Dow Jones futures edged higher after hours, along with S&P 500 futures and Nasdaq futures. Attention turns to the CPI inflation report ahead of Wednesday’s open.
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The stock market rally was mixed on Tuesday, with indices fading towards the close.
Concerns over the growth of cloud computing weighed on titans amazon.com (AZMN), Microsoft (MSFT) and father of Google Alphabet (GOOGL). That also affected cloud software names like Snowflake (SNOW) and data dog (DOOG).
But medical products and services looked strong, with intuitive surgical (ISRG), alignment technology (some) and ZimmerBiomet (ZBH) all flashing buy signals, with medical shock wave (SWAV) making a big move.
house builders Dr Horton (IDH), houses of merit (MONTH), lennar (LONG), Tri Pointe Homes (TPH), and Pulte Group (PHM) were actionable, with the building materials company FirstSource Builders (BLDR) breaking.
Skechers (SKX) also broke out, as several shoe stocks have intensified.
Shares in DR Horton, Skechers, Builders FirstSource and SWAV all moved on well above average volume.
MTH shares are on the leaderboard. DHI shares are on SwingTrader. MSFT shares are among the long-term leaders of IBD. Meritage, Tri Pointe Homes and PHM shares are in the IBD 50.
The video included in this article reviewed the market action and analyzed the stocks of BLDR, DR Horton, and Shockwave Medical.
CPI Inflation Report
The Labor Department will release the CPI inflation report at 8:30 am ET. Economists expect the consumer price index to rise 0.3% in March, and the annual CPI inflation rate to cool to 5.2% from 6% in February. But the core CPI, which excludes food and energy, is expected to rise 0.4% from February. That would push the core CPI inflation rate to 5.6%, up slightly from 5.5% in February.
Annual CPI inflation rates are cooling in part because prices were so high at the start of 2022. But those year-over-year comparisons will smooth out later in the year, making it harder to bring inflation rates down. Meanwhile, economic data has finally softened, including on employment, while banking problems are starting to hit lending.
Investors see a strong possibility of another Fed rate hike in early May, but are betting that would be the final move.
Dow Jones Futures Today
Dow Jones futures were up 0.1% against fair value. S&P 500 futures advanced 0.1% and Nasdaq 100 futures rose 0.15%.
The CPI inflation report is sure to move Dow Jones futures, Treasury yields and more.
Remember that overnight action in Dow futures and elsewhere doesn’t necessarily translate into actual trading at the next regular stock market session.
Join IBD experts as they discuss actionable actions in the stock market rally on IBD Live
stock rally
The stock market rally opened weak, struggled and then faded again late. But the indices closed mixed, as they were for most of the session.
The Dow Jones industrial average rose 0.3% in trading on Tuesday. The S&P 500 Index was flat. The Nasdaq Composite fell 0.4%. The small-cap Russell 2000 rebounded 0.8%.
US crude prices rose 2.2% to $81.53 a barrel, the highest close since January 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 Treasury bill rate fell slightly, but is at 5.03%. That severe inversion of the 3-month to 10-year Treasury yield curve signals the Fed’s incessant fight against inflation and rising recession risks.
ETFs
Among growth ETFs, the Innovator IBD 50 ETF (FFTY) rose 0.7%. The iShares Expanded Technology Software (IGV) Sector ETF fell 0.5%, with Microsoft shares a major IGV holding. The VanEck Vectors Semiconductor (SMH) ETF also fell 0.5%.
Reflecting more speculative historical stocks, the ARK Innovation ETF (ARKK) rose 0.6% and the ARK Genomics ETF (ARKG) rose 1.2%.
SPDR S&P Metals & Mining ETF (XME) rallied 1.5% and the Global X US Infrastructure Development ETF (PAVE) 0.8%. The US Global Jets ETF (JETS) rose 1.5%. SPDR S&P Homebuilders ETF (XHB) rose 2%. The Energy Select SPDR ETF (XLE) rose nearly 1% and the Health Care Select Sector SPDR Fund (XLV) rose 0.3%.
The Financial Select SPDR ETF (XLF) rose 0.9%. The SPDR S&P Regional Banking ETF (KRE) rose 0.3%.
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Cloud computing concerns
Cloud computing growth is likely to slow further, analysts at UBS and Jefferies said, with analysts commenting negatively on Azure, Google Cloud and Microsoft’s Amazon Web Services.
Shares of MSFT fell 2.3% to 282.83, but are still in the one-point buy-flat range of 276.86.
Shares of GOOGL, the least exposed to cloud computing of the three, fell 1% to 105.35. That’s just below a cup-handle buy point of 106.69 settled on Thursday.
AMZN shares sank 2.2% to 99.92. Amazon is working on a bottoming basis, but building below the 200-day line.
Meanwhile, some cloud-related software and network names have withdrawn. SNOW shares had a notable loss, down 5.8%.
Intermittent Buy Volume Stock Signals
Shares of DHI rose 3.7% to 99.77, again above a cup-handle buy point of 99.08 after showing bullish signals early in the session, according to MarketSmith analysis.
BLDR rose 4.2% to 92.37, breaking above a buy point of 90.31 from a flat base near the top of a 14-month consolidation. Last week, Builders FirstSource pulled back amid selling in the industrial and construction space, but held support at the 21-day moving average. While it is still in a buy zone, it is now more than 10% above its 50-day line. On the upside, the relative strength line of BLDR shares is at a new high.
SWAV soared 10.6% to 251.05, jumping above the 200-day line for the first time since December. Investors could have used that move as an aggressive entry. However, Shockwave shares are now trading at the bottom of a basis from last fall that ended in a failed breakout. Investors may want to wait for SWAV shares to rise and then carve out a handle.
Shockwave was triggered when a new Medicare rule could sweeten reimbursement payments for its systems.
Shares of SKX rose 3.4% to 48.70, surpassing a cup-handle buy point of 47.80. Volume was slightly above average, though it didn’t turn positive until late in the session. Skechers shares rose 2% on Monday in a preparation day.
Market recovery analysis
The stock market rally looked destined to close near session highs once again, but it faded in the last hour of trading. But the major indices still look healthy, while the major stocks showed strength.
The Nasdaq Composite lagged but held above the 12,000 level, stopping below key resistance and key support.
The S&P 500 continues to trade tight for the past few days. The Dow Jones reached its best level since February 17. The Russell 2000 is back above its 21-day line.
While some tech titans like Microsoft and Amazon weighed on the indices, the equal-weight Invesco S&P 500 ETF (RSP) rose 0.65%, hitting a one-month high and closing at the 50-day line. The First Trust NASDAQ-100 Equal Weighted Index ETF (QQEW) closed slightly higher versus the 0.6% decline in the Nasdaq 100.
The advancers led the decliners on Tuesday, especially on the New York Stock Exchange. Even in the morning, when the S&P 500 and Nasdaq were near session lows, winners outnumbered losers.
In addition to homebuilders, medical products and footwear, a variety of groups are showing strength, including gold and copper miners, pharmaceuticals, restaurants, various software games and the broad chip sector.
Time the Market with IBD’s ETF Market Strategy
What to do now
The stock market rally has leveled off after some strong selling in growth and industrial stocks last week. A large number of leading stocks are showing buy signals again as market breadth improves.
Investors can gradually add back exposure. Don’t buy extended and don’t focus too much. Sector rotations can still trigger big losses in some areas while putting others in position. The overall market rally could hit new highs with a good day or two, or break key levels with a sell-off.
So stay engaged and be agile. Spot potential leads by working across large watch lists while researching a smaller number of stocks on the cusp of buying areas.
In addition to the CPI inflation report, the earnings season is about to start.
Read The Big Picture every day to stay in sync with market direction and major stocks and sectors.
Follow Ed Carson on Twitter at @IBD_ECarson for stock market updates and more.
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