Market Snapshot: Dow ends more than 500 points higher to start a week rich with inflation, central bank news

What’s driving markets

Stocks were off to an upbeat start during a week in which inflation, plus monetary authorities’ campaigns to combat it, will be at the forefront.

Optimism replaced the caution which prevailed earlier on Monday, following the poor to middling performance of the past several sessions when investors fretted about higher borrowing costs and their impact on the economy plus company earnings.

Tuesday brings U.S. consumer price data for November, followed the next day by the Fed’s interest-rate decision in which policy makers are widely expected to hike rates by 50 basis points to a range of 4.25% to 4.50%. That would mark a downshift in the size of interest-rate increases after the Fed delivered four straight 75-basis-point hikes between June and November.

“Volume earlier today was kind of low and there is a desire to go into wait-and-see mode,” said Thomas Graff, head of investments at Baltimore-based Facet Wealth, which oversees $1.5 billion in assets. “But there’s also two chances for big upside moves this week, either from CPI coming in lower than expected or from the Fed sounding like it might move only 25 basis points at future meetings. So there’s a desire to get ahead of that.”

“It’s becoming more and more consensus that inflation has got enough downside momentum that it’s probably going to keep going down,” Graff said via phone. “The whole trade of being bearish because inflation is going to be sticky is one that a lot of people are questioning.”  

The New York Fed’s November Survey of Consumer Expectations, released on Monday, showed that respondents see inflation running at a 5.2% rate, down from 5.9% in the last survey, one year from now. That’s the largest month-to-month decline on record, the bank said. Three years from now, consumers see inflation running at a 3% rate, down slightly from 3.1% in October.

The S&P 500 is up more than 10% from its 2022 low, but remains down 16.4% for the year to date in the face of the Federal Reserve raising interest rates by 375 basis points since March.

“The recovery in global risk appetite faltered last week, especially in the U.S., where the major indices suffered their biggest setback since September. This week’s agenda is packed with major macro updates that will test sentiment further,” said Ian Williams, strategist at Peel Hunt.

Equity bulls will be hoping inflation can show further signs of cooling, thereby helping the Fed shift to a less aggressive tightening cycle. However, some analysts warned that after last week’s producer price report came in hotter than expected, there is a danger investors may be caught out by a stronger-than-forecast consumer-price index.

“Because the consensus number is relatively low, we may have another [disappointment like Friday’s regarding the producer-price index] at tomorrow’s U.S. CPI release, which could further boost the Federal Reserve (Fed) hawks before Wednesday’s [Federal Open Market Committee] decision, fuel the U.S. dollar, send the U.S. yields higher and the stocks lower,” said Ipek Ozkardeskaya, senior analyst at Swissquote Bank.

Read: CPI days have been among the most volatile for stocks this year. Here’s what to expect ahead of Tuesday’s report

Traders also have rate announcements from the European Central Bank and Bank of England to consider, both due Thursday. U.K. inflation data, with the year-over-year rate currently at 11.1%, is set to be published the day before.

Companies in focus

Amgen Inc. 
AMGN,
-0.67%
agreed to acquire Horizon Therapeutics Plc
HZNP,
+15.49%
in an all-cash deal valued at $27.8 billion, confirming earlier reports and a deal that was first mooted in November. Horizon shares jumped 15.4%, while Amgen shares fell 1%.

Weber Inc.
WEBR,
+23.15%
announced Monday morning that it has reached an agreement with BDT Capital Partners to be taken private. Funds managed by BDT Capital will purchase all of the Weber shares they don’t already own for $8.05 a share in a deal that assigns the maker of barbecue grills a $3.7 billion enterprise value. Weber shares rose 23.2% to $8.01.

Microsoft Corp. 
MSFT,
+2.89%
said on Monday that it was taking a 4% stake in the London Stock Exchange Group 
LSEG,
+2.97%
in a deal that will see the stock exchange use the software giant’s data and cloud infrastructure. LSE shares rose 3% in London, while Microsoft shares were up 2.4% on Nasdaq.

Electric vehicle maker Rivian Automotive Inc. 
RIVN,
-6.16%
said on Monday that it won’t go forward with a plan to make electric vans in Europe with Mercedes-Benz, just three months after agreeing to the pact. Rivian shares fell 6.3%.

Shares of Coupa Software Inc. 
COUP,
+26.67%
jumped almost 27% to $78.67 a share after the company agreed to be taken private by Thoma Bravo for $8 billion in cash. Thoma Bravo will pay $81 a share, a premium of 77% over Coupa’s closing stock price on Nov. 22, the last day prior to media reports about a potential deal for the San Mateo, Calif.-based business-software company, which specializes in products for chief financial officers.

— Jamie Chisholm contributed to this article.