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Dow Jones Futures: Market Rally Fades, But These 4 Stocks Flash Buy Signals; Inflation report due




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 opening.




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The stock market recovery was mixed on Tuesday, with the indices disappearing towards the end.

Concerns about growth in cloud computing weighed on the titans Amazon.com (AZMN), Microsoft (MSFT) and Google parent Alphabet (GOOGL). It also hit cloud software names like Snowflake (SNOW) and Data dog (DDOG).

But medical products and services looked strong, too Intuitive surgical (ISRG), Adjust technology (ALGN) and Zimmer Biomet (ZBH) all flashing buy signals, med Shockwave Medical (SWAV) makes a big move.

Home builders DR Horton (DHI), Merit homes (MTH), Lennar (LEN), Tri Pointe Homes (TPH), and Pulte Group (PHM) were capable of action, with the building materials company Builders FirstSource (BLDR) breaks out.

Skechers (SKX) also broke out, as several footwear stocks have stepped up.

DR Horton, Skechers, Builders FirstSource and SWAV stocks moved on well above average volume.

The MTH share is on the Leaderboard. The DHI share is on SwingTrader. MSFT stock is on the IBD Long-Term Leaders. Meritage, Tri Pointe Homes and PHM stocks are on the IBD 50.

The video embedded in this article reviewed the market action and analyzed BLDR stock, DR Horton and Shockwave Medical.

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 annual CPI inflation cooling to 5.2% from February’s 6%. But the core CPI, which excludes food and energy, is up 0.4% compared to February. That will push core CPI inflation to 5.6%, up slightly from February’s 5.5%.

Annual CPI inflation rates are cooling in part because prices ran so high in early 2022. But those year-over-year comparisons will ease later in the year, making it difficult to bring down inflation rates. Meanwhile, economic data has finally weakened, including on jobs, while banking woes begin to hit lending.

Investors see a strong chance of another interest rate hike by the Fed in early May, but are betting that it will be the last move.

Dow Jones Futures today

Dow Jones futures rose 0.1% relative to fair value. S&P 500 futures rose 0.1% and Nasdaq 100 futures rose 0.15%.

The CPI inflation report is sure to move Dow Jones futures, Treasury yields and more.

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


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


Stock market rally

The stock rally opened weak, bounced back, 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 Tuesday’s trading. The S&P 500 index was flat. The Nasdaq composite fell 0.4 percent. The small-cap Russell 2000 jumped 0.8%.

U.S. crude rose 2.2% to $81.53 a barrel, its highest close since Jan. 23. Copper futures rose nearly 1%.

The 10-year government yield rose 2 basis points to 3.43%. The 2-year government interest rate rose 5 basis points to 4.06%. The 3-month treasury rate fell slightly, but is at 5.03%. The severe 3-month to 10-year inversion of the Treasury yield curve signals the Fed’s unfinished inflation battle and rising recession risks.

ETFs

Among growth ETFs, the Innovator IBD 50 ETF (FFTY) rose 0.7%. The iShares Expanded Tech-Software Sector ETF ( IGV ) fell 0.5%, with Microsoft shares a big IGV entry. The VanEck Vectors Semiconductor ETF ( SMH ) also fell 0.5%.

Reflecting more speculative storied stocks, the ARK Innovation ETF ( ARKK ) climbed 0.6% and the ARK Genomics ETF ( ARKG ) 1.2%.

The SPDR S&P Metals & Mining ETF (XME) rose 1.5% and the Global X US Infrastructure Development ETF (PAVE) rose 0.8%. The US Global Jets ETF (JETS) rose 1.5%. The SPDR S&P Homebuilders ETF (XHB) rose 2%. The Energy Select SPDR ETF (XLE) climbed nearly 1% and the Health Care Select Sector SPDR Fund (XLV) gained 0.3%.

The Financial Select SPDR ETF ( XLF ) rose 0.9%. The SPDR S&P Regional Banking ETF (KRE) rose 0.3%.


Top five Chinese stocks to watch now


Cloud Computing Concerns

Cloud computing growth is likely to slow further, analysts from UBS and Jefferies both said, with negative analyst comments on Microsoft’s Azure, Google Cloud and Amazon Web Services.

MSFT shares fell 2.3% to 282.83, but remain in range from the 276.86 flat-base buy point.

GOOGL shares, the least exposed to cloud computing of the three, fell 1% to 105.35. That’s just below a 106.69 cup-handled buy point cleared on Thursday.

AMZN shares fell 2.2% to 99.92. Amazon is working on a bottom base, but is forming below the 200-day mark.

Meanwhile, some cloud-related software and network names retreated. The SNOW share was a significant loser, down 5.8%.

Stocks are flashing buy signals in volume

DHI shares rose 3.7% to 99.77, back above a 99.08 cup handle buy point after flashing bullish signals earlier in the session, according to MarketSmith analysis.

BLDR climbed 4.2% to 92.37, clearing a 90.31 buy point from a flat base near the top of a 14-month consolidation. Last week, Builders FirstSource pulled back amid selling in the construction and industrial space, but held support at its 21-day moving average. While still in a buy zone, it is more than 10% above the 50-day line now. On the upside, the relative strength line for BLDR stock is at a new high.

SWAV rose 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 stock is now trading around the bottom of a base from last fall that ended in a failed breakout. Investors may want to wait for SWAV stock to move higher and then forge a handle.

The shockwave increased when a new Medicare rule allowed reimbursement payments for their systems.

SKX shares fell 3.4% to 48.70, clearing a 47.80 cup handle buy point. Volume was slightly above average, although it did not turn positive until late in the session. Skechers shares fell 2% on Monday in a setup day.

Market rally analysis

The share price rally appeared to be nearing session highs again, but slowed in the final hour of trading. But the major indexes still look healthy, while leading stocks showed strength.

The Nasdaq Composite trailed but held above the 12,000 level, stopping below key resistance and support.

The S&P 500 has continued to trade tight in recent 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 such as Microsoft and Amazon weighed on the indices, the Invesco S&P 500 Equal Weight ETF ( RSP ) climbed 0.65%, hitting a one-month high and approaching the 50-day line. The First Trust NASDAQ-100 Equal Weighted Index ETF (QQEW) closed fractionally higher compared with a 0.6% decline in the Nasdaq 100.

Advances led departures Tuesday, particularly on the NYSE. Even in the morning, as the S&P 500 and Nasdaq neared session lows, winners outpaced losers.

In addition to homebuilders, medical products and footwear, a number of groups are showing strength, including gold and copper miners, drug makers, restaurants, several software games and the broad chip sector.


Time the market with IBD’s ETF market strategy


What to do now

The stock rally has stabilized after some strong selling in industrial and growth stocks last week. A large number of leading stocks are once again flashing buy signals as market breadth improves.

Investors can gradually add exposure again. Don’t buy extended and don’t get too concentrated. Sector rotations can still trigger large losses in some areas while bringing others into position. The general market rally can explode to new highs with a good day or two – or break key levels with a sell-off

So stay engaged and be nimble. Find potential leaders by working on broad watchlists while researching a smaller number of stocks on the edge of buy ranges.

In addition to the CPI inflation report, earnings season is about to begin.

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 exchange updates and more.

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