Dow futures fall, Tesla AI chief exits; Market rally sees Fed rate hike ‘everything’

Overnight Dow futures are down slightly, along with S&P 500 futures and Nasdaq futures. The stock market rally saw more losses, but closed lower as investors tried to assess the implications of a hot inflation report and the Federal Reserve being bolder with rate hikes. Treasury yields sent higher recession signals.




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c. B. Morgan Chase (JPM) and Morgan Stanley (MS) second-quarter earnings report early Thursday, kicking off big banks’ earnings. Taiwan Semiconductor (TSM) earnings will provide insight to chip makers. JPM, Morgan Stanley and Taiwan Semi are all in long downtrends.

Lee Otto (LI) rebounded higher on Wednesday, while the EV giants Tesla (TSLA) and BYD (BYDDF) Try to find support at key levels. Shock Wave Medical (SWAV), AstraZeneca (AZN) and McKesson (MCK) showed a constructive move near the buying points. Olaplex (OLPX) has been flashing positive signs after selling its 2021 IPO for most of this year.

LI stock was added to SwingTrader on Wednesday. Li Auto, AstraZeneca and MCK stocks are in 50 IBD. Li Auto was also IBD’s stock on Wednesday.

Inflation Report

Headline CPI inflation rose to 9.1% in June from 8.6% in May, its highest level in 40 years and just over 8.8%. Core inflation, which strips out food and energy, fell to 5.9% from 6%.

With crude oil and gasoline prices significantly lower from mid-June, core CPI inflation may subside somewhat in July. But broad-based price gains in June are an ominous sign for long-term inflation.

Core prices rose 0.7% vs. May, the third consecutive month of accelerating gains, on an unconstrained sequential basis. Prices for services excluding energy captured are up to 5.5% off. a year ago.

Fed rate hike expectations

As a result, the CME FedWatch Tool now sees a 78% chance of a 100 basis point rate hike at the end of the July 26-27 meeting, up from 8% on Tuesday. Markets were locked in a 75bp move ahead of Tuesday’s inflation data.

The CPI inflation report raised the odds of a full point rise, but it jumped higher on Atlanta Fed President Rafael Bostic. “It’s all in the game,” Bostick said Wednesday, explicitly emphasizing that “everything” includes a possible 100 basis point move.

“We don’t have to make that decision today,” Loretta Meester, president of the Federal Reserve Bank of Cleveland, told Bloomberg of a percentage point increase. But she stressed that the CPI report was “uniformly bad”.

For September, markets see a 75bp rise as highly likely, a shift from 50bp ahead of the CPI inflation report.

Bottom line, it appears that markets are pricing in 175 basis points in rate hikes over the next two vs. 125 basis points before inflation data.

Also worth noting: The Bank of Canada raised interest rates by 100 basis points on Wednesday, more than expected.

Dow jones futures contracts today

Dow futures are down 0.2% against stocks. fair value. S&P 500 futures fell 0.3%. Nasdaq 100 futures were down 0.25%.

The 10-year Treasury yield rose 6 basis points to 2.96%. The two-year yield rose 5 basis points to 3.19%.

At 8:30 AM ET, the Labor Department will release its June Producer Price Index and weekly unemployment claims. Will the PPI show any reduction in wholesale inflation? Jobless claims will remain low, but should continue to show the labor markets’ slow easing trend.

Remember that overnight action in Dow Jones futures and elsewhere does not necessarily translate into actual trading in the next regular stock market session.


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stock market rise

The stock market rally was sold off Wednesday morning on the back of a hot inflation report, and rebounded to mixed for much of the afternoon before fading away.

The Dow Jones Industrial Average was down 0.7% in stock market trading on Wednesday. The S&P 500 fell 0.45%. The Nasdaq Composite Index is down 0.15%. Small cap Russell 2000 fell 0.1%.

US crude oil prices rose 0.5% to $96.30 a barrel in a bullish and bearish session. Gasoline futures are down about 1%, and prices at the pump are likely to continue to slide at least in the short term.

Treasury returns

The 10-year Treasury yield fell 5 basis points to 2.9% after a brief rise to 3.05% on CPI data. Meanwhile, the two-year yield rose 10 basis points to 3.14%. The one-year Treasury yield rose 12 basis points to 3.2%.

The yield curve is now inverted from 1 to 10 years, while the inversion from 2 to 10 years is the steepest since 2000. The 6-month bill rate (18 basis points up to 2.95%) is now higher than the 10-year rate of return .

All of these Treasury actions indicate a high risk of recession.

ETFs

Among the top ETFs, the Innovator IBD 50 ETF (FFTY) lost one cent to 26.53, while the Innovator IBD Breakout Opportunities ETF (BOUT) was down 0.2%. The iShares Expanded Tech-Software ETF (IGV) slipped 1%, extending weekly losses to 6.2%. The VanEck Vectors Semiconductor Index (SMH) was up 0.8%.

Reflecting speculative story stocks, the ARK Innovation ETF (ARKK) is down 0.7% and the ARK Genomics ETF (ARKG) is up 1.1%. Tesla stock is one of the largest holdings across ETFs on Ark Invest. Cathie Wood’s Ark also owns some shares of BYD.

The SPDR S&P Metals & Mining ETF (XME) is up 2.2% while the Global X US Infrastructure Development ETF (PAVE) (PAVE) is down 0.5%. The US Global Gates Index (JETS) fell 0.8%. The SPDR S&P Homebuilders ETF (XHB) is up 0.2%. The Energy Select SPDR ETF (XLE) was down 0.2% and the Financial Select SPDR ETF (XLF) lost 0.5%. The healthcare sector fund SPDR (XLV) sank 1%, with MCK shares in the ETF.


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me stock cars

Li Auto stock rose 2.8% to 38.03, rebounding from just above the 21-day moving average, providing a solid entry. After more than doubling from early May to late June, LI stock consolidated. Ideally, the Chinese hybrid SUV maker would form a new base, letting the 50-day streak close the gap. Investors can view the current action as an indication of consolidation going back to late 2020.

Meanwhile, Tesla stock reversed higher, up 1.7% to 711.12. TSLA stock regained its 21-day moving average. Stocks fell from near the 50-day line. Tesla stock regained that key level on Friday, but fell back below it on Monday.

TSLA stock was down 1% late Wednesday. Tesla AI chief Andrej Karpathy, who oversaw the autopilot, tweeted that he was leaving the EV giant. Karpathi has been on vacation for months, fueling speculation that he is on his way out.

BYD stock rose 0.9% to 34.80 on Wednesday, finding support at the 200-day line. Shares of China EV and battery giant fell 11% on Tuesday on rumors that Warren Buffett Berkshire Hathaway (BRKB) may sell some or all of its large stake in BYD. Investors will want some clarity on this. But BYD stock needs to form a new base.


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Stocks near the points of purchase

Shockwave Medical stock rose 0.4% to 195.93 after falling to 186 on the day. SWAV stock can operate on a handle starting July 8, but needs an additional two days to set up. It also coincides with the entry of the downward sloping trend line, from the November 2021 and April highs through July 8. The relative strength line, the blue line in the provided charts, has reached record highs even with the SWAV stock far from all-time levels. .

AstraZeneca stock fell 0.6% to 66.30, but rebounded from an intraday test of the 21-day moving average. AZN is working at 67.50 buy points from a base with a double bottom. The UK pharmaceutical giant has crossed that entry three times in recent weeks, but has never closed in on its buying range.

MCK stock fell 0.7% to 325.18, rebounding intraday from another 50-day test. McKesson stock has 340.04 buying points from a flat base, but investors can use 335.67, just above Monday’s high, as a slightly early entry.

Olaplex price rose 6.6% to 15.31, bouncing back above the 21-day and 50-day lines. The trading volume was well below average for the OLPX stock, but it’s been better than the last few days. The stock is running at 17.47 buy points from the bottom base. On Wednesday, Olaplex stock closed above a short, bearish trend line at that base. Combined with approaching the 50-day line, this could provide a strong entry.

The maker of high-end hair care products went public at 21 shares in September 2021, setting a record 30.41 before the end of the year. But that OLPX breakout quickly faded, with stocks dropping all the way to 11.73 on May 10. Earnings and appreciation growth remained strong, with the OLPX stock’s price-to-earnings ratio dropping to 32.

Market Rise Analysis

The stock market rally held up relatively well on Wednesday due to the heated inflation reading, the Fed “everything” and strong recession signals.

Major indices came away from morning lows. Technology led the way, perhaps a bounce on the low 10-year Treasury yield. But the long-term yield is falling amid expectations that the Fed’s hike in interest rates will push the economy into recession. This isn’t exactly great news.

Major indicators are still below their 21-day lines. The 10-week line remains a major hurdle, with the Nasdaq reversing lower from that level this week.

Markets, like the economy, are in constant flux. Leading indicators can return to dips or bounce to test or even cross the 10-week line again. They can also move laterally in a choppy fashion for a long time. This will allow the markets to get more clarity on the economy and raise the Fed’s interest rates, while more rules can be formed. But in the short term, stocks can be very volatile, and investors outside the Internet are entering and shaking them.

The medical sector continues to be the clear leader, with a wide range of stocks and groups showing positive action.


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What are you doing now

The market rally is still suspended, but under pressure. There is no real trend over the past few weeks, while the long-term trend remains negative.

Earnings season is on the cusp of a strong rally, creating a new wave of uncertainty and volatility in the coming weeks.

It’s not the time to add exposure. A few stocks, mostly pharmaceuticals, are showing positive actions, but even they can have some significant daily fluctuations. So consider making at least partial profits quickly. Don’t buy an extension and don’t invest too much in a particular sector or topic.

Stay engaged and be prepared. Keep working on those watchlists, looking to build stocks and show relative strength.

Read the big picture every day to stay in sync with market trend, stocks and leading sectors.

Please follow Ed Carson on Twitter at Tweet embed For stock market updates and more.

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