Dow Jones futures and S&P 500 futures edged lower early Wednesday, while Nasdaq futures were little changed. Debt-ceiling talks got underway while the CPI inflation report is on tap Wednesday morning.
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Axon Enterprise (AXON), Airbnb (ABNB) and Celsius Holdings (CELH) headlined a slew of companies reporting earnings Tuesday night with the stocks near buy points.
The stock market rally stepped down slightly Tuesday. The major indexes are not far from 2023 highs, but market breadth was weak. Salesforce.com (CRM) cleared a short consolidation, offering a buying opportunity. Shockwave Medical (SWAV) rose modestly on earnings, testing an early entry.
Key Earnings
In addition to ABNB stock, Axon and Celsius, Duolingo (DUOL), Flywire (FLYW), Exact Sciences (EXAS), Toast (TOST),, GXO Logistics (GXO) and Wynn Resorts (WYNN) reported Tuesday night, all closing in or near official or early buy areas.
Li Auto (LI) popped after its early Wednesday first-quarter release. Performance Food Group (PFGC) and The New York Times (NYT) reported mixed results. Catalyst Pharmaceuticals (CPRX) also is due before the open. LI stock and these others are closed near buy points.
EXAS stock, Flywire, Toast, Celsius and Li Auto were big winners in extended trading, with DUOL stock up modestly. GXO. Wynn and Performance Food edged higher.
Airbnb plunged more than 10% early Wednesday despite beating views and announcing a $2.5 billion buyback. Bookings and Q2 guidance disappointed. Axon fell modestly in after-hours action.
CRM stock and Shockwave are on the IBD Leaderboard watchlist. CELH stock, Shockwave, Catalyst Pharma, Duolingo and Axon Enterprise are on the IBD 50. AXON stock and Salesforce are on the IBD Big Cap 20. Salesforce was Tuesday’s IBD Stock Of The Day.
The video embedded in this article discussed Tuesday’s market action and analyzed Salesforce, MongoDB (MDB) and SWAV stock.
Debt Ceiling Talks
President Joe Biden and congressional leaders met Tuesday afternoon to discuss the budget and raising the debt-ceiling limit. Positions didn’t shift at the start of what will likely be weeks of negotiations. If there’s no deal by June 1, the U.S. could default on its debt.
Ahead of the White House meeting, House Speaker Kevin McCarthy ruled out a short-term debt-ceiling limit extension, saying “let’s just get this done now.”
The White House also said Biden does not “plan” on a short-term fix, blaming McCarthy and House Republicans for the impasse.
CPI Inflation Report
The Labor Department will release the April consumer price index at 8:30 a.m. ET. Economists expect the CPI to rise 0.4% vs. the prior month, after March’s 0.1% uptick. Core CPI, which excludes food and energy, should advanced 0.4% for a second straight month. The annual CPI inflation rate is seen holding steady at 5%, while the core inflation rate edges down to 5.5%.
Markets are pricing in a very strong chance of a Fed rate pause on June 14, with rate cuts starting in September.
Dow Jones Futures Today
Dow Jones futures fell 0.1% vs. fair value. S&P 500 futures lost about 0.1% and Nasdaq 100 futures were slightly above break-even.
The 10-year Treasury yield dipped 2 basis points to 3.5%. Crude oil futures fell 1%.
The CPI inflation report may not be as important as the last several readings, but it will likely swing Dow Jones futures, Treasury yields and more.
Remember that overnight action in Dow futures and elsewhere doesn’t necessarily translate into actual trading in the next regular stock market session.
Join IBD experts as they analyze actionable stocks in the stock market rally on IBD Live
Stock Market Rally
The stock market rally saw slim to modest losses in Tuesday’s trading.
The Dow Jones Industrial Average dipped 0.2% in Tuesday’s stock market trading. The S&P 500 index retreated 0.5%. The Nasdaq composite gave up 0.6%. The small-cap Russell 2000 slipped 0.3%.
U.S. crude oil prices advanced 0.75% to $73.71 a barrel, up 7.5% over the last three sessions.
The 10-year Treasury yield was flat at 3.52%.
ETFs
Among growth ETFs, the Innovator IBD 50 ETF (FFTY) was just above break-even. The iShares Expanded Tech-Software Sector ETF (IGV) rose 0.3%, with CRM stock a huge holding. The VanEck Vectors Semiconductor ETF (SMH) 1.5%.
Reflecting more-speculative story stocks, ARK Innovation ETF (ARKK) and ARK Genomics ETF (ARKG) both rose 1.1%. EXAS stock is a top five holding across Ark Invest and No. 1 in ARKG.
SPDR S&P Metals & Mining ETF (XME) climbed 0.2%. U.S. Global Jets ETF (JETS) ascended 0.3%. SPDR S&P Homebuilders ETF (XHB) stepped up 0.2%. The Energy Select SPDR ETF (XLE) nudged higher and the Health Care Select Sector SPDR Fund (XLV) declined 0.7%.
The Financial Select SPDR ETF (XLF) declined 0.4%. The SPDR S&P Regional Banking ETF (KRE) also lost 0.4%, coming off intraday lows. That follows Monday’s downside reversal.
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Market Rally Analysis
The stock market rally lost a little ground, but the technical picture remains the same.
The major indexes remain near 2023 highs but unable to punch higher. Those highs have been a ceiling for the indexes, with the 21-day and 50-day lines acting as a floor.
Losers outpaced winners on Tuesday.
The First Trust Nasdaq 100 Equal Weighted Index ETF (QQEW), on the cusp of breaking a downtrend, fell 0.7%, testing the 50-day line once again. The Invesco S&P 500 Equal Weight ETF (RSP) slipped dipped 0.4%, retreating a little further from all its moving averages.
Market leadership remains narrow. Aside from homebuilders and related stocks, which are generally extended, investors can find a few good names out of various groups and sectors.
Salesforce made a nice move Tuesday out of a messy flat base, as some software names step up, but that sector, as elsewhere, is definitely a mixed bag. SWAV stock flirted with an early entry intraday but closed just below being actionable.
Overall, a number of stocks are setting up near buy points, but there hasn’t been much to buy. There have been several earnings gap ups, but those are risky. Some recent ones are working, but that could end if the market deteriorates.
Bank woes are getting less attention on Wall Street, but could easily flare up again.
Wall Street has shifted from inflation and Fed fears to recession worries, but the CPI report could revive rate-hike talk.
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What To Do Now
With the major indexes stuck in a tight range, market breadth weak and buying opportunities limited, there aren’t good reasons to substantially increase exposure.
Investors could nibble at various stocks flashing buy signals, even earnings gaps. But there’s also nothing wrong with staying largely in cash, waiting for the market rally to make a decisive move higher or lower.
A decent number of stocks are right around buy points, with even more not far from setting up. So if the market rally does break to 2023 highs, you want to be ready to act. Even then, investors would want to add exposure gradually.
Read The Big Picture every day to stay in sync with the market direction and leading stocks and sectors.
Please follow Ed Carson on Twitter at @IBD_ECarson for stock market updates and more.
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