S&P 500 closes higher after another lighter-than-expected inflation report, Nasdaq jumps 1.4%

The major averages rose Tuesday after another report signaled that inflation could be slowing.

The Dow Jones Industrial Average ended the day up 56.22 points, or 0.2%, at 33,592.92. The S&P 500 advanced 0.9% to 3,991.73, and the tech-heavy Nasdaq Composite gained 1.5% to close at 11,358.41.

— Tanaya Macheel

Aerospace and defense ETFs are outperforming the broader stock market Tuesday.  

The largest, IShares US Aerospace & Defense ETF (ITA), with $4.3 billion in assets, is ahead 1.3%; Invesco Aerospace & Defense (PPA), with $1.7 billion, is up 1.2%; and the SPDR S&P Aerospace & Defense (XAR), with $1.3 billion, is also 1.2% higher.

— Scott Schnipper

Capital One Financial Corp shares slid more than 6% after Bank of America analysts downgraded the stock to neutral from buy, noting concerns about increasing charge-offs.

The BofA analysts noted that the October net charge-off rate for domestic card loans at Capital One was 2.93%, up 71 basis points from September. That level is 51 basis points above normal October seasonality, they noted. A basis point equals 0.01 of a percentage point.

"We are increasingly concerned that strong loan growth even as the macro weakens could drive losses higher than is currently factored into expectations, which we think will be ill received by investors," the BofA analysts wrote. "We lower our [price objective] to $113 from $124 based on an unchanged 7.5x PE multiple to 2023e EPS. COF offers a more balanced risk/reward profile and we think a Neutral rating is warranted."

The Federal Reserve reported earlier Tuesday that household debt is soaring at its fastest pace in 15 years, as credit card balances rose more than 15% from a year ago.

Meanwhile, retailer stocks were rallying after Walmart and Home Depot reported earnings beats. Walmart was up about 7%. Target and Macy's were both up more than 4% on expectations consumer spending could also help those chain stores.

 "Here we are celebrating retail, but we have Cap One saying delinquencies are rising," said Peter Boockvar, chief investment officer at Bleakley Global Advisors.

—Patti Domm
.

Evercore ISI's Julian Emanuel says the stock market has entered a traditionally dull market period between now and the next employment report, but it could keep heading higher.

"The deeper the starting point for a bear market rally, the higher the rally tends to go," said Emanuel, head of equity, derivative and quantitative strategy. "If you just extrapolate what the June to August rally did, that gets you to 4,150 [on the S&P 500]."

Emanuel said stocks could move higher in the quiet trading days around next week's Thanksgiving holiday. November's jobs report Dec. 2 is the next big piece of data for the Federal Reserve to consider when it meets Dec. 13 and 14.

The Fed will also weigh the November consumer price index, expected Dec. 13. The central bank is expected to hike interest rates by a half percentage point at that meeting.

Better inflation data has helped fuel a market rally since Thursday's October CPI was cooler than expected. The producer price index, released Tuesday, also showed a slower pace of inflation than expected.

The stock market has also entered a period where it typically does well, in the fourth quarter of midterm election years.

Strategists who follow charts have been expecting the S&P to reach 4,100 before it stalls out. The S&P 500 was at 3,987 in afternoon trading.

—Patti Domm

The Invesco QQQ Trust is not the only ETF that has seen significant interest in recent days.

Strategas ETF strategist Todd Sohn said in a note to clients that equity inflows saw more than $20 billion in ETFs on Thursday and Friday last week after a lower-than-expected CPI report. That marked an acceleration of an already strong trend.

"It's not just the last two days though… equity ETFs have taken in nearly +$90 Bn since the October CPI miss roughly a month ago, larger than the flows during both major bear market rallies this year combined," the note said.

Sohn added that high-yield bond ETFs have also seen strong inflows, pointing toward a broader risk-on trend among investors.

"Aggregate market sentiment has been largely supportive this year, but we'd put the recent flows surge on our radar as a growing tactical risk," the note said.

— Jesse Pound

The market may be getting too ahead of itself, taking Tuesday morning's PPI reading as a trend rather than a mere signal, said Daniel Berkowitz, senior investment officer for investment manager Prudent Management Associates.

"Despite these rather assuring sentiments, the possibility looms that the market continues to underestimate the Fed's terminal rate, even after the most recent recalibration upward," he said. "Net, net inflation and interest risk remain skewed to the downside in our assessment.  Despite the downward pressure on Treasury yields, the yield curve remains highly inverted beyond short-term maturities, providing limited compensation for taking material duration risk."

— Tanaya Macheel

Morgan Stanley named exchange operator Cboe Global Markets a top pick and said it could rally more than 25%.

Analyst Michael Cyprys, who has an overweight rating, said a recent decline in value makes the current entry point attractive for the stock. Meanwhile, he said the operator should benefit from continued market volatility that pushes investors to look to shorter and index-focused trading.

"We see Cboe as a defensive beneficiary against a more challenging macro backdrop as elevated market volatility should support the outlook for trading volumes," he said in a note to clients.

CNBC Pro subscribers can click here to read more.

— Alex Harring

Here are three names making the biggest moves midday:

• Walmart — Shares of retailer Walmart jumped more than 7% after reporting quarterly earnings that beat Wall Street's expectations and raising its forward guidance.
• Taiwan Semiconductor — Shares of the Taiwanese chipmaker soared more than 12% after Warren Buffett's Berkshire Hathaway built a $4 billion new stake in the company.
• Sunnova Energy — Shares of solar company rose 7.58% after Deutsche Bank initiated coverage of Sunnova Energy, First Solar and Enphase Energy with buy ratings. First Solar was up 3.57%, and Enphase Energy rose 2.85%.

For more midday movers, check out our full list.

— Michelle Fox, Yun Li

Used car platform Carvana was downgraded by Oppenheimer on Tuesday as short-term concerns around its operational and financial health grow.

The firm downgraded the used car platform to perform from outperform. It also removed a price target of $100, which would have implied an upside of 926.7% from where the battered stock closed Monday.

"We remain optimistic about longer-term prospects for CVNA and the company's shares," analyst Brian Nagel said in a note to clients. "That said, significant nearer-term operational and financial risks for Carvana have emerged and are likely to cloud the CVNA investment story for the foreseeable future."

Still, he said there is a path to strong long-term performance. Despite a more difficult 2023 expected in the base case, the company should see 20% growth in 2025.

Carvana has lost 95.8% since the start of 2022, but rose 7.2% Tuesday in what could be a so-called short squeeze. In other words, investors who bet against the Carvana could be covering their positions, thus boosting the stock. Carvana was one of the most heavily shorted stocks on Wall Street at the end of October.

CNBC Pro subscribers can read more.

— Alex Harring

Shares of Paramount Global rallied more than 8% after a filing revealed that Warren Buffett's Berkshire Hathaway increased its stake in the media company to $1.75 billion at the end of the third quarter.

Berkshire now holds about 15% of Paramount's outstanding Class B shares, which makes it the largest shareholder.

KeyBanc said Berkshire's move is either because the conglomerate believes Paramount will be successful in the streaming wars, or that it is betting that the company could be a likely acquisition target.

— Yun Li

TCI Fund Management is calling on Google's parent company Alphabet to slash costs.

The activist hedge fund, which owns more than $6 billion worth of shares in Alphabet, said in a letter Tuesday that the company needs to aggressively reduce expenses and trim headcount in order to operate more efficiently.

In the letter, signed by Chris Hohn, the fund's founder and portfolio manager, TCI said employee compensation also remains too high. Alphabet also needs to cut its losses in its Waymo self-driving car segment, which has failed to justify its "excessive investment," TCI said.

Shares rose more than 4% on the news.

— Samantha Subin

Traders think that the U.S. economy is either in or near a recession, but that any economic downturn will be short-lived, according to the fourth quarter sentiment survey by Charles Schwab.

Some 55% expect any recession to last less than a year, while 45% think it will last longer. Still, 55% expect some relief in January and have bullish outlooks on a few sectors, including Energy (71%), Health Care (52%) and Utilities (47%). They are bearish on Real Estate (75%), Consumer Discretionary (62%) and Tech (51%).

—Carmen Reinicke

The KraneShares CSI China Internet ETF (KWEB) was last up roughly 10% and on pace for its best day since March 16, when it surged nearly 40%.

The funds' best-performing stocks Tuesday included Lufax Holding and Agora, which rose about 15% and 13%, respectively. Tencent Music Entertainment shares soared more than 16%. Shares of Alibaba, JD.com and Pinduoduo also moved higher.

KWEB is also on track for its fourth consecutive positive day.

— Samantha Subin

President Joe Biden issued a statement on Tuesday following the release of the PPI data, calling it "more good news for our economy" and an "indication that we are starting to see inflation moderate."

"The bottom line is this: my economic plan is showing results, and we face global economic challenges from a position of strength. As I said last week, it will take time to get inflation back to normal levels — and we could see setbacks along the way — but we will keep at it."

— Emma Kinery, Tanaya Macheel

Shares of retail stocks rose Tuesday morning after Walmart and Home Depot earlier in the day reported stronger-than-expected financial results for the third quarter.

Walmart jumped 7% to start the day, while Home Depot inched higher by 1%.

Both Target and Kohl's shares rose about 4%, while Bed Bath & Beyond added 3%. Macy's and Nordstrom advanced 5% and 4%, respectively.

Discount retailers rose too. Dollar General and Costco gained 3% each.

The SPDR S&P Retail ETF was up by 4.1%.

— Tanaya Macheel

The Invesco QQQ Trust exchange-traded fund had $6 billion in inflows last week, the second largest weekly inflow ever, Barclays strategist Anshul Gupta wrote in a note Tuesday. The largest occurred during the Covid rally in September 2020, he pointed out.

The move came amid a strong week for the stock market, with the S&P 500 notching its best week since the one ended June 24. Investors were buoyed by the lower-than-expected increase in the consumer price index.

The QQQ inflows were "another sign of the over-reaction of investors" to the inflation data, likely amplified by technical and positioning drivers, Gupta said.

— Michelle Fox

Biotech has shown a lot of strength lately and is contributing to what's likely to prove broader, fourth quarter outperformance by the health care sector, Mark Newton, head of technical strategy at Fundstrat Global Advisors wrote in a note late Monday entitled, "Biotech breakout worth following as Healthcare gets stronger."

The iShares Biotechnology ETF (IBB) has strengthened lately and is showing a bullish chart pattern, Newton wrote, and "is a very positive development for Biotech which had been slowly building a base for much of the year.  Near-term, I expect IBB to push higher to $140.80, with an outsized chance of hitting $149 which would be strong overhead resistance."

Among the large-cap biotech stocks showing recent strength: MRNA, AMGN, GILD, BIIB. Meanwhile, "former leaders" including VRTX and REGN "remain quite strong technically speaking and should be able to participate given Monday's breakout."

Finally, the IBB has broken out relative to the big pharma ETF (PPH), as well as the iShares US Medical Devices ETF (IHI) and SPDR S&P Health Care Services ETF (XHS) and, as a result, "is the strongest sub-industry group right now within Healthcare," which should continue in to December, Newton said.

— Scott Schnipper

Stocks opened higher Tuesday after October's produce price index signaled that inflation could be slowing.

The Dow Jones Industrial Average rose about 300 points at the open, or 0.9%. The S&P 500 advanced 1.6% and the Nasdaq Composite added 2.4%.

— Tanaya Macheel

October's lighter-than-expected producer price index suggests a "day of recognition" from the Federal Reserve may be coming sooner than expected, Jeremy Siegel, professor of finance at the Wharton School of Business told CNBC's "Squawk Box" on Tuesday.

"I think this moves up the pivot," he said. "All we need is for them to recognize what prices on the ground are actually doing and they are not going up. They're probably going to go 50 basis points, but that should be the absolute pause."

Siegel also told CNBC that the yield on the 10-year Treasury note has likely hit its peak and the S&P shouldn't retest this year's previous lows.

— Samantha Subin

The producer price index, a measure of wholesale inflation, rose 0.2% in October on a month-over-month basis. Economists polled by Dow Jones expected an increase of 0.4%.

The report comes less than a week after the consumer price index report showed a lighter-than-expected increase as well, stoking optimism that inflation could be easing.

— Jeff Cox

These are some of the companies moving before the bell Monday:

• Getty Images — Getty Images slumped 11.8% in the premarket after its quarterly revenue fell short of Wall Street forecasts, although the visual content marketplace operator did see earnings top consensus.
• Taiwan Semiconductor — Taiwan Semiconductor rallied 10.9% in off-hours trading after Berkshire Hathaway disclosed in a Securities and Exchange Commission filing that it had bought more than $4.1 billion of the chip maker's stock during the third quarter.
• Energizer Holdings — The maker of Energizer and Rayovac batteries saw its stock surge 10% in premarket action following better-than-expected quarterly results. Energizer's results came despite what the company calls a volatile operating environment with significant headwinds.

Check out the full list of stocks making the biggest moves here.

— Peter Schacknow, Tanaya Macheel

Walmart and Home Depot kicked off a big week of retail earnings on Tuesday morning.

Walmart shares popped about 7% in early trading after the company boosted full-year guidance. It also beat Wall Street's earnings and sales estimates.

Meanwhile, Home Depot topped analysts' sales and revenue estimates, with comps that were also better-than-expected. It kept guidance in place for the full-year, however, and shares dipped 1% premarket.

— George Manessis, Tanaya Macheel

Quarterly regulatory filings showed that Warren Buffett's Berkshire Hathaway built a large stake in Taiwan Semiconductor, leading to a 10% jump in the chip stock. That would be the stock's biggest one-day gain since July 2020.

CNBC Pro subscribers can read more about Berkshire's third-quarter moves here.

— Yun Li

Jefferies thinks it'll be harder than investors think for Harley-Davidson to grow its subscriber base.

"Simply put, we lack confidence in the go-forward demand trajectory for heavyweight motorcycle segments," the firm said in a note to clients, noting that a recent "retail inflection lacks legs."

Harley-Davidson shares slipped 1.7% before the bell.

CNBC Pro subscribers can read more here.

— Alex Harring

Netflix shares traded more than 2% higher in the premarket after Bank of America double upgraded the streaming giant to buy from underperform.

"Despite slower sub growth, we believe efforts to improve monetization via a value-oriented ad tier and significant conversion of password sharers has the potential to drive operating/financial upside," analyst Jessica Reif Ehrlich said in a note.

CNBC Pro subscribers can read more here.

— Alex Harring

Credit Suisse on Tuesday announced that it would accelerate the restructure of its investment bank by selling a significant portion of its securitized products group (SPG) to Apollo Global Management.

Credit Suisse said the transaction, along with the potential sale of other assets to third-party investors, is expected to reduce SPG assets from around $75 billion to $20 billion.

The bank said the move represented an "important step towards a managed exit from the Securitized Products business, which is expected to significantly de-risk the investment bank and release capital to invest in Credit Suisse's core business."

Read the full story here.

- Elliot Smith

European markets were cautious on Tuesday as investors gauged the economic outlook in the region and wider global economy.

The pan-European Stoxx 600 was flat in early trade, with utilities adding 0.8% while telecoms stocks fell 0.4%.

The muted sentiment comes after a choppy session in the United States on Monday, led by comments from Federal Reserve leaders Lael Brainard and Chris Waller about interest rate hikes.

- Elliot Smith

With many stocks in a bear market, equities could be undervalued by 15%, according to Morningstar.

The equity research firm's chief U.S. strategist believes headwinds that were present earlier in the year will start to recede at the start of next year and benefit stocks.

Dave Sekera also shared his "fair value" assessment on six companies with a "wide economic moat" that will outperform in such an economic environment.

CNBC Pro subscribers can read more here.

— Ganesh Rao

China's industrial production grew 5% in the month of October compared with a year ago, slowing from an increase of 6.3% seen in September. The latest figure misses estimates of a 5.2% rise predicted in a Reuters poll.

Separately, retail sales in China fell 0.5% in October from a year ago, missing expectations.

Analysts polled by Reuters expected a 1% increase, and retail sales grew 2.5% in September.

— Abigail Ng

Which stocks could benefit if China rolls back its zero-Covid policy? Market pros reveal how to play a reopening as China eases some of its virus controls.

Pro subscribers can read more here.

— Zavier Ong

Two major retailers will report earnings Tuesday morning, giving investors more insight into their quarters and how consumers are faring with high inflation and the threat of economic weakness.

Walmart and Home Depot will both release results early Tuesday. Analysts expect Walmart to report earnings per share of $1.32 on revenue of $147.75 billion, according to Refinitiv. Estimates for Home Depot are for earnings per share of $4.12 on $37.96 billion in revenue.

Later in the week, Target, Lowe's, Macy's, Kohl's and Gap will also report their latest results.

—Carmen Reinicke

Shares of the blank-check company that said it planned to merge with Trump Media and Technology Group, former President Donald Trump's social media company, jumped 11% Monday ahead of an announcement from the former president scheduled for Tuesday.

The Digital World Acquisition special acquisition company, or SPAC, is now up more than 66% month to date.

The SPAC announced in October 2021 that it would merge with Trump Media and Technology Group, former President Donald Trump's social media company, but has so far failed to win the support needed. Another shareholder vote is scheduled for later in November.

In addition, the company is attempting to extend its deadline to complete the acquisition of Trump Media to Sep 8, 2023. The SPAC is still down more than 46% year to date.

—Carmen Reinicke, Gina Francolla

Stock futures rose Monday evening, making back some losses from the daily trading session that snapped a two-day winning streak that began after last week's better than expected inflation report.

Futures tied to the Dow Jones Industrial Average gained 72 points, or 0.18%. S&P 500 futures and Nasdaq-100 futures gained 0.25% and 0.33%, respectively.

—Carmen Reinicke