 4.4% to $230.51 from $241.20, according to a recent FactSet report. 

“Earnings expectations have come down already… that probably means there's less of a chance of negative surprises,” Melissa Brown, managing director of applied research at Qontigo, told Investing.com's Yasin Ebrahim on Wednesday.