Stocks poised to halt 5-day rally after inflation report, but weekly gains in sight – MarketWatch

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Chairman Powell has soothed markets, for now.

U.S. stocks traded lower Thursday morning, threatening to snap a five-day streak that helped to drive the Dow and the S&P 500 out of correction territory, at least by one measure.

How did major benchmarks fare?

The Dow Jones Industrial Average DJIA, -0.37% fell 144 points, or 06% to 23,859, while the S&P 500 index SPX, -0.33% slipped by 15 points, or 0.6% to 2,582. Nasdaq-100 futures NQH9, -0.49% receded 38 points, or 0.6%, to 6,947.

On Thursday, the Dow rose 122.80 points, or 0.5%, to 24,001.92, and the S&P 500 advanced 11.68 points, or 0.5%, to 2,596.64. The Nasdaq Composite Index added 28.99 points, or 0.4%, to 6,986.07.

Need to Know: Here’s what might stock the stock market’s post-December bounce

Both the Dow and the S&P finished the day up more than 10% from their December lows, marking their exit from correction territory, or when an asset drops 10% from its recent peak.

Read: The stock market just got off to its best start in 13 years

What’s driving the market?

Investors have taken solace in speeches by Federal Reserve officials in recent weeks, as they have continued to spread the message that the central bank will be cautious in its approach to raising interest rates this year.

Fed Chairman Jerome Powell reinforced that message Thursday during a during a discussion at the Economic Club of Washington stressing that the central bank will be “flexible” and “patient” on monetary policy as inflation is “under control.”

Earlier in the day, a reading of December inflation, the consumer-price index slipped 0.1% to mark the first decline in nine months, the Labor Department said on Friday. That matched the forecast of economists polled by MarketWatch. The increase in the cost of living over the past 12 months slowed to 1.9% from 2.2%, the first time it’s fallen below the key 2% mark since August 2017, but also matched expectations.

The report offers investors a measure of how quickly prices are rising—with higher inflation a potential driver of lower corporate profit margins and more aggressive Fed rate increases.

Investors will also be digesting incrementally good news on the U.S.-China trade front, after U.S. Treasury Secretary Steven Mnuchin told reporters Thursday night that Vice Premier Liu He, the most senior economic policy adviser to President Xi Jinping, would travel to Washington later in January to continue trade negotiations, talks that have been seen by markets as gaining momentum this week.

Meanwhile, the partial U.S. government shutdown entered its 21st day, tying the record for the longest in history. While markets have so far shrugged off the drama in Washington, hundreds of thousands of federal workers won’t receive paychecks this week, and economists warn that the economic effects of the shutdown could grow significant as the standoff drags on.

What are the analysts saying?

“Stocks are loving that central bank policy appears to be in an ultra-dovish mode,” wrote Edward Moya, chief market strategist at Oanda, in a note. “Inflation is low and under control and the main catalyst for the Fed’s ability to be patient. If we see softer prints, we could see yields drop and stocks continue their rally.”

Which stocks are in focus?

Shares of Netflix Inc. NFLX, +3.90% rose 2.1%, after the firm was upgraded to strong buy from outperform at Raymond James.

Chico’s FAS Inc. CHS, +4.30% stock advanced 0.5% Thursday, after the firm announced the closure of 250 stores, as part of an overhaul, with the aim of improving its online offering and customer service.

Activision Blizzard Inc. ATVI, -9.89% fell 11.7%, after the firm announced Thursday evening that it was ceding rights to the “Destiny” franchise to Bungie Inc. Following the move, Benchmark cut its price target on the stock from $93 to $87, and KeyBanc Capital slashed its price target from $80 to $64.

Shares of General Motors Co. GM, +8.22%   rose 6.2% early Thursday, after the automaker said it expects 2018 earnings and adjusted free cash flow to beat expectations and provided an upbeat 2019 outlook.

Yum Brands Inc. YUM, -1.69%  stock is down 2.5%, after the KFC and Pizza Hut parent was downgraded from neutral to sell by Goldman Sachs.

Shares of Starbucks Corp. SBUX, -1.51%   fell 3.7%, also after Goldman Sachs downgraded the stock, to neutral from buy.

How are other markets trading?

Markets in Asia rallied Friday, with Japan’s Nikkei NIK, +0.97% closing 1% higher, while Hong Kong’s Hang Seng Index HSI, +0.55% added 0.6%, and China’s Shanghai Composite SHCOMP, +0.74%  advanced 0.7%.

In Europe, stocks edged lower, with the Stoxx Europe 600 SXXP, +0.07%  down 0.1%.

Crude oil CLG9, -1.14% is lower Thursday, threatening to end its nine-day winning streak Gold prices GCG9, +0.21% advanced 0.1%, while the U.S. dollar DXY, +0.09% fell 0.2%.

DJIA, -0.37%