Dow Jones Futures: S&P 500, Nasdaq Hit Fresh Bear Market Lows; Big Inflation Reports Due

Dow Jones futures tilted higher Tuesday night, along with S&P 500 futures and Nasdaq futures, as investors look ahead to big inflation reports and Federal Reserve news.

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The Nasdaq and S&P 500 hit fresh bear market lows Tuesday. The Dow Jones led an intraday rally, but the major indexes faded to mostly negative by the close. Chip stocks continue to sell off in the wake of weak demand and U.S. controls on China sales. Tesla (TSLA) extended its sharp slide.

Investors should be on the sidelines, entirely or nearly all in cash.

On Wednesday morning, the Labor Department will release the producer price index, a warm-up for Thursday’s consumer price index. Meanwhile, Fed minutes from the September policy meeting will be out Wednesday afternoon.

Megacaps Apple (AAPL), Microsoft (MSFT), Google parent Alphabet (GOOGL), Amazon.com (AMZN) and especially Tesla stock lost ground Tuesday near recent or long-term lows.

Energy stocks Exxon Mobil (XOM), Albemarle (ALB), Cheniere Energy (LNG), Eli Lilly (LLY) and Vertex Pharmaceuticals (VRTX) boast relative strength lines at or near highs, with most close to potential buy points.

Vertex and LNG stock are on IBD Leaderboard. VRTX stock is on the IBD 50. XOM stock, Vertex and Albemarle are on the IBD Big Cap 20. Microsoft and Google stock are IBD Long-Term Leaders. The video embedded in this article discussed Tuesday’s market action and analyzed LNG stock, Commercial Metals (CMC) and Deckers Outdoor (DECK).

Key News

Uranium miner Cameco (CCJ) is teaming up with Brookfield Renewable Partners (BEP) to buy nuclear-power giant Westinghouse Electric for about $8 billion. Cameco will own 49% and Brookfield 51%. CCJ stock sold off overnight. BEP stock was not active.

Intel (INTC) plans to cut thousands of jobs amid the PC slowdown, with major reductions in sales and marketing, Bloomberg reported late Tuesday. INTC stock edged higher overnight. Advanced Micro Devices (AMD) last week reported preliminary Q3 revenue that was far below views, slamming AMD stock, Intel and many others. Several other reports highlight PC weakness.

Early Wednesday, PepsiCo (PEP) will report third-quarter earnings. PEP stock edged higher Tuesday. But shares have retreated over the last several weeks, even as the RS line has trended higher over that time.

Dow Jones Futures Today

Dow Jones futures edged higher vs. fair value. So did S&P 500 futures. Nasdaq 100 futures rose 0.2%.

The yen fell to a 24-year low, below the level that triggered Bank of Japan intervention last month.

The 10-year Treasury yield edged up 1 basis point to 3.95%.

Crude oil futures fell 1%.

The Labor Department will release the producer price index at 8:30 a.m. ET, exactly 24 hours ahead of the CPI inflation report. At 2 p.m. ET, the Federal Reserve will release September meeting minutes.

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 Tuesday

The stock market started off weak, tried to bounce but faded again, led by the Nasdaq.

The Dow Jones Industrial Average edged up 0.1% in Tuesday’s stock market trading, with Amgen (AMGN) a big contributor thanks to an analyst upgrade. The S&P 500 index fell 0.7%. The Nasdaq composite sank 1.1%. The small-cap Russell 2000 closed fractionally higher.

U.S. crude oil prices fell nearly 2% to $89.35 a barrel, continuing to pull back modestly after spiking last week.

The 10-year Treasury yield rose 6 basis points to 3.94% from 3.88% on Friday. The 10-year yield hit 3.97% intraday, just below the 12-year high set on Sept. 27. U.S. bond markets were closed Monday, but bond futures and sovereign yields around the world had signaled another rise in the 10-year Treasury yield was coming.

ETFs

Among the best ETFs, the Innovator IBD 50 ETF (FFTY) fell 1.1%, while the Innovator IBD Breakout Opportunities ETF (BOUT) edged up 0.15%. The iShares Expanded Tech-Software Sector ETF (IGV) gave up 1.75%, with MSFT stock a major IGV holding.

The VanEck Vectors Semiconductor ETF (SMH) tumbled 3.15%. Chip-equipment makers such as Lam Research (LRCX) were among the big losers, along with just-tumbling leaders such as On Semiconductor (ON).

SPDR S&P Metals & Mining ETF (XME) retreated 0.9%. U.S. Global Jets ETF (JETS) sank 0.65%. The Energy Select SPDR ETF (XLE) declined 0.8%. The Health Care Select Sector SPDR Fund (XLV) rose 0.5%.

Reflecting more-speculative story stocks, ARK Innovation ETF (ARKK) fell 1.8% and ARK Genomics ETF (ARKG) dipped 0.5%. Tesla stock is a major holding across Ark Invest’s ETFs.

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Stocks To Watch

XOM stock gave up 0.85% to 98 on Tuesday, rebounding from intraday lows. The oil major appears to be working on a handle after skyrocketing last week amid booming oil prices and a strong Q3 update. For now, Exxon stock has a 105.67 consolidation buy point.

ALB stock slipped 1.8% to 272.99, back below a rising 50-day line. Shares aren’t far from a potential trendline entry as the lithium giant works on a potential flat base. But buying the volatile Albemarle stock in a bear market would be extremely risky.

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LNG stock edged up 0.15% on Tuesday to 168.14, rebounding from its 10-week line intraday. The liquefied natural gas leader is looking strong but needs to forge a new base.

LLY stock rose 1.15% to 327.60, bouncing from its 21-day line. Eli Lilly stock is trying to get back to a 335.43 flat-base buy point, according to MarketSmith analysis.

VRTX stock nudged 0.2% higher Tuesday to 295.16, continuing to trade tightly in its 10%-deep flat base. The buy point is 306.05, with 304.36 offering a slightly lower entry.

Megacap Stocks

Apple stock fell 1%, just above last week’s three-month lows. Microsoft stock sank 1.7%, slumping to a 17-month low, with PC woes a major concern. GOOGL stock dipped 0.7%, slightly above a 52-week low set Sept. 30. AMZN stock closed down 1.3% after hitting its worst level in nearly three months.

Tesla stock gave up 2.9% to 216.50, hitting its worst levels since June. The EV giant has fallen for five straight sessions and eight of the last nine. TSLA stock is closing on its 52-week low of 206.84 set last May. Tesla earnings are due on Oct. 19.

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Stock Market Analysis

Soon after Tuesday’s open, the Nasdaq composite and S&P 500 set fresh bear market lows. The Dow Jones, never down much, led a rebound as Treasury yields backed off. But after briefly turning modestly higher, the S&P 500 and Nasdaq faded for most of the afternoon as yields regained momentum. The Dow did scratch out a slim gain.

With the Nasdaq and S&P 500 undercutting lows, their rally attempts are wiped out. The Dow Jones’ market rally attempt is still ongoing, but the blue chip index is hitting resistance at its 10-day line.

Losers trumped winners, but not overwhelmingly.

Meanwhile, the September CPI inflation report looms large.

The stock market has repeatedly rallied into inflation data, Fed events and other Fed-relevant reports over the past couple of months, with investors trying to wish into reality a Fed pivot on rates. When the actual news dashes hopes, stocks have staged significant sell-offs.

Thursday’s CPI report also comes as earnings season starts to kick in. That could add significant volatility, especially for individual stocks and sectors. Chip warnings do not bode well for overall tech earnings and beyond.

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What To Do Now

This is not a good time to be making buys. Many stocks that had looked promising a week ago have been hard hit, especially tech names such as Paylocity (PCTY), Enphase Energy (ENPH) and On Semiconductor (ON). But even resilient names haven’t made much headway: Vertex stock is only up slightly from six months ago.

Investors should look for strong relative strength. Many stocks with RS lines at highs may be below their 50-day and 200-day lines, with charts showing heavy damage. But with the bear market still hitting new lows, that’s OK.

So keep updating your watchlists while staying engaged. When the market shows real signs of strength, you want to be ready. But don’t jump the gun.

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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