Stock market today: Dow cuts gains but ends higher as Fed comes into focus

By Yasin Ebrahim

Investing.com -- The Dow cut the bulk of its gains Tuesday as investors weighed up data showing easing inflation pressures for the second-straight month just a day ahead of the Federal Reserve's interest rate decision. 

The Dow Jones Industrial Average gained 0.30%, or 103 points, though had been up more than 700 points at the highs of the day. The Nasdaq Composite rose 1%, and the S&P 500 rose 0.7%.

The Labor Department said Tuesday its consumer price index rose 0.1% last month after edging up 0.3% in October. For the year through November, the CPI increased 7.1%, marking the smallest increase since December 2021.

The lower inflation print isn’t likely to alter the Fed’s monetary policy decision expected on Wednesday, though it will likely spark debate among members on how much further to increase rates until reaching a peak.

“Overall, a smaller 50 bp hike is expected for the Fed’s meeting tomorrow, to be followed by another 50 bp over the first quarter next year before the Fed feels comfortable to pause the current cycle and reassess,” RBC said.

Expectations that the Fed could pause sooner rather than later pushed Treasury yields sharply lower, sparking a Meta-led surge in big tech.

Meta Platforms Inc (NASDAQ:META) gained more than 4% after Goldman Sachs flagged the social media giant as a "top pick", saying most of the bad news about the firm’s core social media business and concerns about its hefty investments in the metaverse is increasingly priced into the shares.

Alphabet Inc (NASDAQ:GOOGL) rose 2%, while Apple (NASDAQ:AAPL) and Microsoft Corporation (NASDAQ:MSFT) ended in the green, with the latter up more than 1%. 

Energy added to gains from a day earlier as oil prices were driven higher by ongoing supply constraints amid the closure of the Keystone pipeline supplying Canadian heavy crude to the U.S. Gulf Coast of Mexico.   

Halliburton Company (NYSE:HAL) rallied more than 7%, while APA Corporation (NASDAQ:APA) and Schlumberger NV (NYSE:SLB) were up about 4% each.

In health care, meanwhile, Moderna (NASDAQ:MRNA) jumped 20% after the drugmaker announced positive results from its experimental skin cancer treatment.

Pfizer (NYSE:PFE), meanwhile, closed up nearly 2% as Goldman Sachs upgraded its rating on the stock to buy from neutral on expectations the firm's RSV, migraine, and sickle-cell disease drugs will drive growth in 2023.

The move higher in the broader market comes as some continue to warn of a downturn next year, driven by a deterioration in corporate earnings as margins come under pressure from a weaker consumer amid the impact of higher interest rates.

“As earnings projections deteriorate and the lagged effects of Fed’s actions begin to set in a more concrete way, I think markets will turn down,” Phillip Toews, CEO & portfolio manager of Toews Asset Management, told Investing.com’s Yasin Ebrahim in an interview on Monday.