Dow Jones Futures fall, Tesla AI chief exits; Market rally sees ‘Everything.’ Fed Rate Hike

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Dow Jones futures fell slightly overnight, along with S&P 500 futures and Nasdaq futures. Stock market rallies saw more losses but ended at lows as investors tried and weigh the implications of hot inflation reports and Fed rate hikes. Recession signals were louder from the Treasury yields.




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JPMorgan Chase (JPM) and Morgan Stanley (MS) report second-quarter earnings early Thursday, kicking off big bank earnings. Taiwan Semiconductor (TSMThe earnings of chipmakers (((() will give insight. Long-term downtrends are seen in JPM stock and Morgan Stanley, as well as Taiwan Semi.

Li Auto (LIWednesday’s bullish rebound by ) was followed by a strong showing from EV giants Tesla (TSLA) and BYD (BYDDF) try to find support at key levels. Shockwave Medical (SWAV), AstraZeneca (AZN) and McKesson (MCK) showed constructive action near Purchase points. Olaplex (OLPXAfter the 2021 IPO was sold for most of this year, ) showed positive signals.

LI stock was also added SwingTraderWednesday Li Auto and AstraZeneca are available on Wednesday. IBD 50. Li Auto was also Wednesday’s IBD Stock Of The Day.

Inflation Report

The CPI inflation rate headlineIn June, the inflation rate jumped to 9.1% from 8.6% in May. This is a new 40-year high. Core inflation, which excludes food and energy, fell to 5.9% from 6.

The headline CPI inflation rate may cool slightly in July, with crude oil and gasoline prices dropping significantly since June’s mid-June. The broad-based price gains in June are a warning sign that inflation will continue to rise over the long term.

Core prices rose 0.7% in May compared to May. This was the third straight month with accelerating gains. The increase in services prices, which exclude energy, was 5.5% compared to a year prior.

Fed Rate Hike Outlook

This has led to the following: CME FedWatch ToolNow, there is a 78% chance that the Fed will raise its rate by 100 basis points at the July 26-27 meeting. This is up from 8% on Tuesday. Markets were locked in on a 75basis point move prior to Tuesday’s inflation data.

While the CPI inflation report raised odds of a full point hike, they were higher for Raphael Bostic (Atlanta Fed President). Bostic declared Wednesday that “everything’ is in play, explicitly affirming that there could be a 100-basis-point move.

Loretta Mester from Cleveland Fed stated that a percentage-point increase was not necessary. She stressed, however, that the CPI report was “uniformly poor.”

The markets expect a 75 basis point increase in September, up from 50 basis points prior to the CPI inflation reports.

Markets are pricing in 175 basis points rate increases over the next two meetings, compared to 125 basis points prior to the inflation data.

Notable: On Wednesday, the Bank of Canada raised rates 100 basis points higher than anticipated.

Dow Jones Futures Today

Dow Jones futures fell 0.2% vs. fair value. S&P 500 futures retreated 0.3%. Nasdaq 100 futures declined 0.25%.

The 10-year Treasury yield climbed 6 basis points to 2.96 percent. The 2-year yield rose 5 basis points, to 3.19%.

8:30 a.m. ET ET: The Labor Department will publish the June producer price index as well as weekly jobless claims. Is there any cooling in wholesale inflation as indicated by the PPI? While jobless claims may not decline, it should show a steady easing trend in labor markets.

Remember, overnight action is possible Dow futuresHowever, what you see elsewhere does not necessarily translate into trading the next regular. stock market session.


IBD Live is a live stream where IBD experts analyze the stocks that are most likely to be affected by the stock market rally.


Stock Market Rally

Stock market rallies were halted Wednesday morning by the hot inflation data. However, they rebounded to mixed for the majority of the afternoon before fade.

Wednesday’s drop in the Dow Jones Industrial Average was 0.7% Stock market trading. The S&P 500 index declined 0.45%. The Nasdaq composite fell 0.15%. The Russell 2000 small-cap index fell 0.1%

In an up-and down session, U.S. crude oil prices rose 0.5% and reached $96.30 per barrel. The price of gasoline futures dropped nearly 1% and prices at the pump are likely to continue falling at least for the short term.

Treasury Yields

After briefly rising to 3.05% in CPI data, the 10-year Treasury yield dropped 5 basis points to 2.9%. The two-year yield climbed 10 basis points to 3.144%. The one year Treasury yield increased 12 basis points, to 3.2%.

Inversion of the yield curve from the 1-year to 10 year is now evident. The sharpest inversion since 2000 is the 2-year-to-10 year inversion. The 6-month bill rate has increased 18 basis points to 2.95 percent, which is higher than the 10-year yield.

All that Treasury action signals rising recession risk.

ETFs

The list of Best ETFsThe Innovator IBD50 ETF is also available.FFTY) lost 1 cent to 26.53, while the Innovator IBD Breakout Opportunities ETF (BOUT) dipped 0.2%. The iShares Expanded Software Sector ETF (IGV) slumped 1%, extending the weekly loss to 6.2%. VanEck Vectors Semiconductor ETFSMH) gained 0.8%.

ARK Innovation ETF (ARK Innovation ETF) is a reflection of more-speculative stock stories.ARKK) fell 0.7% and ARK Genomics ETF (ARKG) rose 1.1%. Ark Invest’s ETFs have the largest holdings of Tesla stock. Cathie Wood’s Ark also has some BYD stock.

SPDR S&P Metals & Mining ETF (XME) gained 2.2% while the Global X U.S. Infrastructure Development ETF (PAVE) retreated 0.5%. U.S. U.S.JETS) descended 0.8%. SPDR S&P Homebuilders ETF (XHB) edged up 0.2%. The Energy Select SPDR ETF (XLE) dipped 0.2% and the Financial Select SPDR ETF (XLF) lost 0.5%. SPDR Fund Health Care Select Sector SPDR FundXLV) sank 1%, with MCK stock in the ETF.


Five of the Best Chinese Stocks to Watch Now


Li Auto Stock

Li Auto stock rose 2.8%, to 38.03. This rebounded from just above 21-day moving average and offers an aggressive entry. LI stock has been consolidating since June, when it more than doubled. The ideal situation would be for China’s hybrid SUV maker to create a new base that closes the gap. Investors might view the current actions as a way to control a consolidation that will take place in 2020.

During this time, Tesla stock rose 1.7% to 711.12. TSLA stock regained its 21-day moving mean. Stocks fell from their 50-day line. Tesla stock recovered that key level on Friday but fell below it Monday.

TSLA stock fell 1% late Wednesday. Andrej Karpathy (Tesla AI chief), who was responsible for Autopilot, announced that he had left the electric vehicle giant. Karpathy had been on a lengthy sabbatical that lasted for several months. This led to speculation that he was about to leave.

BYD stock rose 0.9% to 34.80 Wednesday, finding support at the 200-day mark. The China EV- and battery giant plunged 11% Tuesday due to rumors about Warren Buffett’s retirement. Berkshire Hathaway (BRKB) might be selling some or all of its big BYD stake. Investors will need to know the details. BYD stock will need to find a new foundation.


Tesla vs. BYD – Which EV giant is the better buy?


Stocks Close to Buy Points

After falling to 186 intraday, Shockwave Medical stock gained 0.4% to 195.93. SWAV stock may be on the verge of forming a handle, but that will take a few more days. It also coincides the downward-sloping trendline entrance, which runs from November 2021 to April peaks up to July 8. The Relative strength lineThe blue line on the charts shows that, the blue line, has reached record highs despite having SWAV stock at all-time lows.

AstraZeneca stock fell 0.6% to 66.30 but recovered from an intraday test for the 21-day moving Average. AZN stock has a 67.50 purchase point. Double-bottom Base. The U.K.’s drug giant, however, has been able to cross that threshold three times in recent weeks but has not yet closed within the buy range.

MCK stock dropped 0.7% to 325.18, bounced intraday from another fifty-day test. McKesson stock now has a 340.04 purchase point. Flat baseHowever, investors can use 335.67 as an entry point, which is slightly earlier than Monday’s intraday high.

Olaplex rose 6.6% to 15.31. It rebounded back above its 21 and 50-day lines. Volume was lower than average for OLPX stock but better than the previous few days. Shares are trading at a 17.47 purchase point from a bottoming basis. Olaplex stock closed Wednesday just below a short, downward-sloping trendline at that base. This could be an opportunity to enter aggressively, as it is close to the 50 day line.

OLPX, a high-end hair-care product maker, went public in September 2021 at 21 cents per share. It hit a record of 30.41 minutes before the end. OLPX shares plunged to 11.73 by May 10, after the OLPX stock price surge. Estimates and earnings growth have been strong with OLPX shares falling to 11.73 on May 10.

Market Rally Analysis

Due to the Fed’s hot inflation readings, strong recession signals and “everything” Fed signal, Wednesday’s rally in stock markets was quite solid.

Major indexes were well above morning lows. Techs were the leaders, possibly due to the higher 10-year Treasury yield. The long-term yield is dropping due to expectations that Fed rate increases will cause the economy into recession. This isn’t exactly good news.

The major indexes still fall below their 21 day lines. The Nasdaq has reversed from its previous level by 10 weeks, which is a significant hurdle.

The economy and markets are constantly changing. Major indexes may fall to new lows, rebound or test the 10-week mark again. They could also move in a sideways fashion, sometimes for a long time. The markets would have more information on the economy and Fed rates hikes. There could also be more bases. However, stocks may be volatile, luring investors into the stock market and shaking them out.

The medical sector is still the dominant market, with many stocks and groups showing positive actions.


IBD’s ETF Market Strategy Will Time the Market


What to do now?

Although the market rally is still in place, it is under pressure. Over the past few weeks there has been no clear direction, and the long-term trend remains negative.

The earnings season is rapidly ramping up, creating uncertainty and volatility in the next weeks.

This is not the best time to add exposure. Although a few stocks, mainly medicals, show positive activity, even these stocks can experience large daily swings. Consider taking at most partial profits as soon as possible. Don’t invest too much in any one topic or sector.

Keep your eyes open and prepared. Keep working on your watchlists and looking for stocks showing relative strength.

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

Follow Ed Carson @ @IBD_ECarson for stock market updates and more.

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