Dow Jones Futures: Inflation Report Approaches Market Rally; Elon Musk sells more Tesla shares
Dow Jones futures edged higher overnight, along with S&P 500 futures and Nasdaq futures, with the July CPI inflation report on tap ahead of Wednesday’s open. Elon Musk sold Tesla shares for $7.9 billion on August 5.
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The stock market rally lost ground, pulled back from resistance levels which Micron technology (MU) triggered a sale of chip shares.
On the upside, some natural gas-related stocks showed strength, including Range resources (RRC), EQT Corp. (EQT) and Equinor (EQNR), all of which broke downtrends in handles, flashing potential early entries. However, RRC stock was the only one to move on OK volume. LNG ( GLNG ) managed some near-term levels, still near the 50-day line, but earnings are due on Thursday.
apple ( AAPL ) and Microsoft shares rose on Tuesday.
continued a recent reversal to the downside while
Elon Musk sells Tesla shares
Tesla ( TSLA ) CEO Elon Musk sold 7.9 million shares on Aug. 5 worth $6.9 billion, according to SEC filings released Tuesday night.
On the evening of August 4, Tesla held its annual shareholder meeting, with Musk touting the EV giant’s growth prospects. Shareholders approved a 3-for-1 stock split, which will take place on August 25.
The next day, Musk sold the 3.3 million shares. TSLA stock slipped 6.6% to below the 200-day mark. On Monday, Tesla stock tried to reclaim its 200-day line, but pared big intraday gains to just 0.8%. On Tuesday, shares fell 2.4% to 850.
There are no indications from Musk so far as to why he is selling more Tesla shares. It is possible the stock sale is to raise money for his $44 billion Twitter ( TWTR ) takeover, which Musk is trying to get out of. It is also unclear if there will be any further TSLA stock sales by Musk in the near future.
Meanwhile, Tuesday, China’s Li Auto (LI) sold out hard. Tesla shares fell 2.4% to 850. Li Auto shares fell 7%, undermining the recent consolidation and approaching 200 days. Li Auto earnings are on August 15.
Among Li’s China EV rivals, Nine (NIO) fell 5% on Tuesday, breaking through the 50-day line while it was gigantic BID (BYDDF) lost 2.5%, starting to live below its rising 50-day.
Key income
Celsius (CELH) and Exelixis (EXEL) posted significant earnings after the close, along with declining growth plays Coin base (COIN), Roblox (RBLX) and Trade Desk (TTD).
CELH shares rose modestly overnight after initially retreating. Celsius earnings’ triple-digit EPS and sales growth topped Q2 views. But the gross margins came in a low light. Celsius shares fell 7.8% on Tuesday to 93.38 as it pulls back from its Aug. 2 high of 109.74. A big three-month run was capped by the early August jump of one PepsiCo (PEP) investment and distribution agreement.
EXEL shares rose modestly in extended trading after Exelixis earnings beat expectations. The stock fell 2.3% to 21.06 on Tuesday. Exelixis stock is working on a messy cup-with-handle base with a buy point of 22.57. Investors can use a downtrend line to find a slightly lower entry.
COIN stock fell solidly overnight as Coinbase posted under-show trading and a much worse-than-expected loss. The cryptocurrency exchange slid nearly 11% to 87.68 on Tuesday. Coinbase stock had doubled since late June, but is well below its April 2021 opening day peak of 429.54.
RBLX stock plunged in prolonged action as Roblox reported a bigger-than-expected loss while revenue fell short. Orders and user growth also missed. The stock fell 3.35% to 47.26 on Tuesday. RBLX stock had more than doubled since bottoming out in early May. But shares of the video game platform are well below their November 2021 peak of 141.60.
TTD stock rose as Trade Desk met EPS views, but beat earnings views and gave bullish guidance. Trade Desk shares fell 0.9% to 54.50 on Tuesday, but have rebounded from a 52-week low of 39 on July 14.
EQNR stock is on the IBD Leaderboard Watch List. RRC stock is on SwingTrader and is Tuesday’s IBD Stock. Microsoft (MSFT) is a long-term IBD leader. The CELH share and Equinor are on the IBD 50.
The video embedded in the article discussed Tuesday’s market action and analyzed RRC stock, Costco Wholesale (COST) and Hyatt (H).
Dow Jones Futures today
Dow Jones futures rose 0.1% relative to fair value. S&P 500 futures and Nasdaq 100 futures rose 0.1%.
The Labor Department releases the July CPI inflation report at 8:30 a.m. ET. The inflation data is sure to have a big impact on Dow futures and Treasury yields.
Keep in mind 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
Inflation report
Economists expect the consumer price index for July to show an increase of 0.2% compared to June, after the previous month’s rise of 1.3%. The CPI inflation rate is expected to cool to 8.7% from June’s 40-year high of 9.1%. This reflects the decline in petrol prices, which will also provide some relief in August.
But the core CPI, which excludes food and energy, should show an increase of 0.5% after June’s advance of 0.7%. Core inflation is set to rise to 6.1% from 5.9%.
Markets are giving a 67.5% chance of another 75 basis point rate hike by the Fed on September 21, followed by quarter-point moves in November and December.
Stock market rally
The stock market rally gave up ground on Tuesday, led by chip stocks.
Micron warned of revenue and capital spending cuts. It came the next day Nvidia (NVDA) cut sales forecasts. The MU share fell 3.7% while the chip shares were big losers on Tuesday, especially memory-focused equipment manufacturers such as e.g. Lamb Research (LRCX).
Apple shares rose 5 cents to 164.92, continuing to trade close above the 200-day line. Apple’s relative strength line is already at a new high. Microsoft rose 0.7% to 282.30, still below its 200-day.
The Dow Jones Industrial Average fell 0.2 percent in Tuesday’s trading. The S&P 500 index lost 0.4 percent. The Nasdaq composite gave up 1.2 percent. The small-cap Russell 2000 fell 1.3%.
US crude oil prices turned lower, closing down 0.3% at $90.50 a barrel. The prices of natural gas rose by 3.2 per cent.
The 10-year government yield rose 3 basis points to 2.8%. The 2-year government interest rate rose 5 basis points to 3.27%. The yield curve is inverted from 1-year to 10-year, a recession warning.
ETFs
Among the top ETFs, the Innovator IBD 50 ETF ( FFTY ) fell 2%, while the Innovator IBD Breakout Opportunities ETF ( BOUT ) fell 0.4%. The iShares Expanded Tech-Software Sector ETF ( IGV ) gave up 1.5%, with MSFT stock as the top IGV holding. The VanEck Vectors Semiconductor ETF ( SMH ) fell 4.2%. MU stock is a notable SMH holding.
ARK Innovation ETF ( ARKK ) reflected more speculative stock stocks, falling 5.45% and ARK Genomics ETF ( ARKG ) 5.4%. Tesla stock remains a large holding across Ark Invest’s ETFs.
The SPDR S&P Metals & Mining ETF ( XME ) rose 0.8% and the Global X US Infrastructure Development ETF ( PAVE ) fell 0.5%. The US Global Jets ETF (JETS) fell 1.7%. The SPDR S&P Homebuilders ETF ( XHB ) fell 3.3%. The Energy Select SPDR ETF (XLE) rose 1.8% and the Financial Select SPDR ETF (XLF) gained 0.5%. The Health Care Select Sector SPDR Fund ( XLV ) fell 0.3%.
Top five Chinese stocks to watch now
Market rally analysis
The stock rally pulled back on Tuesday, as the major indexes retreated from various resistance levels.
The Nasdaq, which erased strong morning gains on Monday, led Tuesday’s slide. It is supported by a trend line that goes back to January, but is still above the early June highs. The Russell 2000, which cleared June highs on Monday, is back in resistance territory. The S&P 500 and Dow Jones, which tested those levels on Monday morning, are also retreating.
A rally break around current levels could be positive. Many leading stocks that have run up the right side of bases could use a handle and tighter action.
The most important indices may also start a sharper retreat. That doesn’t necessarily mean undercutting the bear market lows. It is also possible for the market to pull back, and then settle in a difficult area for a significant period of time.
The sell-out in the semi-finals is a bad sign. Chip stocks usually play a significant role in any meaningful market rally. Chip’s recent progress had been encouraging.
On the upside, aerospace/defence, energy and health insurers held up well or continued to advance. Biotechs generally retreated modestly after strong gains.
Wednesday’s inflation report will provide a short-term catalyst, but how stocks open won’t necessarily be how they close.
Time the market with IBD’s ETF market strategy
What to do now
The market recovery has encountered some resistance. This can be temporary or the start of a larger retreat. In any case, you may want to reduce your exposure and take a share of the profits. If it’s just a pause, new buying opportunities will soon appear.
There are some buying opportunities in natural gas plays like Range Resources. If you are napping, it should probably be in the context of not increasing your net exposure. And be quick. Energy prices and market conditions can change quickly.
Continue working on watchlists. This is a confirmed market rally with a number of stocks trying to rally. You will be ready.
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