The Dow Jones Industrial Average reversed lower after another key inflation report — the Producer Price Index — came on Wednesday in the wake of a stock market slump on a hot CPI. Meanwhile, the 10-year government bond yield is on the verge of a June 11-year high.
The US Department of Labor said the Manufacturing Index (PPI) fell 0.1% mom in August, in line with estimates. Wholesale inflation rose 8.7% yoy, down from the 9.8% increase in July and in line with Econoday estimates.
On Tuesday, CPI inflation eased to 8.3%, down from 8.5% in July and 9.1% in June amid falling gas prices. The consumer price index rose by 0.1% over the month. But Wall Street economists had expected the CPI to show a monthly decline of 0.1%, bringing the CPI inflation rate down to 8%. Worse, core inflation accelerated more than expected to 6.3%.
As a result, markets now believe there is a 38 percent chance of a full percentage point hike at the next Federal Reserve meeting. Prior to Tuesday, Wall Street was not betting on that possibility at all.
Now the market leader in electric vehicles Tesla (TSLA) was up 2% on Wednesday. Among the Dow Jones Industrials are tech titans Apple (AAPL) and Microsoft (MSFT) were higher after the market open today. note (MRK) rose 0.7% after Berenberg upgraded the stock to buy.
Given the current volatility of the market Arista Networks (A NET), DoubleVerify (DV), Palo Alto Networks (PANW) and Pure storage (PSTG) – as well as Dow Jones shares rafters (CVX) – are among the top stocks to buy and watch. Keep in mind that the increased volatility in the market is a good reason for investors to be more defensive, especially after Tuesday’s market slump.
DoubleVerify is an IBD Leaderboard stock. Chevron and Palo Alto were featured in this week’s “Stocks Near a Buy Zone” column.
Dow Jones Today: Treasury Yields, Oil Prices
After Wednesday’s opening bell, the Dow Jones Industrial Average fell 0.25% after giving up early gains, while the S&P 500 fell 0.2%. The tech-heavy Nasdaq Composite lost 0.1% in morning action.
Among exchange-traded funds, Nasdaq 100-tracker Invesco QQQ Trust (QQQ) is down 0.1% and SPDR S&P 500 ETF (SPY) is down 0.2% in early trade.
The 10-year Treasury yield rose to 3.43% on Wednesday morning. On Tuesday, the 10-year Treasury yield hit its highest close since June 14 and is just below the 11-year high of 3.48% set on June 14.
US oil prices fell on Wednesday as they continue to consolidate after recent gains. West Texas Intermediate futures traded back below $87 a barrel.
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Stock market rally under pressure
On Tuesday, all three major stock indices fell below their 50-day moving averages, putting a return to their September 6 lows into play. The Dow Jones Industrial Average fell 3.9% while the Nasdaq fell 5.2%.
Ahead of the inflation report, Tuesday’s The Big Picture column commented: “It’s best to stay out of the market’s way at this point. Assess your current holdings. If you have some names that are profitable and holding above the short-term support levels, it’s okay to hold. In the leaderboard portfolio, for example, we still hold InvescoSolar (TAN) because it is slightly above our entry and holding above its converged 10- and 21-day moving averages.”
The best way to find leadership in emerging markets is to use the relative strength line. The RS line measures a stock’s price performance against the S&P 500. When the stock is outperforming the broader market, the RS line moves up. When a stock underperforms the broad market, the line points down.
The RS line is drawn on all IBD and MarketSmith charts. In addition, the IBD Stock Screener includes a list of quality stocks with relative strength lines at new highs. MarketSmith also has the RS Blue Line Dot list, which looks for RS lines at new highs. (IBD MarketSmith offers free access for a whole week.)
If you are new to IBD, you should take a look at the CAN SLIM stock trading system and basics. Recognizing chart patterns is a key to investing guidelines. IBD offers a wide range of growth stock lists, such as Leaderboard and SwingTrader.
Investors can also create watch lists, find companies approaching a buy point, or develop custom screens at IBD MarketSmith.
Five Dow Jones stocks to watch right now
Keep an Eye on Dow Jones Stocks: Chevron
Dow Jones stock Chevron fell 1.9% on Tuesday but is still holding above support at the key 50-day moving average. The stock is nearing its final buy point at 166.93 – according to chart analysis by IBD MarketSmith – amid a strong performance for energy stocks so far this year. The stock was up 1% early Wednesday.
CVX stock is showing a strong 97 out of 99 perfect IBD Composite Ratings, according to the IBD Stock Checkup. Investors can use the IBD Composite Rating to easily gauge the quality of a stock’s fundamental and technical metrics.
3 top growth stocks to buy and watchrightde Stock market rally
Top stocks to watch: Arista, DoubleVerify, Palo Alto Networks, Pure Storage
Arista Networks added a handle to a double-bottom basis, placing the correct entry at 132.97, according to chart analysis by IBD MarketSmith. Arista’s relative strength line is close to the highs. ANET shares gained 0.1% early Wednesday.
IBD leaderboard stock DoubleVerify holds above a buy point of 28.07 in a bottoming base. The shares are in the 5% buy zone that extends to 29.47. DV shares fell 0.1% on Wednesday morning.
Cybersecurity leader Palo Alto Networks is nearing a buy point of 578.89 in a mug with a handle, despite falling 3.4% on Tuesday. According to the IBD leaderboard commentary, an early entry around 560 is also in play due to a trend line. Shares rose 0.5% on Wednesday.
Pure Storage is approaching a buy point of 31.62 in a mug with a handle. Meanwhile, an early entry is also in play after the stock has moved above a downtrend line within this handle. Shares fell 0.3% on Wednesday.
Join IBD experts as they analyze leading stocks from the current stock market rally on IBD Live
Tesla stock slipped 4% on Tuesday, breaking a five-day winning streak. The shares gave up their 200-day moving average they had just recalled. The electric vehicle giant was up 2% on Wednesday morning.
Shares are about 30% off their 52-week high.
Dow Jones Leaders: Apple, Microsoft
Among Dow Jones stocks, Apple stock tumbled 5.9% Tuesday, falling back below its 50- and 200-day moving averages. The stock is about 14% away from a buy point at 176.25 for a mug with a handle. Apple shares rose 0.3% on Wednesday.
Microsoft fell 5.5% on Tuesday, ending a four-day winning streak. The software giant remains well below its 50- and 200-day moving averages. Shares are about 28% off their 52-week high. Microsoft shares rose 0.1% on Wednesday morning.
Follow Scott Lehtonen on Twitter at @IBD_SLehtonen for more on growth stocks and the Dow Jones Industrial Average.
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