11/18/22

The major averages are mixed and quiet for the day with the S&P 500 little changed on Friday as investors assessed tougher language from Federal Reserve speakers and pored over the latest earnings reports.

The market was divided, with the broad market index wavering over the flat line, while the Nasdaq Composite dropped 0.4% and the Dow Jones Industrial Average up by 96 points, or 0.3%.

All of the major averages are on pace for down weeks — the Dow is down 0.5% for the week, while the S&P and Nasdaq are lower by 1.3% and 2.1%, respectively. All three indexes are positive for the month, however.

The S&P 500 and Nasdaq gave up an earlier rally as investors started coming back to reset after a couple of rallies over the past week, beginning with the October CPI print. Stephanie Lang, chief investment officer at Homrich Berg, said this week is characterized by a "back-to-reality viewpoint."

"Following the big rally coming off the better-than-expected CPI print, the market's digesting the current data, which is bringing things back to reality," she said. "The rally that that followed the CPI print we don't feel was justified by fundamentals… The market's also pricing in a soft landing here, which we don't think is likely to occur. So when you hear the Fed officials coming out and reiterating their stance you're starting to see the market readjust to that."

On Friday, Boston Federal Reserve President Susan Collins expressed confidence Friday that policymakers can tame inflation without doing too much damage to employment.

St. Louis Federal Reserve President James Bullard said Thursday that "the policy rate is not yet in a zone that may be considered sufficiently restrictive." He suggested that the appropriate zone for the federal funds rate could be in the 5% to 7% range, which is higher than what the market is pricing.

Recent U.S. economic data shows inflation has finally peaked, according to Ned Davis Research's Thomas Bruce.

The latest reading on the U.S. consumer price index showed a year-over-year increase of 7.7%, below a Dow Jones estimate of 7.9%. The CPI also came in below expectations month over month.

Given this data, "we believe inflation has peaked and our base case is for the Fed to reduce their pace of rate hikes to 50 basis points in December," Bruce, a research analyst at the firm, wrote earlier this week. "With favorable seasonality, technicals, and market sentiment, there's just cause for optimism, despite an investment landscape still rife with macroeconomic concerns."

These companies are making headlines in midday trading.

Ross Stores — Ross Stores jumped 10% after a quarterly beat on earnings and revenue. The company was also named by Credit Suisse as its top pick in the off-price retail sector.

Foot Locker — Shares jumped 7% after Foot Locker surpassed expectations in its latest quarterly report and raised its full-year forecast.

Carvana — Carvana dropped 6% after an internal message obtained by CNBC's Scott Wapner said the company plans to lay off about 1,500 employees, or 8% of its workforce.