Dow Jones Futures Rise On Hopes Inflation Fever Has Peaked As CPI Data Looms
Dow Jones futures rose solidly early Wednesday, along with S&P 500 futures and Nasdaq futures, with a key inflation report on tap. The stock market had an up-and-down session Tuesday, with techs closing higher as the Dow Jones lagged.
Meanwhile, Merck stock, Dollar Tree (DLTR) are among stocks worth watching amid the ongoing market correction.
The Labor Department will release the April consumer price index at 8:30 a.m. ET Wednesday. Economists expect the CPI to show a 0.2% increase vs. March. Core CPI, which excludes food and energy, should climb 0.4%. Year over year, consumer prices should surge 8.1%, down from March’s 40-year high of 8.5%. Core inflation should ease to 6% from March’s 6.5%. Year-over-year comparisons are getting tougher.
Meanwhile, the Labor Department will release the April producer price index on Thursday.
Stocks To Watch
Merck stock is holding just below a cup-with-handle buy point. LPX stock and possibly Atkore are working on handles after both gapped up on earnings last week. ANTM stock and Dollar Tree (DLTR) have pulled back to their 50-day lines around the top of prior buy zones. This could offer a buying opportunity, or a sell signal.
Meanwhile, the relative strength line for Apple (AAPL) keeps hitting new highs, as shares rose 1.6% on Tuesday. AAPL stock is fighting to get back to its 200-day line, but it’s easily the best-looking megacap.
Microsoft (MSFT) looks a lot worse than Apple stock, but did rebound 1.9% Tuesday after undercutting 2022 lows. Cybersecurity play Fortinet (FTNT) jumped 6.8% Tuesday after also undercutting its 2022 lows. That could be a hopeful sign for these institutional-quality software leaders, but they are nowhere close to being actionable.
Anthem and Microsoft stock are on IBD Leaderboard. MRK stock is on SwingTrader. Microsoft and FTNT stock are IBD Long-Term Leaders. ATKR stock is on the IBD 50. Dollar Tree was Tuesday’s IBD Stock Of The Day.
The video embedded in the article reviewed Tuesday’s market action and analyzed Merck stock, Louisiana-Pacific and Anthem.
Dow Jones Futures Today
Dow Jones futures rose 0.9% vs. fair value. S&P 500 futures climbed 1.2% and Nasdaq 100 futures advanced 1.5%.
Crude oil futures rebounded 4%.
The 10-year Treasury yield fell 7 basis points to 2.92%, continuing a retreat this week ahead of key inflation data.
The CPI inflation report is sure to move Dow Jones futures and Treasury yields before the open.
China consumer prices rose 2.1% in April vs. a year earlier. Producer prices jumped 8%. Both were slightly higher than expected. That comes amid severe Covid lockdowns that have slashed production and demand.
Stock Market Tuesday
The stock market opened sharply higher, soon reversed lower, then rebounded again before fading to mixed.
The Dow Jones Industrial Average fell 0.3% in Tuesday’s stock market trading. The S&P 500 index climbed 0.2%, with FTNT stock leading the way. The Nasdaq composite rose 1%. The small-cap Russell 2000 closed little changed.
U.S. crude oil prices fell 3.2% to $99.76 a barrel, back below $100. Crude tumbled 6.1% on Monday.
The 10-year Treasury yield retreated nine basis points to 2.99%. The 10-year yield hit 3.17% intraday Monday before reversing lower.
Among the best ETFs, the Innovator IBD 50 ETF (FFTY) dipped 0.2%, while the Innovator IBD Breakout Opportunities ETF (BOUT) fell 0.5%. The iShares Expanded Tech-Software Sector ETF (IGV) climbed 1.3%, with MSFT stock the No. 1 holding and Fortinet also a component. The VanEck Vectors Semiconductor ETF (SMH) up 2.5%.
SPDR S&P Metals & Mining ETF (XME) declined 1.1% and the Global X U.S. Infrastructure Development ETF (PAVE) lost 1%. U.S. Global Jets ETF (JETS) ascended 0.9%. SPDR S&P Homebuilders ETF (XHB) declined 1.4%. The Energy Select SPDR ETF (XLE) advanced 0.9% and the Financial Select SPDR ETF (XLF) dropped 0.9%. The Health Care Select Sector SPDR Fund (XLV) rose 0.4, with MRK stock and Anthem both holdings.
Ark Stocks Tumble
Coinbase and Unity stock are top 10 Ark Invest holdings. COIN stock and Unity reported weaker-than-expected first-quarter results and gave weak guidance, with Coinbase also filing for a mixed shelf offering. Coinbase dived 14% in premarket trade while Unity stock crashed 22%. Both already fell to fresh record lows Tuesday.
The stock market got a big bounce at Tuesday’s open, reversed lower, rebounded again before fading to close mixed. The Nasdaq rose solidly, though well off intraday highs, while the S&P 500 edged higher and the Dow Jones fell slightly.
The market was due for a bounce, but Tuesday’s action was hardly inspiring. At best, it marked day one of a stock market rally attempt for the Nasdaq and S&P 500 index.
If the major indexes continue to advance, investors could look for a follow-through day in a few days.
There is little in the way of market leadership right now.
Energy, fertilizer and other commodity stocks tried to rebound Tuesday from Monday’s severe losses, but gains faded or even turned to losses. Mining and metal stocks have already crumbled.
A few drugmakers such as Merck are faring well, while some medical services firms like ANTM stock are hanging on. Some wood and building products firms are trying to set up, including LPX stock.
Consumer staples, such as food producers and discount retailers, are holding up or moving higher. But will these defensive plays lag when a new market rally takes hold?
Growth stocks are still in brutal downturns. While investors should still watch Apple stock and a few giants such as Microsoft, they are definitely not buys right now.
The major indexes could react positively to Wednesday’s inflation report, but it won’t be a game-changer for the Federal Reserve. Fed rate hikes are likely to continue at a brisk pace until a downward trend in inflation is in place over several months. Still, a relatively tame inflation report could ease fears the Fed won’t be able to engineer a soft landing.
What To Do Now
Investors shouldn’t be tempted to add exposure until there is clear evidence of a market uptrend.
Just last week, the major indexes rallied for three straight days, with the March 4 gain on the Federal Reserve meeting especially encouraging. We know how that ended up.
At this point, investors should wait for a follow-through day before making new buys. Even then, investors should be cautious, gradually adding exposure as a new market uptrend gains momentum, and quick to withdraw if the rally falters.
There may be few stocks to buy on a FTD. Even many stocks with strong relative strength are far off highs or have damaged charts.
Watch the market action on the sidelines, and keep your watchlists fresh.
Read The Big Picture every day to stay in sync with the market direction and leading stocks and sectors.
Please follow Ed Carson on Twitter at @IBD_ECarson for stock market updates and more.
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