Futures contracts rise; Has inflation fever reached its climax?

Dow Jones futures rose slightly overnight, as did S&P 500 and Nasdaq futures, with a key inflation report. The stock market had a bullish session on Tuesday, with tech closing higher as the Dow Jones lagged.


Coinbase (CURRENCY) and Unit software (U) dipped late on weak first-quarter results. COIN and Unity shares are notable holdings of Ark Invest

Meanwhile, Merck stocks, dollar tree (DLTR) are among the stocks to watch in the context of the ongoing market correction.

Inflation report

The Department of Labor will release the April consumer price index at 8:30 a.m. ET on Wednesday. Economists expect the CPI to post a 0.2% increase from March. The core CPI, which excludes food and energy, is expected to climb 0.4%. Year-over-year, consumer prices are expected to jump 8.1%, down from the 40-year high of 8.5% recorded in March. Core inflation is expected to fall to 6% from 6.5% in March. Year-to-year comparisons become more difficult.

Meanwhile, the Department of Labor will release April’s producer price index on Thursday.

Stocks to Watch

Giant Dow Merck (MRK), Louisiana-Pacific (LPX), Atkore (ATKR), Anthem (ANTM) and DLTR stocks are all worth watching right now.

Merck stock is holding just below a cup-with-handle buy point. LPX stocks and possibly Atkore are working on the handles after both boosted profits last week. ANTM stock and dollar tree (DLTR) returned to their 50-day lines around the top of previous buy zones. This could provide a buy opportunity or a sell signal.

Meanwhile, the relative force line for Apple (AAPL) continues to hit new highs, with shares rising 1.6% on Tuesday. AAPL stock is struggling to get back to its 200-day line, but this is by far the best-looking megacap.

Microsoft (MSFT) looks much worse than Apple stock, but rebounded 1.9% on Tuesday after topping 2022 lows. Cybersecurity Play Fortinet (FTNT) jumped 6.8% on Tuesday after also surpassing its 2022 lows. That might be a sign of hope for these leaders in institutional-grade software, but they’re far from actionable.

Both Anthem and Microsoft stocks are on the IBD ranking. MRK stock is on SwingTrader. Microsoft and FTNT stocks are long-term leaders of IBD. ATKR stock is on the IBD 50. Dollar Tree was the IBD stock of the day on Tuesday.

The video embedded in the article reviews Tuesday’s market action and analyzes Merck, Louisiana-Pacific and Anthem stocks.

Dow Jones Futures Today

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

The CPI inflation report is sure to move Dow Jones futures and Treasury yields ahead of the open.

China is due to release data on consumer and wholesale price inflation on Tuesday evening. It comes amid severe Covid lockdowns that have reduced production and demand.

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

Join the experts at IBD as they analyze actionable stocks in the stock market rally on IBD Live

Stock market tuesday

The stock market opened sharply higher, quickly reversed lower, then rebounded again before turning mixed.

The Dow Jones Industrial Average fell 0.3% in trading on Tuesday. The S&P 500 index climbed 0.2%, led by FTNT stock. 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, falling back below $100. Crude fell 6.1% on Monday.

The 10-year Treasury yield fell nine basis points to 2.99%. The 10-year yield hit 3.17% intraday on Monday before reversing lower.

Among the top ETFs, the Innovator IBD 50 ETF (FFTY) fell 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 leading the charts and Fortinet also a component. VanEck Vectors Semiconductor (SMH) ETF up 2.5%.

The SPDR S&P Metals & Mining ETF (XME) lost 1.1% and the Global X US Infrastructure Development ETF (PAVE) lost 1%. The US Global Jets ETF (JETS) climbed 0.9%. The SPDR S&P Homebuilders ETF (XHB) fell 1.4%. The Energy Select SPDR ETF (XLE) rose 0.9% and the Financial Select SPDR ETF (XLF) fell 0.9%. SPDR Health Care Fund (XLV) rose 0.4, along with MRK and Anthem shares.

Falling stocks from the ark

Reflecting more speculative historical stocks, ARK Innovation ETF (ARKK) edged down 0.1% in Tuesday’s regular session and ARK Genomics ETF (ARKG) jumped 3.1%. But both fell in overnight trading.

Coinbase and Unity stocks are Ark Invest’s top 10 holdings. COIN stock and Unity reported weaker than expected first quarter results and gave weak guidance, with Coinbase also filing a mixed shelf offering. Coinbase plunged 16% overnight while Unity stock crashed 29%. Both have already fallen to new record lows on Tuesday.

Five best Chinese stocks to watch now

Market analysis

The stock market rebounded big on Tuesday’s open, reversed lower, rebounded again before fading to a mixed close. The Nasdaq rose solidly, albeit far from intraday highs, while the S&P 500 rose slightly and the Dow Jones fell slightly.

The market was expected to rebound, but Tuesday’s action was uninspiring. At best, it marked the first day of an attempted stock market rally for the Nasdaq and the S&P 500 index.

If the major indexes continue to advance, investors may be looking for a follow-up day starting next week.

There is little leadership in the market right now.

Energy, fertilizer and other commodity stocks tried to rebound on Tuesday after Monday’s heavy losses, but the gains faded or even turned into losses. Mining and metals stocks have already collapsed.

A few drugmakers such as Merck are doing well, while some medical services companies like ANTM stocks are holding up. Some lumber and building products firms are trying to establish themselves, including the LPX stock.

Consumer staples, such as food producers and discount retailers, are holding steady or rising. But will these defensive plays lag when another market rally takes hold?

Growth stocks are still experiencing sharp declines. While investors should always be watching Apple stocks and a few giants such as Microsoft, they are certainly not bought at the moment.

Major indexes may react positively to Wednesday’s inflation report, but that won’t be a game-changer for the Federal Reserve. Fed rate hikes are expected to continue at a steady pace until a downward inflation trend is in place for several months. Still, a relatively subdued inflation report could allay fears that the Fed may not be able to stage a soft landing.

Time the Market with IBD’s ETF Market Strategy

What to do now

Investors should not be tempted to add exposure until there is clear evidence of an uptrend in the market.

Just last week, the major indexes rallied for three straight days, with the March 4 gain at the Federal Reserve meeting being particularly encouraging. We know how it ended.

At this point, investors should wait for a tracking day before making any new purchases. Even then, investors should be cautious, gradually adding exposure as a new uptrend in the market gains momentum, and exit quickly if the rally falters.

There may be few stocks to buy on an FTD. Even many stocks with strong relative strength are off the highs or have damaged charts.

Monitor market action on the sidelines and keep your watchlists up to date.

Read The Big Picture every day to stay in tune with market direction and top stocks and sectors.

Please follow Ed Carson on Twitter at @IBD_ECarson for stock market updates and more.


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