Market Claims Key Levels Ahead Of CPI Inflation Report


Dow Jones futures changed little overnight along with S&P 500 futures and Nasdaq futures.


The stock market rally was indecisive for much of Tuesday, but major indices gained momentum, with the S&P 500 moving its 50-day moving average. Investors await December’s CPI inflation report Thursday morning.

Medtempo (MEDP) rose sharply on Tuesday, flashing another buy signal after a similar move spiraled out of control in late 2022. First solar energy (FSLR) recovered from its 50-day line and secured an early entry as well. But ELEVEN beauty (ELF) and Super micro computer (SMCI) plummeted after Monday’s reversals.

MEDP Stocks and ELF Beauty are on IBD Leaderboard. The SMCI stock is at the IBD 50. Medpace was the IBD stock of the day on Tuesday.

Tesla (TSLA) and UnitedHealth (UNH) fell lower as many big caps continue to struggle.

Investors should remain cautious, especially as the CPI inflation report looms.

Business news

In the meantime, Wells Fargo (WFC) will largely exit the mortgage business under regulatory pressure, TBEN reported late Tuesday. It will only offer home loans to existing banking and asset management clients and borrowers in minority communities. WFC stock was little changed in extensive trading.

Axcelis Technologies (ACLS), which made a strong move in the last few sessions, said revenue for the December-ended fourth quarter was $250 million, compared to the chip equipment maker’s previous guidance of $232 million to $240 million. ACLS stock surged higher after hours.

Impinj (PI) says fourth-quarter revenue passed $76 million versus the RFID chip manufacturer’s previous expectation of $71.5 million-$73.5 million. The PI share, already slightly above the 50-day line, rose sharply overnight. That could provide an early entry or close to the flat base buy point of Impinj stock. PI stocks are also on Leaderboard.

Earnings season is also starting to pick up again late in the week. Taiwan semiconductor (TSM) reports Thursday morning. On Friday, JPMorgan Chase (J.P.M.), bank of America (BAC), Citi group (C) and Wells Fargo all report for the opening along with Delta Airlines (DAL) and UnitedHealth.

Dow Jones Futures Today

Dow Jones futures rose 0.1% from fair value. S&P 500 futures rallied higher and Nasdaq 100 futures fell lower.

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The yield on 10-year Treasury bills fell 3 basis points to 3.59%.

Crude oil futures fell 1%.

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

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

Stock market rally

After Monday’s disappointing drop, the stock market rally strengthened on Tuesday afternoon and closed near session highs.

The Dow Jones Industrial Average rose 0.6% during Tuesday’s stock trading. The S&P 500 index climbed 0.7%. The Nasdaq composite climbed 1%. The small-cap Russell 2000 popped 1.5%

Shares of Tesla fell 0.8% after rising 5.9% on Monday. Shares moved higher on Friday after hitting a bear market low of 101.06 after the EV giant announced major price cuts in China and other key Asian markets. TSLA stock needs a lot of repair.

Tesla has applied to Texas for a major expansion of its Austin assembly plant, the Austin Business Journal reported late Tuesday. Tesla Austin is still ramping up to its existing capacity.

UNH shares fell 0.8% to their worst level since last June. The Dow Jones health insurer has already plummeted 8.3% in 2023, after finishing 2022 fairly well. UnitedHealth earnings and guidance Friday will be important for the suddenly embattled industry.

US crude oil prices rose 0.7% to $75.12 a barrel. The natural gas price fell by 6.9%.

The 10-year Treasury yield rose 10 basis points to 3.62% after falling 20 basis points in the previous two sessions.

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Among growth ETFs, the Innovator IBD 50 ETF (FFTY) was up 1.1%, while the Innovator IBD Breakout Opportunities ETF (BOUT) was up 0.15%. The iShares Expanded Tech-Software Sector ETF (IGV) gained 0.1%. The VanEck Vectors Semiconductor ETF (SMH) was up 1.3%, just above the 200-day line after clearing the 50-day mark on Friday. TSM Shares is a large SMH holding company.

Reflecting more speculative story stocks, ARK Innovation ETF (ARKK) was up 2.5% and ARK Genomics ETF (ARKG) was up 3.6%. Tesla stock is still a major holding at Ark Invest, with Cathie Wood strengthening her position in recent weeks.

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SPDR S&P Metals & Mining ETF (XME) was up 2.5% and the Global X US Infrastructure Development ETF (PAVE) was up 1.6%. US Global Jets ETF (JETS) rose 2.4%, with DAL stocks among the notable holdings. SPDR S&P Homebuilders ETF (XHB) rose 1%. The Energy Select SPDR ETF (XLE) gained 0.7% and the Financial Select SPDR ETF (XLF) gained 0.6%. The Health Care Select Sector SPDR Fund (XLV) closed 0.8% higher, with UNH shares a top position in XLV.

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Analysis of the market rally

The stock market rally spent much of the morning trading near break-even, but ended Tuesday with a relatively strong performance.

The S&P 500 rose above the 50-day mark. The 200-day average is slightly above that.

The Dow Jones recovered from a test of its 50-day line after moving above that key level on Friday. The Nasdaq rose from its 21-day line to the 50-day line not far off.

The Russell 2000 is again above the 50-day mark, just below the 200-day mark.

The S&P MidCap 400 rose on Tuesday after finding support at the 50-day mark. That is after jumping above the 21-day, 50-day and 200-day lines on Friday. Invesco S&P 500 Equal Weight ETF (RSP) is very similar.

RSP and the MidCap 400 show how big caps like Apple (AAPL), Tesla and UNH stocks have weighed in the market.

A sustained stock market rally may not last until there is clarity on when the Federal Reserve will stop raising interest rates. Markets strongly expect a quarter-point gain at the February 1 policy meeting and again at the end of March.

Thursday’s CPI inflation report may hold expectations for a quarter-point increase. Inflation should fall further in the coming months, if only because year-over-year comparisons are so steep.

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Leading stocks mixed

A number of leading stocks have issued buy signals in recent days and weeks. But most of them quickly foundered. In some cases, like MEDP stocks, they bounce back a few days later.

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Medpace was up 5.9% to 223.29 in heavy volume, recovering from the 50-day line and clearing the December 29 high when MEDP attempted to exit.

First Solar rose 7.4% to 171.01 and continued a run of mini-gains. The switch from the 50-day line offered early access within a new base, but now looks a bit extended. But the official buy point of 173.78 is not far away.

Other names keep tumbling.

ELF shares had a promising breakout on Friday, but gave up most of those gains on Monday and fell 8.3% to 51.15 on Tuesday, below the 50-day line and undermining the low of the flat base.

SMCI shares rose Monday morning, offering an early entry, but closing only marginally higher. On Tuesday, shares fell 7.55%, below the 50-day mark, following a short-seller report.

Many other stocks hover around potential buy points.

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What to do now

The stock market rally is still underway, but major indices, sectors and especially leading stocks are prone to reversals. Thursday’s CPI inflation report could lead to big gains, with major indices moving decisively above some key levels. But it can also go the other way.

Investors should be careful with their exposure and wary of new purchases, especially ahead of the CPI report.

If you’re making new purchases, you need to know your exit strategy before you get in. Consider taking partial profits quickly to lock in some profits.

This is still a market for window displays. But there are many intriguing stocks to watch from different sectors. Get those watchlists ready.

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

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


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