Dow Jones Reverses Another Key Inflation Report After CPI Leads Market Down

Dow Jones Reverses Another Key Inflation Report After CPI Leads Market Down


The Dow Jones Industrial Average reversed lower after another key inflation report, the Producer Price Index, came out on Wednesday in the wake of a stock market slump due to a hot Consumer Price Index reading. Meanwhile, the 10-year Treasury yield is about to hit June’s 11-year high.


The US Department of Labor said the manufacturing index, or PPI, fell 0.1% in August from the previous month, matching estimates. Wholesale inflation rose 8.7% from a year earlier, down from July’s 9.8% rise and in line with Econoday estimates.

On Tuesday, the CPI inflation rate eased to 8.3%, down from 8.5% in July and 9.1% in June, amid falling gas prices. The consumer price index rose 0.1% in the month. But Wall Street economists had expected the CPI to show a monthly decline of 0.1%, which would bring the CPI inflation rate to 8%. Worse still, core inflation accelerated more than expected, to 6.3%.

As a result, markets now believe there is a 38% chance of a full percentage point increase at the next Federal Reserve meeting. Before Tuesday, Wall Street was not betting on that possibility at all.

Meanwhile, electric vehicle leader Tesla (TSLA) rose 2% on Wednesday. Among the industrialists of the Dow Jones, the technological titans Apple (AAPL) and Microsoft (MSFT) were higher after the opening of the stock market today. Merck (MRK) rose 0.7% after Berenberg upgraded the stock to buy.

In the current market volatility, Arista Networks (A NETWORK), double check (DV), Palo Alto Networks (PANW) and pure storage (PSTG), as well as Dow Jones shares Chevron (CVX) — are among the top stocks to buy and watch. Note that increased market volatility is a good reason for investors to be more defensive, especially after Tuesday’s market crash.

DoubleVerify is an IBD leaderboard action. Chevron and Palo Alto appeared in the Stock column near a buy zone this week.

Dow Jones Today: Treasury Yields, Oil Prices

After the opening bell on Wednesday, the Dow Jones Industrial Average fell 0.25% after giving up early gains, while the S&P 500 was down 0.2%. The Nasdaq Tech Composite lost 0.1% in morning action.

Among exchange-traded funds, Nasdaq 100 tracker Invesco QQQ Trust (QQQ) fell 0.1%, and the SPDR S&P 500 ETF (SPY) lost 0.2% in early trading.

The 10-year Treasury yield rose to 3.43% on Wednesday morning. On Tuesday, the 10-year Treasury yield hit its highest closing level since June 14 and is just shy of the 11-year high of 3.48% set on June 14.

US oil prices were lower on Wednesday as they continue to consolidate after recent gains. West Texas Intermediate futures traded back below $87 a barrel.

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Stock market rally under pressure

On Tuesday, all three major stock indexes fell below their 50-day moving averages, triggering a trip back to their September 6 lows. The Dow Jones Industrial Average fell 3.9%, while the Nasdaq plunged 5.2%.

Prior to the inflation report, Tuesday’s The Big Picture column commented: “Best to stay out of the way of the market at this point. Assess your current positions. If you have some names that are profitable and holding above support levels in the short term, it’s okay to hold. In the rating portfolio, for example, we’re still holding solar inversion (TAN) because it is slightly above our entry and remains above its converging 10-day and 21-day lines.”

The best way to find emerging stock market leadership is by using the line of relative strength. The RS line measures a stock’s price performance against the S&P 500. If the stock is outperforming the broader market, the RS line slopes up. If a stock is lagging the broader market, the line will point down.

The RS line is plotted on all IBD and MarketSmith charts. In addition, the IBD Stock Screener includes a list of the highest rated stocks with lines of relative strength at new highs. MarketSmith also has the “RS Blue Line Dot” list, which looks for RS lines at new highs. (IBD MarketSmith provides free access for a full week.)

If you are new to IBD, consider taking a look at their stock trading system and the basics of CAN SLIM. Recognizing chart patterns is a key to investment guidelines. IBD offers a wide range of growth stock listings such as Leaderboard and SwingTrader.

Investors can also create watchlists, find companies nearing a point of purchase, or build custom displays on IBD MarketSmith.

Five Dow Jones Stocks to Watch Now

Dow Jones Stocks to Watch: Chevron

Dow Jones shares Chevron fell 1.9% on Tuesday but still remain above support at the key 50-day line. The stock is nearing its latest buying point at 166.93, according to graphical analysis from IBD MarketSmith, amid strong performance by energy stocks so far this year. The stock was up 1% early Wednesday.

CVX stock shows a strong 97 out of a perfect IBD Composite Rating of 99, according to IBD Stock Check. Investors can use the IBD Composite Rating to easily gauge the quality of a stock’s fundamental and technical metrics.

Top 3 Growth Stocks to Buy and Watch in the Current stock market rally

Top Stocks to Watch: Arista, DoubleVerify, Palo Alto Networks, Pure Storage

Arista Networks has added a handle to a double bottom basis, placing the correct entry at 132.97, according to IBD MarketSmith chart analysis. Arista’s relative strength line is near highs. ANET shares gained 0.1% early Wednesday.

IBD leaderboard shares DoubleVerify remain above a buy point of 28.07 on a bottoming basis. Shares are in the 5% buy zone rising to 29.47. Shares of DV were down 0.1% on Wednesday morning.

Cybersecurity leader Palo Alto Networks is nearing a buy point of 578.89 on a glass with a handle despite Tuesday’s 3.4% drop. An early entry around 560 due to a trend line is also on the cards, per IBD leaderboard commentary. Shares rose 0.5% on Wednesday.

Pure Storage approaches a buy point of 31.62 in a mug with a handle. Meanwhile, an early entry is also on the cards after the stock moved above a downtrend line within that handle. Shares fell 0.3% on Wednesday.

Join IBD experts as they discuss the top stocks in the current stock market rally on IBD Live

Tesla Stock

Tesla shares fell 4% on Tuesday, snapping a five-day winning streak. Stocks gave up their 200-day line, which they had just recovered. The electric vehicle giant was up 2% on Wednesday morning.

Shares are about 30% off their 52-week high.

Dow Jones Leaders: Apple, Microsoft

Among Dow Jones stocks, Apple shares fell 5.9% on Tuesday, falling back below their 50- and 200-day lines. The stock is 14% from the buy point at 176.25 for a mug with a handle. Apple shares rose 0.3% on Wednesday.

Microsoft fell 5.5% on Tuesday, ending a four-day winning streak. The software giant remains well below its 50 and 200 day lines. Shares are 28% below their 52-week high. Microsoft shares rose 0.1% on Wednesday morning.

Be sure to follow Scott Lehtonen on Twitter at @IBD_SLehtonen for more information on growth stocks and the Dow Jones Industrial Average.


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