Dow Jones Posts Worst Week Since September

Stocks finished lower Friday, with all the major averages closing out the week with losses.

The Dow Jones Industrial Average shed 305.02 points, or 0.9%, to close at 33,476.46. The S&P 500 tumbled 0.73% to end at 3,934.38, while the Nasdaq Composite fell 0.7% to finish at 11,004.62.

For the week, the Dow fell 2.77% to post its worst week since September. The S&P tumbled 3.37%, while the Nasdaq dropped 3.99%.

— Samantha Subin

The relative strength of the U.S. consumer is going to help prop up inflation, meaning that bringing price increases down to normal levels is going to take longer than expected.

“Our expectations are that inflation gets in control really at the end of next year to 2024,” Brian Moynihan, Bank of America’s CEO, said during an interview with CNBC Friday.

“This is going to take a little longer than people would like, it’s not going to be clear overnight,” Moynihan said. “It’s going to take a bit of time for higher short-term rates to continue to slow down the economy and bring inflation under control.”

The Federal Reserve Bank has delivered four 0.75 percentage point increases to its benchmark rate and its widely expected to hike rates by another 0.5 percentage point in the coming week. They are likely to continue with rate hikes if inflation data keeps coming in hotter than expected.

With that in mind, Bank of America anticipates that rates will continue to climb and stay elevated next year. Keeping rates high will be integral to bringing inflation in check.

“Whether the terminal rate is five or five and a half is not as important as holding it there until we’re sure,” said Moynihan.

— Carmen Reinicke

If history is any guide, a trend higher in the market could kick off as soon as next week, according to Jeffrey Hirsch of the Stock Trader’s Almanac.

“Over the last 21 years, the market typically begins its march higher on or around the tenth trading day of December,” he wrote. “This year the tenth trading day is December 14, the same day as the Fed announcement.”

This period, he said, is also near the time that tax-loss selling pressures typically subside.

Next week, Hirsch expects the Federal Reserve to deliver a widely expected 50 basis point rate hike, but continue shifting toward a “more dovish stance.” That, he said, would be enough of a reason to kick off a rally into the end of the year and even 2023.

“We remain bullish and look for additional confirmation for this stance from the market next week,” he wrote.

— Samantha Subin

Lululemon shares fell Friday after the athleisure maker issued a weaker-than-expected outlook. Morgan Stanley still sees a lot of good in the stock, however, and raised its price target on it Friday.

The firm reiterated its overweight rating on shares and raised its price target to $387, about 17% from where it closed Thursday.

“The stock is likely taking a breather following its +34% run since October, and market expectations got ahead of themselves,” Morgan Stanley equity analyst Alex Straton said in a note. “Fundamentals continue to be strong and the company’s ability to drive exceptional demand against a challenged consumer and macro backdrop remains impressive.”

— Tanaya Macheel

Stocks were mostly lower as the final hour of trading kicked off Friday.

The Dow Jones Industrial Average last traded 85 points, or 0.3% lower, and was on pace for its worst week since September. The S&P 500 and Nasdaq Composite traded down 0.1% and up 0.1%, respectively.

— Samantha Subin

Elon Musk said Friday any economic downturn would be more severe if the Federal Reserve tightens policy again next week.

The Fed will conclude a two-day meeting Wednesday with an announcement on where interest rates are heading. Central bank officials have indicated, and markets widely anticipate, another 0.5 percentage point hike.

— Yun Li

Costco is uniquely situated in an inflationary environment and could stand to win more members as consumers get increasingly price conscious, according to Cowen.

“Costco is well-positioned in an inflationary environment and could also benefit from increased trade down traffic as higher income consumers shop for quality value,” analyst Oliver Chen said in a note to clients.

He named the stock a best idea for 2023. CNBC Pro subscribers can read more about why.

— Alex Harring

Wall Street’s top strategist Marko Kolanovic said he has turned bearish after November’s rally.

“The market was moving higher and higher last month and we are at this point quite actually nervous that we would see the downside,” JPMorgan’s Kolanovic said on CNBC’s “Halftime Report.”

The strategist said a combination of lower earnings and higher terminal rates means that stocks have some room to decline from here.

For 2023, Kolanovic said the market could retest its bottom in the first quarter or second, and then stocks could see a rebound as the Federal Reserve reverses its policy.

The top-rated strategist had been one of the biggest bulls on Wall Street this year. He has correctly advised investors to buy the comeback in the second half of this year, but now is rethinking that view.

— Yun Li

Mizuho downgraded Coinbase to underperform from neutral, saying the company could struggle if an agreement that is a key driver of revenue gets negotiated.

Managing Director Dan Dolev cut the price target to $30, which implies the stock would drop 30% from where it closed on Thursday. He said Coinbase’s agreement with Circle that brings over some of the latter’s investment interest as revenue could get renegotiated, which could hurt the Coinbase’s earnings in the future.

“Our assessment of consensus estimates for interest income for COIN suggests that the Street is underestimating the potential risks,” he said in a note to clients.

CNBC Pro subscribers can read more about the downgrade here.

— Alex Harring

Ongoing volatility as the market digests the latest economic data creates an opportunity for investors to buy up some valuable stocks that get dragged into the chaos, according to John Stoltzfus, Oppenheimer’s chief investment strategist.

“All of this, it creates a period of volatility, which we think actually offers opportunity for investors to catch some babies that get thrown out with the bathwater,” he told CNBC’s “Squawk on the Street” on Friday.

— Samantha Subin

These stocks had some of the biggest moves during midday trading

• Beyond Meat — Shares of Beyond Meat dropped nearly 9% after being downgraded to sell from hold by Argus, which cited falling demand.
• RH — The retailer formerly known as Restoration Hardware gained nearly 3% after it reported third-quarter earnings-per-share and revenue that beat expectations.
• DocuSign — DocuSign’s stock rallied16.3% after reporting upbeat quarterly results, as well as better-than-expected billings, subscription renewals and additional sales to existing customers.

Read more here.

— Michelle Fox

Analysts at Jefferies are turning pessimistic on life insurance stocks heading into the new year.

In a note to clients on Thursday night, analyst Suneet Kamath downgraded Equitable Holdings and MetLife to hold from buy, trimming price targets on both stocks.

“We don’t see YTD tailwinds from rising interest rates, lower COVID mortality and low credit losses as drivers of P/E expansion in 2023, yet see some recessionary risks,” Kamath wrote.

MetLife was modestly lower Friday.

— Jesse Pound

Goldman Sachs upgraded shares of Jazz Pharmaceuticals to buy from neutral based on its positive outlook on operating margin performance and multiple expansion.

For one, Goldman cites Jazz Pharmaceuticals’ guidance for 5% adjusted operating margin improvement by 2025, a goal which it has already met this year.

“As such, we believe management will be able to maintain these operating margin improvements into 2025, even without substantial top-line growth from key franchises,” analyst Madhu Kumar wrote in a note Thursday.

There is also strong demand for its blood cancer therapy Rylaze, potential acceleration in the launch of its idiopathic hypersomnia (IH) drug Xywav and opportunity for revenue growth with its epilepsy drug Epidiolex, he said.

Kumar modestly lowered his price target to $190 from $192, implying nearly 27% upside from Thursday’s close.

— Michelle Fox

Shares of Exxon Mobil have soared more than 70% so far this year, and still have more room to run, Goldman Sachs analyst Neil Mehta wrote in a note Friday.

“While we recognize XOM has outperformed the S&P and the Brent price sharply this year, we still believe the business is undergoing a multi-year transformation, with strong capital returns, volume growth, and improved corporate transparency,” he said.

Mehta raised his enterprise value/debt-adjusted cash flow multiple to 7.5x from 7.0x and adjusted his earnings-per-share estimates to $13.58 in 2022, $9.31 in 2024 and $9.59 in 2024 from $14.15, $12.33, and $9.58, respectively. Because of those updates, Goldman dropped its price target to $116 from $121, still representing 11% upside from Thursday’s close.

— Michelle Fox

The potential for a Santa Claus rally into the end of the year depends on next week’s consumer price index report, according to Chris Zaccarelli, chief investment officer for Independent Advisor Alliance.

“It is likely that the Fed will move ahead with their plans of reducing the rate hike down from 75 bps per meeting to 50 bps per meeting, but if there is any chance of a Santa Claus rally this year, it will hinge on the inflation data next Tuesday coming in lower than expected,” he wrote.

— Samantha Subin

Needham downgraded Carvana to hold from buy as fears over the long-term health of the company mount.

Bloomberg first reported earlier this week that some of the used car platform’s creditors were banding together for negotiations. This has raised concern over a Chapter 11 bankruptcy in the near future.

Needham said the market may be pricing in a bankruptcy as the stock has fallen over the last two days. While the company appears to have methods for acquiring cash like real estate and vehicle inventory, the firm said a long-term solution is not yet apparent. Needham said recent layoffs only lowered faith in management’s ability to turn the company around.

“While we think CVNA has a potential strategic path, we’re not convinced it will prove successful over the long term,” analyst Chris Pierce said in a note to clients Friday.

In addition to downgrading the stock, Pierce removed a price target after it was previously set at $20. The stock’s price closed Thursday at $4.96.

Carvana had dropped 38.5% this week following the Tuesday Bloomberg report. The stock has dropped 97.9% so far this year.

— Alex Harring

Expectations of a 50 basis point hike next week from the Federal Reserve stand despite November’s higher-than-expected producer price index.

“It’s unlikely today’s hotter-than-expected report would be enough to push the Fed to stick with the 75 basis point hikes next week, but any negative news on the inflation front is a thorn in the side of both the Fed and investors,” said Mike Loewengart, head of model portfolio construction at Morgan Stanley Global Investment Office.

— Samantha Subin

Consumers grew more optimistic about the economy and less worried about inflation in December, according to a closely watched survey.

The University of Michigan Index of Consumer Sentiment rose to 59.1 for the month, up from 56.8 in November and ahead of the Dow Jones estimate for 56.5, according to a preliminary reading Friday. The index remains well below its year-ago level of 70.6, which was 16.3% higher than the current reading.

On inflation, one-year expectations fell to 4.6% from 4.9% for the lowest reading in more than a year. Five-year inflation expectations were unchanged at 3%.

The current conditions index also rose to 60.2, a 2.4% gain from November.

Stocks trimmed losses following the report.

—Jeff Cox

Utilities was the only S&P 500 sector on pace for weekly gains.

The sector last traded 0.3% higher for the week at around 9:55 a.m. ET. It was boosted by gains from names like Evergy, American Electric Power and CMS Energy.

— Samantha Subin

Stocks opened lower Friday.

The Dow Jones Industrial Average fell 111 points, or 0.3%. The S&P 500 and Nasdaq Composite shed 0.5% and 0.7%, respectively.

— Samantha Subin

The price gains that fueled the surprisingly hot November PPI report came from some unusual places, according to the Bureau of Labor Statistics.

The services portion of the PPI, which was the main driver of November’s inflation reading, saw an abnormally high increase in financial services.

“About one-third of the November rise in the index for final demand services can be traced to prices for securities brokerage, dealing, investment advice, and related services, which jumped 11.3 percent,” the BLS press release said.

The index for final demand goods, meanwhile, rose 0.1% in November, led mainly by a 3.3% increase in final demand for food goods.

— Jesse Pound

Third Point’s Dan Loeb hiked his stake in Bath & Body Works to 6% as the activist investor said he might push for board changes to improve governance issues at the retailer, according to a new regulatory filing.

Loeb said the company’s board has “made errors in structuring its executive compensation” so that excess awards were made that are unrelated to company performance.

The hedge fund manager said he has “significant concerns” about financial discipline and the board’s ability to make “long-term value-maximizing decisions through responsible and thoughtful capital allocation.”

Shares of Bath & Body Works jumped about 5% in premarket trading Friday.

— Yun Li

The producer price index, a measure of what companies get for their products in the pipeline, increased 0.3% for November and 7.4% from a year ago. Economists surveyed by Dow Jones had been looking for a 0.2% gain. Excluding food and energy, core PPI was up 0.4%, also against a 0.2% estimate.

Dow futures, which were higher before the report, rolled over and were last down about 100 points as the hotter-than-expected inflation report hurt hopes the Federal Reserve would soon end its hiking campaign. Treasury yields ticked higher after the report.

This report raises the stakes for Tuesday’s more important consumer prices report.

—Jeff Cox, John Melloy

These are some of the stocks moving before the bell:

Broadcom – Shares rallied 3.9% after the chip maker reported better-than-expected quarterly results and an upbeat outlook. The company also raised its dividend and said it would resume share buybacks.

Bath & Body Works  – Bath & Body Works shares jumped 4.9% following news that Daniel Loeb’s Third Point has a more than 6% stake in the personal care products retailer. An SEC filing also revealed that Third Point is pushing the company to appoint new board members.

Netflix – Netflix gained 2.7% before the bell following two positive analyst reports. Wells Fargo upgraded the streaming service’s stock to overweight from equal weight, saying content growth would lessen customer churn. Cowen named the stock a “best idea” for 2023, pointing to additional monetization avenues including the new ad-supported tier.

DocuSign  – DocuSign posted a 10.9% jump following upbeat quarterly results for the electronic signature technology company. DocuSign also reported better-than-expected billings — a metric that tracks sales to new customers — plus subscription renewals and additional sales to existing customers.

Read the full list of stocks moving here.

— Samantha Subin, Peter Schacknow

Shares of Lululemon tumbled 7% before the bell Friday after sharing a weak outlook for the fourth quarter.

The popular athletics apparel retailer beat analysts’ top and bottom line estimates, with earnings beating expectations by 3 cents a share. Revenue came in at $1.86 billion versus the expected $1.81 billion.

For the holiday period, Lululemon said it expects earnings to range between $4.20 and $4.30 a share, compared to estimates of $4.30. It also expects revenue between $2.605 billion and $2.655 billion, compared to the expected $2.649 billion.

The company modestly raised its forecast for the full year.

— Samantha Subin, Melissa Repko

Investors looking for a port in a likely storm next year should look at Microsoft, Goldman Sachs said.

“Microsoft’s large footprint within the enterprise and its vast product portfolio … leaves it well positioned to continue to expand its wallet share amongst its customers despite a slower IT spending environment and a weaker consumer,” the bank said in a note to clients, naming the tech giant a top pick for 2023.

“The strategic positioning of Microsoft within enterprises can be elevated by customers’ heightened focus on optimizing IT spend and consolidating their technology stack with existing vendors,” they added.

CNBC Pro subscribers can read more here.

— Alex Harring

Netflix shares rose more than 2% after Wells Fargo upgraded the streaming giant to overweight from equal weight, noting that the company’s new ad video business could lead to a strong 2023.

“After a period of turmoil around slowing subscribers and revenue growth, NFLX is using every arrow in the quiver,” Wells Fargo said. “Our deep dive into NFLX sees content improving churn, while AVOD [advertising-based video on demand] and paid sharing improve estimates.”

CNBC Pro subscribers can read more here.

— Fred Imbert

Some global consumer tech companies could gain as China relaxes some Covid-19 restrictions, and shares of four firms could rise by more than 40%, according to HSBC.

The Asia-focused bank said a faster-than-expected recovery of consumer electronics in the coming months would benefit these companies.

CNBC Pro subscribers can read more here.

— Ganesh Rao

Shares of DocuSign are soaring in after-hours trading on rosy earnings.

The tech company stock jumped as much as 16% after it beat expectations on the top and bottom lines for the latest quarter, reporting adjusted earnings of 57 cents per share on $645 million in revenue where Wall Street expected adjusted earnings of 42 cents and revenue of $627 million, according to Refinitiv.

Read what other stocks are moving in after hours trading here.

—Carmen Reinicke

Economists expect that wholesale prices ticked up slightly in November, in-line with the pace of the previous month.

The consensus for November’s producer price index, due Friday, is a seasonally-adjusted 0.2% increase on a monthly basis, according to FactSet data. On the year, economists surveyed by FactSet expect a 7.2% increase.

In October, the index rose 0.2% on the month, less than anticipated. It also notched an 8% yearly gain, according to data from the Bureau of Labor Statistics.

—Carmen Reinicke

Stock futures were flat Thursday evening as Wall Street looks ahead to the November producer price index report, which will give more information on inflation when it’s released Friday.

Futures tied to the Dow Jones Industrial Average rose 2 points, or 0.01% at the start of futures trading. S&P 500 futures and Nasdaq 100 futures were up 0.01% and down 0.002%, respectively.

Shares of Lululemon fell nearly 7% after the company gave a weaker-than-expected fourth-quarter outlook, even though it beat Wall Street expectations with its third-quarter results.

—Carmen Reinicke