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Dow Jones Futures: Stocks called for the biggest Fed rate hike in 40 years; Apple, Tesla Tumble

Dow Jones futures edged higher overnight, along with S&P 500 futures and Nasdaq futures. Stock markets rallied on Tuesday on a hotter-than-expected inflation report, with the major indexes breaking below their 50-day moving averages and wiping out all or nearly all of their recent gains. .




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The Consumer price index in August much worse than expected. Consumer prices rose 0.1%, compared with a 0.1% decline, where food and rent prices pushed up costs despite the plunge in gasoline prices. The core CPI, which excludes food and energy, rose 0.6 percent, twice as much as expected. Headline inflation has cooled again, to 8.3%, but Wall Street expects 8%. Core inflation rose more than expected, to 6.3%.

That prompted one Wall Street firm to predict that the Federal Reserve will raise interest rates entirely by a percentage point at the Fed’s meeting on September 20-21. That would be the highest level since the start. in the 1980s, when then-Fed Director Paul Volcker waged an all-out war on inflation.

Pure storage (PSTG), Tesla’s rival Nio (NIO), Devonian energy (DVN), Wolfspeed (WOLF) and Enphase Energy (ENPH) showed relatively healthy action on Tuesday.

Megacaps Apple (AAPL) and Tesla (TSLA), which has appeared to buy signals recently, fell sharply on Tuesday, back below a key level. Nvidia (NVDA) and Facebook father Meta . Platform (META), no one has an idea of ​​the current market leaders, plummeting to a 2022 low.

DVN stock is on IBD Rankings. PSTG stock is on SwingTrader and it’s Tuesday IBD shares of the day. Tesla and Devon Energy stocks are IBD 50. Devon and ENPH shares are on IBD Big Cap 20.


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Dow Jones Futures Today

Dow Jones futures are up 0.2% above fair value. S&P 500 futures were up 0.2 percent and Nasdaq 100 futures were up 0.15 percent.

The yield on the 10-year Treasury note rose 3 basis points to 3.45%.

At 8:30 a.m. ET, the Labor Department will release the August producer price index.

Remember that action overnight in Dow futures contract and elsewhere it doesn’t necessarily translate into actual trading the next week stock market meeting.


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Rally stock market

The stock market rally suffered its worst losses of 2022, with the major indexes closing at near-session lows on hot inflation reports and concerns about a Fed rate hike.

Another factor? Reuters reported on Tuesday, Reuters reported on US options for sweeping sanctions versus China to confront any Taiwan invasion. The European Union is facing pressure to do the same. That would increase the risk of a major economic split between China and the West.

The Dow Jones Industrial Average fell 3.9% on Tuesday stock market trading. The S&P 500 index fell 4.3%. The Nasdaq composite index fell 5.2%. The small-cap Russell 2000 lost 3.9%.


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Nvidia stock and META stock are down more than 9%, both falling to 2022 lows.

U.S. crude oil prices fell 0.5% to $87.31 a barrel.

The yield on the 10-year Treasury note rose 6 basis points to 3.42%. The benchmark yield hit 3.45% on the day, just below the 11-year high of 3.48% set on June 14. Short-term yields rose more.

ETF

Among the Best ETFsThe Innovator IBD 50 ETF (FFTY) fell 2.9%, while the Innovator IBD Breakthrough Opportunity ETF (BOUT) lost 2.35%. iShares Expanded Technology-Software Sector ETF (IGV) sank 4.7%. VanEck Vectors Semiconductor ETF (SMH) decreased by nearly 6%. NVDA stock is a large holding SMH stock.

SPDR S&P Metals & Mining ETF (XME) accounted for 3.7%. SPDR S&P Homebuilders ETF (XHB) decreased by 5.9%. SPDR Select Energy ETF (XLE) 2.5% retreat and financial SPDR ETF (XLF) decreased by 3.75%. SPDR Fund for the Healthcare Sector (XLV) decreased by 3.3%.

Reflecting a more speculative narrative on stocks, the ARK Innovation ETF (ARKK) fell 6.8% and the ARK Genomics ETF (ARKG) 5.6%. TSLA stock is a large stock on Ark Invest ETFs.


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Stocks show strength

PSTG stock fell 3.8% to 29.64 on Tuesday, but closed above the 21-day line. Pure repository is working on a cup base with handle with 31.62 buy points. Investors can use a move above Monday’s high of 30.88 as a slightly lower entry.

Nio shares rose 0.9% to 21.95, hitting the 200-day mark on the day after surging 13.5% on Monday. Shares of the Chinese EV startup have gained 28% over the past five sessions, four on high volume. Analysts are increasingly optimistic about Nio’s lineup. Nio began deliveries of the ET5 sedan, its third new EV this year, on September 30. Nio stock bottomed out at 24.53 point of purchasebut investors can use a decisive move above the 200-day line as an early entry.

DVN stock fell 3% to 69.07, pulling back after breaking a trendline of a handle on Monday. The point to buy cup with handle is 75.37. Investors can now use Monday’s high of 71.57 as an early entry. A longer pause should help the 50-day moving average catch up somewhat.

WOLF stock fell 2.5% to 113.98 on Tuesday after falling to 111.26 shortly after the open. Evercore ISI has launched the chipmaker with an out-of-the-box performance, saying it’s a great way to play into the EV space. Investors can see the recent action as leverage for a major consolidation, with 123.35 buy points. A move above Monday’s high could provide an early entry, but Wolfspeed stock extended, it has outpaced some of its moving averages.

ENPH stock fell 1.1% to 305.50 after testing the 21-day line. Investors can buy Enphase stock right now off the 21-day line, although market conditions increase risk. A longer pause in ENPH stock will allow the 50-day line to rise rapidly to make some point.

Apple stock

Apple shares fell 5.9%, falling below the 50-day and 200-day levels on high volume, giving up gains from the previous two sessions. AAPL stock broke a downtrend in a correction on Monday, offering an early entry, but that is now gone. Shares of the Dow Jones tech giant are hitting a buy level of 176.25 from that handle.

Pre-order Apple’s iPhone 14 seems to be running harder or harder than last year’s iPhone 13. Actual iPhone 14 sales start Friday.


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Tesla shares

Tesla shares fell 4% to 292.13, retreating slightly below the 200-day level but holding the 21-day level and comfortably above the 50-day mark. Trading volume was light, but above the five-day gain.

TSLA stock is said to have a short-term basis in a much larger consolidation, with a buy point of 314.74. A move above Monday’s high of 305.49 could provide an early entry.

Tesla’s director of investor relations, Martin Viecha, said at a conference on Tuesday that cost and supply chain constraints are being loosened for electric vehicles, which should lead to lower prices. Viecha said Tesla will eventually unveil a cheaper electric vehicle, but gave no details on when that might happen. Tesla recently introduced the lower-range Model Y in Europe at a much cheaper price.

Market aggregation analysis

The recent resurgent stock market rally has extended amid the CPI inflation witnessed on Tuesday. The major indexes and the Russell 2000 both fell below their 50-day moving averages. The Dow Jones Industrial Average fell last week’s low while the S&P 500 almost did. Nasdaq wiped out most of the gains from the previous four sessions.

Leading stocks, many of which have surged in recent days, also took a hit from Tuesday. The losers make it difficult for the winners, following strong market breadth in recent days.

Apple stock showed damaging action on Tuesday. Tesla also retreated, after some low volume gains, but its chart looks a bit better.

While Pure Storage and Nio stocks still look good, there’s a good chance they will falter if the market comes under more pressure.

The stock market has rallied over the past few days in no small part on expectations of a subdued inflation report. That should prompt the Fed to start raising rates less aggressively.

But following the hot inflation report, Nomura Securities forecasts Fed policymakers will raise rates by 100 basis points on September 21. Late Tuesday, Ed Yardeni of Yardeni Research reported a rate hike. The Fed’s headline rate is “more likely” than 75 basis points. .

Markets are fully pricing in at least 75 basis points for the Fed’s third consecutive meeting next week. But now there’s about a one in three chance it’s 100 basis points, up from zero before the CPI data. The market is betting on higher year-end odds.

Yields on 10-year Treasuries have continued to plummet over the past few weeks.

A more aggressive Fed, higher Treasury yields and a stronger dollar are not great recipes for stocks. That especially happens when the markets bet the opposite.

Now the question is where will the market go from here. Will the major indexes cut last week’s lows and move toward June lows? It is possible that the market will swing in a range as Wall Street waits for actual signs that the Fed will slow rate hikes.


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What to do now

Investors may have wanted to take profits looking at Tuesday’s CPI inflation report, as the low volume gains were priced in the good news. At this point, you may want to lock in profits left on recent buys or stop losses.

You should keep the light exposed. Hot inflation data has weakened the short-term bullish case for a Fed rate hike, with market trends currently uncertain.

At some point, whether next week, next month or next year, the market will be in a clear uptrend. That’s when real money will be created.

So work on your watch list, focusing on relative strength and signs that major institutions are buying back shares.

Read Big picture every day to stay in sync with market trends and top stocks and sectors.

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

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