Stock Market Remains Erratic After Inflation Data; Airlines Tumble On This Forecast

U.S. stock market indexes remained uncertain at midday Wednesday as enthusiasm over cooler inflation data faded. A soft profit outlook from American Airlines (AAL) sent the industry broadly lower.

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Indexes have been erratic, surrendering gains after the first hour of the session. At midday, indexes made a move off session lows. The S&P 500 was up 0.1%. The Nasdaq composite was off 0.1% and held barely above the 12,000 level.

The Dow Jones Industrial Average climbed 0.2%. The Russell 2000 faded 0.2%. The Innovator IBD 50 ETF (FFTY) improved and was up 0.6%.

Advancing stock led decliners by a 9-7 ratio on the NYSE, and losers had a small advantage over winners on the Nasdaq. Volume fell on the NYSE and rose on the Nasdaq compared with the same time on Tuesday.

Microsoft Target Raised; Homebuilders Extend Rally

Dow Jones component Microsoft (MSFT) climbed 0.6% after Wedbush analyst Dan Ives raised the price target to 315 from 290 and maintained an outperform rating. Ives cited stable growth of Azure, Microsoft’s cloud-computing platform.

The note comes a day after UBS issued a report saying it was cautious on Azure. Microsoft shares remain in buy range from the 276.86 buy point of a cup base.

Strength in homebuilders continued as Lennar (LEN) rose just past the 106.23 buy point of a cup-with-handle base. But volume was light and the stock was slightly below the entry at midday.

Biotech Vertex Pharmaceuticals (VRTX) rallied above its 325.29 buy point but low volume raised a red flag.

Stock Market And Bonds React To Inflation Data

The Consumer Price Index, or CPI, edged up 0.1% from the previous month and 5% year over year. Both gauges showed improvement from February and were below consensus forecasts. Core prices, which exclude food and energy, rose 0.4% month to month and 5.6% on an annual basis. Both were in line with estimates.

Alexandra Wilson-Elizondo, co-head of portfolio management for Multi Asset Solutions at Goldman Sachs Asset Management, said the CPI print will keep a 25-basis point hike on the table for the May meeting. The strategist added that March data doesn’t reflect post-banking stress and the subsequent tightening of credit conditions.

The 10-year Treasury yield fell 7 basis points to 3.37%. Odds of a quarter-point rate hike fell modestly, according to CME Group’s FedWatch.

Fed funds futures indicate a 67% chance of a quarter-point rate increase at the May 3 Fed meeting, and a 33% probability that the central bank will pause rate hikes. Odds for another hike at the June meeting remain low, at 3%, with a 68% chance there will be no change in rates.

Later today, the stock market will get a look at the Fed’s thinking when minutes of the March meeting are released at 2 p.m. ET.

Acquisition Sparks 32% Market Move

Triton International (TRTN) soared 32% after the shipping container leasing company agreed to be acquired by Brookfield Infrastructure Partners (BIP) for $85 per share, or an enterprise value of more than $13 billion. Brookfield shares were little changed.

Emerson Electric (EMR) agreed to acquire rival test-equipment maker National Instruments (NATI) for $60 per share in an all-cash deal valued at about $8 billion. NATI stock gapped 9.5% above a cup base to new highs, while Emerson shares fell nearly 2%.

American Airlines sold off more than 9%, losing grip on its 200-day moving average and falling to the lowest price since early January. The airline raised its first-quarter profit guidance but it fell short of expectations.

The stock is on pace for its worst day since March 7, 2022, when it fell 12%, according to Dow Jones Market Data. The news rattled other airline stocks, which are today’s worst-performing industry group, down 4.3%.

Rival Delta Air Lines (DAL), which reports Q1 earnings Thursday morning, and United Airlines (UAL) also fell below their 200-day lines.

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