Dow Jones futures tilted higher late Tuesday, along with S&P 500 futures and Nasdaq futures. The stock market rally had a wild session Tuesday, closing lower but off intraday lows. Inflation fears spooked investors worldwide with the consumer price index on tap Wednesday morning.
Tesla (TSLA) remains in focus as it tries to find long-term support following weak China sales figures. Apple stock also is trying to rebound from long-term averages. Facebook stock and Goldman Sachs are finding support in buy zones. Trex and HZO stock pulled back but are just below buy points. Nvidia stock is finding key support after a prior breakout fizzled. RBLX stock skyrocketed following earnings as it sets up another potential IPO base.
The stock market rally had a whipsaw session, with the major indexes tumbling at the open. At one point the Nasdaq was looking like a vertical violation. However the tech-heavy index, which has lagged in recent days and for the past few months, slashed losses. So did the small-cap Russell 2000. The Dow Jones and S&P 500 index were laggards Tuesday, but aren’t far from record highs.
Inflation Data On Tap
The Labor Department releases the April consumer price index at 8:30 a.m. ET. Economists expect the CPI to show a 0.2% gain vs. March. Core CPI, excluding food and energy, is forecast to rise 0.3%. Year over, year, the CPI should pop 3.6%, with core CPI up 2.3%. That include easy comparisons to April 2020, when the global economy slammed on the breaks due to the pandemic and related shutdowns, sending energy prices plunging.
The producer price index, far more sensitive to soaring commodity prices, is due out on Thursday morning.
Still, rising goods prices are starting to filter into the economy, with many companies citing looming margin pressures. Massive government spending, with President Joe Biden pushing another $4 trillion in two packages, is turbocharging economic growth along with a rapid post-pandemic global recovery.
The Federal Reserve says inflation will accelerate in 2021, but then cool off again. The concern is that higher inflation will not be temporary, forcing the Federal Reserve to step in, first by tapering bond buys and eventually higher interest rates.
Keep in mind that the Fed’s favorite inflation gauge, the core PCE deflator, relies heavily on housing prices. While home prices are rising sharply, owners’ equivalent rent is not. Meanwhile, tame medical costs are helping to control overall inflation, even as Americans feel the pinch at the gas station and grocery store.
Dow Jones Futures Today
Dow Jones futures rose 0.1% vs. fair value. S&P 500 futures climbed slightly. Nasdaq 100 futures tilted higher.
Coronavirus cases worldwide reached 160.30 million. Covid-19 deaths topped 3.33 million.
Coronavirus cases in the U.S. have hit 33.54 million, with deaths above 596,000.
Stock Market Rally Tuesday
The stock market rally finished relatively well, but Tuesday still ended in the loss column.
The Dow Jones Industrial Average fell 1.4% in Tuesday’s stock market trading. The S&P 500 index lost 0.9%, though finishing near session highs. The Nasdaq composite rebounded to lose just 0.1%.
Highly valued tech stocks rebounded, while mining and metals had a strong session. Meanwhile financials retreated somewhat while housing-related names struggled.
Among the best ETFs, the Innovator IBD 50 ETF (FFTY) slid 1.2%, with HZO stock among the drags. The Innovator IBD Breakout Opportunities ETF (BOUT) retreated nearly 2%. The iShares Expanded Tech-Software Sector ETF (IGV) rose 1.1%. The VanEck Vectors Semiconductor ETF (SMH) edged up 0.2%. Nvidia stock is a key SMH holding.
SPDR S&P Metals & Mining ETF (XME) popped 2.3% while Global X U.S. Infrastructure Development ETF (PAVE) lost 0.9%. U.S. Global Jets ETF (JETS) edged up 0.4%. The SPDR S&P Homebuilders ETF (XHB) sank 1.5%.
Reflecting more-speculative story stocks, ARK Innovation ETF (ARKK) climbed 2.1% and ARK Genomics ETF (ARKG) 1.05%. Both remain well below their 200-day lines. Tesla stock is the largest holding across ARK Invest’s ETFs.
Tesla stock fell 1.9% to 617.20 but rebounded from an intraday low of 595.60. On a weekly chart, TSLA stock tested its 40-week line for the first time since late 2019. The relative strength line is right at 2021 lows, reflecting the EV giant’s laggard performance vs. the S&P 500 after a stellar 2020.
Holding the 40-week and 200-day lines will be important for Tesla stock. As the ultimate “story stock” of 2020, Tesla could reflect and fuel further weakness in that space, or inspire a rebound.
Early Tuesday, the China Passenger Car Association reported that Tesla sold 25,845 made-in-China vehicles in April. Tesla shipped 14,174 cars to Europe. CPCA sales apparently included Tesla exports, after excluding them in prior months. If so, that would suggest China sales of just 11,671, a huge 67% drop from March’s 35,478. If exports are separate from April sales of 25,845, then the monthly decline was a still-significant 27%.
It’s unclear what spurred the Tesla sales decline. It could reflect a backlash from Chinese consumers as state media highlights complaints. Or Tesla could be struggling with chip shortages, like the rest of the auto industry.
Apple stock dipped 0.7% to 125.91. Intraday, shares rebounded from their 200-day moving average. Still Apple stock is below its 50-day line while the RS line is also near recent lows.
FB stock rose 0.2% to 306.53, rebounding from its 10-week line and holding the 300 level. Facebook stock gave up all of its recent post-earnings gain but is in buy range from a 299.81 handle buy point initially cleared on April 1. The RS line for FB stock is near 2021 highs, but still well off its late 2020 peaks.
Nvidia stock eked out a 0.3% gain to 572.25 after rebounding from its 50-day line. Like many chip stocks, a recent Nvidia breakout failed. NVDA stock could flash an early buy signal if it retakes its 21-day line and breaks a downtrend. But, like Apple stock, its RS line is not inspiring.
RBLX stock skyrocketed 21% to 77.65 on Tuesday. Late Monday, the video game IPO missed on earnings and sales, but reported strong user growth. After a failed IPO base breakout, Roblox stock is trying to form another short consolidation, with a too-short double-bottom pattern forming. Investors could use 77.70 as an early entry from the middle of that squished “W” consolidation. But after such a big move, a pullback would not be a surprise.
MarineMax stock fell 6.1% to 62.43 on Tuesday, dropping back below a cup-base buy point of 64.09. A pullback from a cup base isn’t too much of a surprise, especially in the current market environment. Volume was heavy for the boating retailer, not a great sign. But the RS line for HZO stock is still near highs. MarineMax earnings growth also is worth watching.
Trex stock retreated 1.6% to 106.10 Tuesday after the artificial wood products maker reported better than expected results though EPS and sales growth slowed. Shares rebounded off lows, and the slim closing decline looks better given the losses among housing-related plays. A 107.74 buy point is still valid, but investors might treat the past couple of weeks as a high handle and wait until Trex stock clears this mini-consolidation. The RS line is not far from highs.
Keep in mind that rival Azek (AZEK) reports Thursday. AZEK stock also dropped below a buy point Tuesday.
GS stock sank 2.4% to 359.92. Goldman stock remains above a shallow cup-base buy point of 356.95, according to MarketSmith analysis. The RS line is just below highs. Goldman earnings growth has been picking up
The Dow Jones fell back to its 21-day exponential moving average. The S&P 500 hit a one-month low and closed below its 21-day line for the first time since late March. But the broad market index closed near session highs and not far from all-time levels.
The Nasdaq was a relative outperformer Tuesday, with limited losses after briefly turning positive. Still, it remains below its 50-day line, losing significant ground over the past week or two. The Russell 2000 retreated further from its 50-day line, though it also finished near session highs after tumbling intraday to its lowest levels since the end of March.
While the stock market rally is in a confirmed uptrend, the short-term action has been weak and choppy.
Ongoing sector rotation added to the overall whipsaw market action. Miners and story growth stocks have diverged over the last few months, but on Tuesday they both rallied. Meanwhile, housing-related stocks had a rough session even though the 10-year Treasury yield didn’t rise much.
If the stock market rally rebounds from here, then Tuesday will look like a short-term bottom. But if selling continues, investors will quickly forget a short-lived intraday bounce.
What To Do Now
Amid all this market uncertainty, investors should be cautious about adding exposure. Perhaps Tuesday’s low will turn out to be a great buying opportunity. But if the market continues to slide, even the standouts are likely to struggle just to hold their ground.
There’s also not too much to buy. Tesla stock and other story plays are heavily damaged. Apple stock doesn’t look inspiring. Goldman stock and Facebook are in buy range. Trex and HZO stock could be actionable soon. RBLX stock could flash buy signals, though that’s an exceptionally volatile name. A few oil and gas companies that saw recent breakouts fizzle are bouncing back, though many did not.
Alternatively, investors may want to consider further reducing exposure until the short-term market direction looks more favorable. When you’re planning a picnic, you don’t want to pick a date for it if there’s a 50% chance of rain. When investing large sums of real money, you want to have the odds stack in your favor.
Choppy market rallies are among the most dangerous for active investors, because there’s just enough positive action to lure investors in, often only to rough them up.
Still, investors should always be looking for new buying opportunities even if they don’t end up pulling the trigger. Remember to stay engaged overall. The stock market rally could improve quickly, or deteriorate even faster.
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