Dow futures were down slightly early Thursday, along with S&P 500 and Nasdaq futures, as the CPI inflation report is due to be released before the open of trading. The S&P 500 and Nasdaq both hit record highs on Wednesday, with the Nasdaq hitting its highest level in more than a year. That’s a warning for investors to take note of.
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What investors need to know about how the CPI and PPI reports will affect the stock market
Main trends in the stock market
NVIDIA (NVDA) continued its strong trading run on Wednesday. Taiwan Semiconductor Manufacturing (TSM) reported strong sales in June. Tesla (TSLA) extended its winning streak to 11 sessions.
Cameraman (CCJ), Carvana (CVNA) and GE Aerospace (GE) issued a buy signal.
Software and restaurant stocks struggle, leaders Crowdstrike (CRWD) and Kava (CAVA) is under pressure.
Costco Wholesale (COST) announced its first membership fee increase since 2017, sending its shares higher early Thursday morning.
Delta Airlines (DAL) slightly missed second-quarter profit expectations and lowered its third-quarter EPS outlook. Delta Air Lines shares fell, along with other airline stocks.
Nvidia, Cava and Taiwan Semiconductor stocks are on the IBD Leaderboard. Nvidia and CrowdStrike stocks are on the IBD 50. GE Aerospace was Wednesday’s IBD Stock Of The Day.
Dow Jones Futures Today
Dow Jones futures were trading 0.15% below fair value, S&P 500 futures were down 0.1% and Nasdaq 100 futures were slightly lower.
The yield on the 10-year Treasury note rose to 4.29%.
The June CPI inflation report will likely move Dow futures and Treasury yields ahead of the open.
Remember that overnight movements in Dow futures or any other stocks do not necessarily translate into actual trading in the next regular stock market session.
CPI Inflation Report
The Labor Department will release its June Consumer Price Index at 8:30 a.m. ET on Thursday. Economists expect the overall CPI to have risen 0.1% from May. The core CPI is expected to have risen 0.2%.
The market sees a 73.3% chance of a 0.25 percentage point rate cut at the September 17-18 meeting.
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Stock market rise
Stocks posted solid, broad-based gains. The Dow Jones Industrial Average rose 1.1% on Wednesday, its highest close since late May. The S&P 500 rose 1% and the Nasdaq Composite surged 1.2%, both of which rose for the seventh straight trading day to hit record highs.
The Russell 2000 index of small-cap stocks rose 1.1%, while the Invesco S&P 500 Equal Weight ETF (RSP) rose 0.8%, after both stocks recovered above their 50-day moving averages.
The First Trust Nasdaq 100 Equal Weighted Index ETF (QQEW) rose 0.8% to a record high.
U.S. crude oil prices rose 0.85% to $82.10 a barrel.
The yield on the 10-year Treasury note fell 2 basis points to 4.28%.
Nasdaq expansion raises investor warning
The Nasdaq is currently 9% above its 50-day moving average, its highest since closing 10.1% above this key level on June 15, 2023. The risk of a pullback is increasing, but as the past few days and weeks have shown, the pullback does not have to happen soon, be sharp or prolonged.
The S&P 500 is up 5.4% from its 50-day average and is currently trading slightly higher.
ETF
Among growth ETFs, the Innovator IBD 50 ETF (FFTY) fell 0.1%. The iShares Expanded Tech-Software Sector ETF (IGV), which holds CRWD shares, was down slightly. The VanEck Vectors Semiconductor ETF (SMH) rose 2.35%. Nvidia and TSM shares are SMH’s largest components.
Reflecting more speculative names, the ARK Innovation ETF (ARKK) fell 0.2%, and the ARK Genomics ETF (ARKG) dropped 0.4%. Tesla shares are the No. 1 holding across Ark Invest’s ETFs.
The SPDR S&P Metals & Mining ETF (XME) rose 0.9%, while the Global X US Infrastructure Development ETF (PAVE) added 1.5%. The US Global Jets ETF (JETS) rose 0.6%, with Delta Air being a big holding. The SPDR S&P Homebuilders ETF (XHB) rebounded 2.2%. The Energy Select SPDR ETF (XLE) rose 0.7%, and the Health Care Select Sector SPDR Fund (XLV) added 0.95%.
The Industrial Select Sector SPDR Fund (XLI) rose 0.9%, with GE shares as its top holding.
The Financial Select SPDR ETF (XLF) rose 0.4%.
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Tesla shares reach 11th consecutive win
Tesla shares rose 0.35% to 263.26 on Wednesday, their 11th consecutive day of gains. The stock has risen 44%, its longest streak since a 13-day gain streak in June 2023. Almost all of the gains were driven by strong volume. TSLA shares have risen significantly since their late June surge.
Nvidia stock
Nvidia shares rose 2.7% to 134.91, and are up 7.2% this week. The stock is approaching its June 20 intraday high of 140.76, but this consolidation is too short-lived to provide a buying opportunity.
NVDA shares are rising on renewed AI optimism, especially from Taiwan Semiconductor.
Taiwan Semiconductor said early Wednesday that second-quarter revenue rose 40% year-over-year on strong sales in June driven by demand for AI chips. Nvidia is a big customer for the foundry giant, which also makes AI chips. apple (AAPL), Broadcom (AVGO) and many more.
TSM shares rose 3.5% to $191.01, its highest closing price ever, and hit $192.80 on Monday morning, giving Taiwan Semiconductor’s market capitalization a record $1 trillion at one point. Its closing price on Wednesday was $990.72 billion.
Stocks in buy area
Cameco shares rose 9.6% to 53.71, topping their 50-day moving average on heavy volume on a strong day in uranium trading. CCJ shares have a 56.24 buy point from a flat base, base-on-base pattern. But buying Cameco shares from the 50-day line has been a better bet than a traditional breakout over the past year.
Carvana shares rose 4.2% to 130.97, re-establishing a 129 buy point in a cup base, buoyed by bullish analyst comments, but volatile CVNA shares struggled to hold on from a traditional breakout.
GE Aerospace shares rose 1.6% to 165.74, rising above their 50-day moving average, providing an early entry opportunity. Investors can also use the short-term highs of 167.50 and 169.15 for additional entry, with 170.80 becoming an official flat base buy point.
CrowdStrike and Cava shares come under pressure
Software and restaurant stocks are under pressure, which is starting to hurt the real leaders in those sectors.
CrowdStrike shares fell 3% to $374.45, down from their lows for the first time since early June but still below their 21-day moving average. The stock had been trading tightly from a cup-handle base just above the buy zone since its spike on June 8. CRWD shares tried to break out of that trading range on Tuesday but then reversed course.
Kava shares tested their 50-day line and fell 5.5% to 85.30 after dropping 4.75% on Tuesday, after briefly trying to break out of a messy sideways trend on Monday.
It remains to be seen whether these moves are the start of a longer-term decline, or whether CrowdStrike and Cava are finally engaged in some constructive shakeout.
What to do now
The market rally is likely to be extended heading into inflation data and the start of earnings season, but this comes with additional risks, and investors should prepare for big market and sector moves, especially for individual stocks.
Stocks continue to emit buy signals, while some are also giving off possible sell signals.
Investors can still have significant exposure in the current market, but may also consider taking profits. Now is definitely the time to get involved and be ready to act.
Watchlists should be updated frequently as underlying stocks and sectors fluctuate.
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