Dow Jones futures were slightly higher overnight, along with S&P 500 futures and Nasdaq futures. Attention turns to the CPI inflation report ahead of Wednesday’s open.
Stock market gains were mixed on Tuesday, with indices fading to the close.
Concerns about cloud-computing growth have weighed on the titans Amazon.com (AZMN), Microsoft (MSFT) and Google Parents letters (Google) also hit similar cloud software names Snowflake (Snow) and Datalog (the dog)
But medical products and services remained strong Intuitive surgery (ISRG), Align technology (ALGN) and Zimmer Biomed (ZBH) with all flashing buy signals Shock wave medicine (Swat) is a great move.
House builders TR Horton (DHI), Meritage Homes (MTH), Lenor (Len), Dry Point Homes (TPH), and Pulte Group (PHM) worked with a building materials company Builders First Source (BLDR) break out.
Sketchers (SKX) exploded as many shoe stocks rallied.
Shares of DR Horton, Skechers, Builders FirstSource and SWAV outperformed the average.
The MTH stock is in motion Leaderboard. DHI stock is on SwingTrader. MSFT stock is among IBD’s long-term leaders. Stocks include Meritage, Dry Point Homes and PHM IBD 50.
Video embeddedThis article reviews market action and examines BLDR stock, DR Horton and Shockwave Medical.
Large bank reserves
Banks that offered $30 billion in deposits First Republic (FRC) will set aside about $100 million each for loss reserves, Bloomberg announced Tuesday night, the sources said. JP Morgan Chase (JPM), Wells Fargo (WFC), Citigroup (C) and Bank of America (BAC) added $5 billion each. JP Morgan, Wells and Citi reported Friday, with BofA due next week.
CPI Inflation Report
The Labor Department will release the CPI inflation report at 8:30 a.m. ET. Economists expect the consumer price index to rise 0.3% in March, with the annual CPI inflation rate easing to 5.2% from February’s 6%. But core CPI, which excludes food and energy, rose 0.4% versus February. That would lift the core CPI inflation rate to 5.6%, up slightly from February’s 5.5%.
Annual CPI inflation rates are cooling somewhat since prices were so hot in early 2022. But those year-over-year comparisons become easier later in the year, making it harder to understate inflation rates. Meanwhile, economic data, including jobs, is finally weakening, while bank woes begin to hit credit.
Investors see a strong possibility of another central bank rate hike in early May, but are betting that will be the final move.
Dow Jones Futures Today
Dow Jones futures rose 0.1% vs. fair value. S&P 500 futures rose 0.1% and Nasdaq 100 futures rose 0.1%.
The CPI inflation report is sure to move Dow Jones futures, Treasury yields and more.
Remember that overnight action in Dow futures and elsewhere does not necessarily translate into actual trading in the next regular stock market session.
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Stock market rally
The stock market boom started weak, struggled again, then faded again of late. But indices closed mixed for most of the session.
The Dow Jones industrial average rose 0.3% in stock market trading on Tuesday. The S&P 500 index was flat. The Nasdaq composite fell 0.4%. The small-cap Russell 2000 rose 0.8%.
U.S. crude oil prices rose 2.2% to $81.53 a barrel, the highest since Jan. 23. Copper futures rose nearly 1%.
The 10-year Treasury yield rose 2 basis points to 3.43%. The 2-year Treasury yield rose 5 basis points to 4.06%. The 3-month T-bill rate fell slightly, but remained at 5.03%. That sharp 3-month to 10-year Treasury yield curve inversion signals the Fed’s unfinished inflation fight and growing recession risks.
Among growth ETFs, the innovator IBD 50 ETF (FFTYUp 0.7%. iShares Expanded Technology-Software Sector ETF (IGV) fell 0.5%, with Microsoft stock a key IGV holding. VanEck Vectors Semiconductor ETF (SMH) fell 0.5%.
Reflecting the more speculative story stocks, the ARK Innovation ETF (ARKKrose 0.6% and the ARK Genomics ETF (ARKG) 1.2%
SPDR S&P Metals & Mining ETF (XME) returned 1.5% and the Global X US Infrastructure Development ETF (sidewalk) 0.8%. US Global Jets ETF (JETS) up 1.5%. SPDR S&P Homebuilders ETF (XHB2% up. Energy Select SPDR ETF (XLE) rose nearly 1% and the Health Care Select Sector SPDR Fund (XLVrose 0.3%.
Fund Selection SPDR ETF (45) advanced 0.9%. SPDR S&P Regional Bank ETF (Createrose 0.3%.
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Cloud computing concerns
Cloud-computing growth is likely to slow further, with negative analyst sentiment about Microsoft’s Azure, Google Cloud and Amazon Web Services, analysts at both UBS and Jefferies said.
MSFT shares fell 2.3% to 282.83, but are still in range from a flat-base buy point of 276.86.
GOOGL stock, the least exposed to cloud-computing of the three, fell 1% to 105.35. This is below Thursday’s 106.69 cup-with-handle buy point.
AMZN stock fell 2.2% to 99.92. Amazon is working on a bottom line, but is forming below the 200-day line.
Meanwhile, some cloud-related software and networking names retreated. SNOW stock fell 5.8% and suffered significant losses.
Buy Stock Flashing Signals in Volume
DHI stock rose 3.7% to 99.77, above the 99.08 cup-with-handle buy point, after flashing positive signals earlier in the session, according to MarketSmith analysis.
BLDR rose 4.2% to 92.37, clearing a 90.31 buy point from a flat base following a 14-month consolidation. Last week, Builders First Source retreated amid a sell-off in the construction and industrial space, but found support at the 21-day moving average. While in a buy zone, it is now 10% above its 50-day line. On the upside, the relative strength line for BLDR stock is at a new high.
SWAV rose 10.6% to 251.05, vaulting above the 200-day line for the first time since December. Investors may have used that move as an aggressive entry. However, Shockwave shares have been trading near the bottom of a floor since last fall that ended in a failed breakout. Investors may want to wait for SWAV shares to rise and then fake a hold.
The shock wave rose as a new Medicare rule softened reimbursement rates for its systems.
SKX shares rose 3.4% to 48.70, clearing a 47.80 cup-with-handle buy point. Volume was slightly above average, although it did not turn positive until late in the session. Skechers stock rose 2% in a setup day on Monday.
Market rally analysis
The stock market’s rally looked set to once again approach session highs, but faded in the final hours of trading. But major indices still look healthy, while leading stocks have shown strength.
The Nasdaq composite lagged behind, but remained above the 12,000 level, pausing below key resistance and key support.
The S&P 500 has continued to trade tight for the past several days. The Dow Jones hit its best level since February 17. The Russell 2000 is back above its 21-day line.
While some tech titans like Microsoft and Amazon weigh in on the index, the Invesco S&P 500 Equal Weight ETF (RSP) rose 0.65%, hitting a one-month high and completing a 50-day streak. First Trust NASDAQ-100 Equal Weight Index ETFQQEW) closed fractionally higher versus a 0.6% drop in the Nasdaq 100.
Advances led declines on Tuesday, particularly on the NYSE. Even in the morning, when the S&P 500 and Nasdaq were at session lows, winners outnumbered losers.
Apart from homebuilders, medical supplies and footwear, various groups are showing strength, including gold and copper miners, drugmakers, restaurants, several software plays and the broader chip sector.
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What to do now
Stock market gains were steady after some sharp selling in industrial and growth stocks last week. A large number of leading stocks are flashing buy signals again as the market breadth improves.
Investors can gradually add back exposure. Don’t buy the stretch and don’t focus too much. Sector cycles can still trigger big losses in some areas while leveling others. The overall market rally could reach new highs in a good day or two – or break through key sell-off levels.
So stay engaged and stay active. While researching a limited number of stocks at the peak of buy areas, find potential leaders by working through broad watch lists.
In addition to the CPI inflation report, earnings season is about to begin.
Read the big picture every day to stay in tune with market direction and leading stocks and sectors.
Follow Ed Carson on Twitter @IBD_ECarson For stock market updates and more.
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