Dow Jones Futures Rise, But So Bond Yields With Inflation Reports Due

5 min read
11 months ago

Dow Jones futures rose Wednesday morning, along with S&P 500 futures and Nasdaq futures, as investors look ahead to big inflation reports and Federal Reserve news. The 10-year Treasury yield moved toward 4% yet again.

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), (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 rose slightly early Wednesday. 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) reported better-than-expected third-quarter earnings. PEP stock rose modestly in premarket trade. 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 climbed 0.5% vs. fair value. S&P 500 futures advanced 0.7%. Nasdaq 100 futures rose 0.9%.

The 10-year Treasury yield climbed 2 basis points to 3.96%, closing in on 12-year highs and the 4% level.

Crude oil futures rose slightly.

The yen fell to a 24-year low, below the level that triggered Bank of Japan intervention last month. The Bank of England refuted a report that it could extend an emergency bond-buying program past Friday.

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.

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.

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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