Dow Jones Futures: CPI Inflation Report After S&P 500 Cuts Key Level


Dow Jones futures rose slightly, along with S&P 500 futures and Nasdaq futures, after a tough day for the S&P 500 and the stock market rally. All eyes will turn to the October CPI inflation report.




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The stock market rally lost ground on Wednesday, with the S&P 500 falling below its 50-day moving average. Mixed election results, Bitcoin’s ongoing woes, China’s renewed lockdowns and a looming consumer price index were all possible contributors.

Bitcoin fell to a two-year low after Binance, the world’s largest cryptocurrency exchange, said Wednesday afternoon it would not buy rival FTX.

Megacaps didn’t help. Tesla ( TSLA ) fell off key levels on Wednesday to a two-year low, as longtime bulls on Thursday criticized the impact of the “Twitter circus” on the Tesla brand. Amazon.com (AMZN) also set fresh bear market lows. apple (AAPL), meanwhile, had its worst close since June Microsoft (MSFT) and parent Google Alphabet (GOOGL) fell slightly.

Facebook parent Meta platforms (META) was the exception, rebounding after job announcements and cost-cutting. But the main suppliers fell.

Basic Earnings

Catalyst Pharmaceuticals (CPRX), Perfect the energy (EE), Celsius Holdings (CELH) and Rivian (RIVN).

Shares of CPRX rose modestly in premarket action as Catalyst Pharma beat EPS and revenue views. The biotech also projected Q4 sales in line with consensus. Catalyst shares were back down 5.35% in the early session on Wednesday.

CELH shares rose overnight on strong Celsi earnings growth after the energy drink maker fell to its lowest level since July on Wednesday. Rivian shares rebounded on mixed Q3 results after hitting four-month lows It is obvious (LCID) results.

EE shares not trading after Excelerate earnings beat views. Shares of Excelerate slipped on Wednesday, testing the 50-day line.

early Thursday, Nio ( NIO ) reported a bigger-than-expected loss early Thursday, but earnings topped. EV rival Tesla China also gave conservative Q4 guidance for shipments amid recent Covid-related production issues. Nio shares rose slightly in premarket trading. Shares fell to a two-year closing low on Wednesday after southern manufacturing hub Guangzhou announced Covid lockdowns, hitting many Chinese stocks.

Meanwhile, the network firm Digi International (DGII) is also working this morning. DGII stock pulled back toward its 50-day line on Wednesday as it worked on a bullish buy point.

CPI Inflation Report

The consumer price index for October will be released at 8:30 am on Thursday. Economists expect the CPI inflation report to show prices rose 0.7% from September. Core CPI, which excludes food and energy, should rise 0.5%.

The annual CPI inflation rate should decrease to 8% from 8.2% in September. Core inflation is seen to remain stable at 6.6%.

The Federal Reserve wants to see clear and convincing evidence that inflation is slowing before ending interest rate hikes. Markets are leaning slightly toward a 50-basis-point Fed rate hike in December, but there’s still a strong chance for a fifth consecutive 75-basis-point move. The November employment data and CPI report will be released before the December Fed meeting and announcement.

Dow Jones Futures today

Dow Jones futures were up 0.1% at fair value. S&P 500 futures rose 0.2%, and Nasdaq 100 futures rose 0.4%.

The 10-year Treasury yield fell 6 basis points to 4.09%.

By Wednesday afternoon, bitcoin was trading above $16,000, a two-year low.

Crude oil prices fell slightly, while natural gas prices rose.

Remember that an overnight move in Dow futures and elsewhere does not necessarily translate into actual trading in the next regular trading session.


Join IBD’s experts as they analyze the stocks that made the most of the stock rally on IBD Live


Stock market rally

The stock market rally opened mixed on Wednesday, but then lost ground, closing at session lows, especially in the afternoon.

The Dow Jones Industrial Average was down about 2% in stock trading on Wednesday. The S&P 500 index fell 2.1%. The Nasdaq composite lost 2.5%. The small-cap Russell 2000 fell 2.7%.

The 10-year Treasury yield rose 2 basis points to 4.15%.

The dollar had a strong session after three days of big declines.

The price of crude oil in the United States fell by 3.5% to $85.83 per barrel. US weekly crude oil inventories rose by the most in a month. Meanwhile, China’s lockdown has raised concerns about crude demand there. US natural gas futures fell 4.5%.

Bitcoin

Bitcoin fell again on Tuesday after Binance’s initial deal to buy FTX collapsed, with Binance leaving after looking at its rival’s books. “Our hope was to support FTX’s customers in providing liquidity, but the issues are beyond our control or ability to assist,” Binance said in a statement on Wednesday afternoon.

Seen as a potential savior for ailing crypto firms earlier this year, FTX is now in danger of collapsing.

Bitcoin fell to $15,554.48, its worst performance in two years. The pioneering cryptocurrency fell below $20,000 on Monday. Other major cryptocurrencies such as Ethereum continue to sell off, along with crypto-related stocks.

ETFs

Among the top ETFs, the Innovator IBD 50 ETF ( FFTY ) lost 4.2%, while the Innovator IBD Breakout Opportunities ETF ( BOUT ) lost 1.8%. The iShares Expanded Tech-Software Sector ETF ( IGV ) lost 2.2%, a major component of Microsoft shares. VanEck Vectors Semiconductor ETF (SMH) lost 2.7%.

Reflecting more speculative story stocks, the ARK Innovation ETF ( ARKK ) fell 6.5% and the ARK Genomics ETF ( ARKG ) fell 4.3%. Tesla stock is a major holding in Ark Invest’s ETFs.

The SPDR S&P Metals & Mining ETF ( XME ) lost 5.4%, while the Global X US Infrastructure Development ETF ( PAVE ) lost 2.1%. The US Global Jets ETF ( JETS ) was down about 1%. The SPDR S&P Homebuilders ETF ( XHB ) fell 1.75%. The Energy Select SPDR ETF (XLE) fell 4.9%, while the Financial Select SPDR ETF (XLF) fell 1.7%. The Healthcare Select Sector SPDR Fund ( XLV ) fell 1.1%.


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Tesla shares

Tesla shares fell 7.2% to 177.59, hitting a 2021 low. On Tuesday, Elon Musk announced that he was selling about $4 billion worth of TSLA stock on November 4, 7 and 8, presumably to help with his takeover of Twitter. The announcement could lift the bullishness on TSLA shares, although Musk has yet to say whether he has completed his latest batch of stock sales.

Elon Musk’s takeover of Twitter has wider implications. It takes up a lot of his time, and there are concerns that his Twitter actions and tweets will damage Elon Musk’s brand and possibly Tesla’s. At the Twitter Spaces event on Wednesday, Musk talked about subscriptions and added savings and payment features, but didn’t do much to win back wary advertisers.

Also, Tesla could fall along with other Chinese stocks after increased lockdowns in China. In addition, many US and Chinese EV stocks posted double-digit losses on Wednesday, including shares of Nio, Lucid and RIVN.

Finally, Tesla still owns some Bitcoins.

“It deserves to be looked at,” President Biden said Wednesday evening when asked whether Musk was a national security risk, adding that there were “many ways.”

TSLA shares posted modest pre-sell gains as Wedbush analyst Dan Ives cut his price target from 300 to 250 and removed Tesla from his “Best Ideas” list. “The Twitter circus is slowly starting to affect Tesla’s original EV brand, which could affect demand,” he said.


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Other Megacap Stocks

Meta Platforms will cut 11,000 jobs, or 13% of its workforce. Facebook’s parent will also limit infrastructure spending as investors shy away from large meta-caps. META shares rose 5.2% but were hit by cost containment Arista Networks (ANET), Nvidia (NVDA) and other vendors benefiting from the metaverse splurge.

Apple shares fell 3.3% to 134.87. While the iPhone maker didn’t break October’s intraday low or June 16 bear market bottom, AAPL shares closed at their worst level since June 17. Earlier this week, Apple warned that China’s Covid restrictions would hurt iPhone 14 Pro production.

Amazon shares fell 4.3% to their lowest point since March 2020. MSFT shares fell 1.9%. Google shares fell 1.8%. However, both are still up slightly during the week.

Market rally analysis

The sell-off returned on Wednesday, when the stock market rally appeared to be regaining momentum. The Dow Jones fell slightly below its 200-day line. The S&P 500 fell below its 50-day moving average. The Russell 2000 also fell below the 50-day line.

The lagging Nasdaq retreated after hitting resistance at its 21-day line on Tuesday.

Treasury yields rose, but not by much. The dollar has rebounded but has been on a downward trend lately. The still-uncertain election results may have played a role, suggesting a smaller-than-expected GOP wave. Bitcoin’s decline, China’s lockdown and often negative earnings reactions all contributed.

Finally, the market rally has been under pressure for the past week. The S&P 500 above its 50-day line is the minimum level for market strength. A move above this key level by the Nasdaq would be an even stronger signal.

The October CPI report could set the tone for Fed rate hike expectations and perhaps market direction for at least a few weeks.


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What to do now

While the Dow is near recent highs and the Nasdaq near bear market lows, the market rally is expanding. A volatile, sideways market is extremely dangerous for investors.

A strong bull market generally lifts all boats. A bear market sinks them, leaving everyone on dry land. But choppy market waters will be enough to tempt investors with mini-runs for indexes and strong gains for individual stocks. But after buying near the short-term top, investors are in for a pullback. This can go on with investors taking a bunch of small losses or very large losses.

It’s good to make some test buys and hold positions if they work, although you might consider taking at least partial profits quickly in this environment. But investors should wait for the market rally to show sustained strength before significant exposure.

But it’s important to stay engaged. Investors should have a game plan and execute if the market or individual holdings break lower or higher. Update your watchlists to be ready to take advantage of the next true bull market rally.

Read The Big Picture daily to stay in sync with market direction and leading stocks and sectors.

Follow Ed Carson on Twitter @IBD_ECarson for stock updates and more.

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