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

What’s driving markets

U.S. stock indexes were up as of Monday afternoon, with consumer discretionary shares and several technology companies leading the broader market higher, as traders braced for a busy week of economic data releases.

Tesla shares
TSLA,
+9.71%
jumped 9.1% after Morgan Stanley upgraded the electric-vehicle giant’s stock to overweight from equal weight, while raising the 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 that will help determine whether a rebound is justified. The August U.S. consumer-price index will be published Wednesday morning, while the retail sales report for the same month is due on Thursday. Both are likely to influence the Federal Reserve’s thinking as policy makers consider whether to eventually adjust interest rates at their policy meeting next week.

The headline consumer-price index is forecast to accelerate to 0.6% in August from July’s 0.2% gain, while the core 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 The Wall Street Journal. 

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

A report from The Wall Street Journal on Sunday reaffirmed expectations in markets that the central bank is likely to pause rate increases at next week’s Federal Open Market Committee meeting, though policy makers are shifting toward a more balanced bias on rates. While the Summary of Economic Projections set to be released on Sept. 20 will likely show that an additional increase is still on the table, an unspecified number of officials are worried about raising rates and causing a downturn, the newspaper reported.

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

No major U.S. economic data is set for release on Monday, so the focus will remain on Treasury yields, said Tom Essaye, president of the Sevens Report Research. If yields are relatively stable, then stocks can rebound from last week’s losses, Essaye said in an email.

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
 was unchanged at 4.982% while the yield on the 10-year Treasury
BX:TMUBMUSD10Y
advanced 2.2 basis points to 4.279%. 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
depreciated against the Japanese yen
USDJPY,
-0.89%
on Monday, while the 10-year Japanese government bond yield 
BX:TMBMKJP-10Y
climbed 5.5 basis points to 0.705% — a level not seen since at least 2014.

Companies in focus

• Qualcomm Inc. 
  QCOM,
  +4.02%
  rose 3.9% after Apple Inc. 
  AAPL,
  +0.57%
  extended a deal to get modem semiconductors from the chip maker for at least three more years. Shares of Apple were up 0.3%.

• Walt Disney Company
  DIS,
  +1.02%
  stock gained 0.7% after CNBC reported that its fight between cable giant Charter Communications 
  CHTR,
  +3.32%
  and Disney came to a close. The two companies reportedly reached an agreement to restore popular channels such as ESPN to the cable operator’s nearly 15 million subscribers. Class A shares of Charter Communications were up 3.6%.

• Class A shares of Hostess Brands Inc.
  TWNK,
  +19.33%
   jumped 19.1% 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,
  -0.95%
  fell 1.5% after the e-commerce giant said in a surprise announcement on Sunday that outgoing CEO Daniel Zhang will also be stepping down as chairman and chief executive of its cloud business unit.

Jamie Chisholm contributed.