Dow edges up at midday as stocks look to rebound ahead of coming inflation, retail sales data

What’s driving markets

U.S. stock indexes were higher Monday at midday, with several technology shares leading the broader market higher as traders braced for a busy week of economic data releases.

Tesla shares
TSLA,
+9.13%
jumped 8.8% after Morgan Stanley upgraded the electric-vehicle giant’s stock to overweight from equal weight, while raising their price target to a Wall Street-high of $400 per share from $250, basing most of that newfound optimism on Tesla’s new machine-learning supercomputer, Dojo.

Don’t miss: When will consumers stop buying more stuff? It’s a key question for the stock market in the week ahead.

Still, the stock market has a handful of near-term events to help determine whether a rebound is justified. The August U.S. consumer-price index will be published Wednesday morning, while the August retail sales report is due Thursday. Both may impact the Federal Reserve’s thinking as it considers whether to change interest rates at its policy meeting next week.

The headline consumer-price index is forecast to accelerate to 0.6% in August from July’s 0.2%, while the core price measure that strips out volatile food and fuel costs, is expected to rise a mild 0.2% from a month earlier, according to a survey of economists by Dow Jones. 

“[I]f the incoming data continues to be softer (on inflation), the Fed likely shifts away from ‘data dependency’ towards looking at more forward measures,” said Tom Lee, head of research at Fundstrat Global Advisors, in a Monday note.

Lee pointed to a report from The Wall Street Journal on Sunday suggesting that Fed officials now think the burden has shifted toward evidence of an accelerating economy to justify higher rates, a potentially important change in the Fed’s reaction function. The report also said there was a consensus not to raise rates at next week’s FOMC meeting, but that the Summary of Economic Projections to be released Sept. 20 will likely show if additional increases are on the table.

See: Why financial markets may be unprepared for a fourth-quarter ‘inflation surprise’

No major U.S. economic data are scheduled for release on Monday, so focus will remain on Treasury yields, and if yields are relatively stable, then stocks can rebound from last week’s losses, said Tom Essaye, president at the Sevens Report Research. 

U.S. government bond yields edged mostly higher on Monday after the Bank of Japan said it could end its negative interest-rate policy when achievement of its 2% inflation target is in sight. The yield on the 2-year Treasury
BX:TMUBMUSD02Y
 rose less than 1 basis point to 4.98% while the yield on the 10-year Treasury
BX:TMUBMUSD10Y
advanced 3 basis points to 4.29%. Yields move in the opposite direction to prices.

See: Dollar tumbles against yen after BOJ head hints that negative interest rates could end

The U.S. dollar
DXY
tumbled against the Japanese yen
USDJPY,
-0.89%
on Monday, off 0.4% to ¥146.44, while the 10-year Japanese government bond yield 
BX:TMBMKJP-10Y
climbed 5.5 basis points to 0.705% — a level not seen since 2014.

Companies in focus

• Qualcomm Inc. 
  QCOM,
  +4.78%
  rose 3.2% on Monday after Apple Inc. 
  AAPL,
  +0.17%
  extended a deal to get modem semiconductors from the chipmaker for three more years. Shares of Apple were up less than 0.1% as the company had been expected to begin using its own internally developed 5G modem beginning in 2024.

• Walt Disney Company
  DIS,
  +0.80%
  stock gained 1.6% after CNBC reported that its fight between cable giant Charter Communications 
  CHTR,
  +3.79%
  and Disney came to a close. The two companies reportedly reached an agreement to restore popular channels including ESPN and ABC to the cable operator’s nearly 15 million subscribers. Shares of Charter Communications were up 2.3%.

• Shares of Hostess Brands Inc.
  TWNK,
  +19.16%
   jumped 19.2% after the Twinkies and HoHos maker announced an agreement to be acquired by J.M Smucker Co. in a cash-and-stock deal valued at $5.6 billion.

• American depositary receipts of Alibaba Group Holding
  BABA,
  -1.50%
  fell 2% after the e-commerce giant Sunday said in a surprise announcement that outgoing CEO Daniel Zhang will also be stepping down as chairman and chief executive of its cloud business unit.