The Dow Jones Industrial Average turned higher after another key inflation report – the producer price index – arrived on Wednesday as the stock market fell from a hot reading in the consumer price index. Meanwhile, the 10-year Treasury yield is on the verge of hitting an 11-year high in June.
The US Labor Department reported that the producer index, or PPI, fell 0.1% in August from the previous month, matching forecasts. Wholesale inflation rose 8.7% from a year earlier, down from a 9.8% jump in July and in line with Econoday forecasts.
In Tuesday, CPI inflation rate fell to 8.3%, down from 8.5% in July and 9.1% in June, amid falling gas prices. The consumer price index rose 0.1% on a monthly basis. But Wall Street economists had expected the consumer price index to show a 0.1 percent month-on-month decline, bringing inflation down to 8 percent. Worse still, core inflation accelerated more than expected to 6.3%.
As a result, the markets now believe there is a 38% chance of a full percentage increase at the next Federal Reserve meeting. Before Tuesday, Wall Street wasn’t betting on that possibility at all.
Meanwhile, a leader in electric vehicles Tesla (TSLA) traded up 2% on Wednesday. Avg Dow Jones Industrialstechnological titans An apple (AAPL) and Microsoft (MSFT) were higher after today’s stock market open. Merck (MRK) rose 0.7% after Berenberg upgraded the stock to buy.
With the current market volatility, Arista Networks (NETWORK), DoubleVerify (DV), Palo Alto Networks (PANW) and Clean storage (PSTG) — as well as Dow Jones stocks Chevron (CVX) — are among the best stocks to buy and watch. Note that increased market volatility is a good reason for investors to be more defensive, especially after Tuesday’s market decline.
DoubleVerify is IBD ranking availability. Chevron and Palo Alto were featured in this week’s column Stocks Near Buy Zone.
Dow Jones today: Treasury yields, oil prices
After Wednesday’s open, the Dow Jones Industrial Average rose 0.25 percent after reversing early losses, while the S&P 500 rose 0.4 percent. The tech-heavy Nasdaq Composite gained 0.35% in morning trade.
The yield on the 10-year Treasury note rose to 3.43% on Wednesday morning. On Tuesday, the yield on the 10-year Treasury note hit its highest closing level since June 14 and was just short of the 11-year peak of 3.48% set on June 14.
U.S. oil prices edged lower on Wednesday as they continued to consolidate after recent gains. West Texas Intermediate futures traded back below $87 a barrel.
Stock market rally under pressure
On Tuesday, all three major stock indexes trailed below their 50-day moving averages, leading to a return to their September 6 lows. The Dow Jones Industrial Average fell 3.9%, while the Nasdaq fell 5.2%.
Before the inflation report, The Big Picture column on Tuesday commented: “It is best to stay out of the market at this time. Evaluate your current possessions. If you have some names that are profitable and are holding above short-term support levels, it is good to hold them. ranking portfolio, for example, we still hold Invesco Solar (TAN) because it is slightly above our entry and holding above its converging 10- and 21-day lines.”
The best way to find leadership in the emerging stock market is by using line of relative strength. The RS line measures the stock’s price performance relative to the S&P 500. If the stock is outperforming the broader market, the RS line curves upward. If a stock lags the broad market, the line will point lower.
The RS line is plotted on all IBD and MarketSmith charts. In addition to IBD Stock Screener includes a list of the highest rated stocks with relative strength of new highs. MarketSmith also has the “RS Blue Line Dot” list, which reviews for RS lines of new highs. (IBD MarketSmith provides free access for an entire week.)
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Dow Jones stocks to watch: Chevron
Shares of Dow Jones Chevron fell 1.9% on Tuesday, but are still holding above support at the key 50-day line. Shares are nearing their latest buy point at 166.93 – according to IBD MarketSmith chart analysis — amid a strong performance by energy stocks so far this year. Shares were up 1% early Wednesday.
CVX shares showing a strong 97 out of a perfect 99 IBD Composite Rating, according to IBD Stock Check. Investors can use the IBD Composite Rating to easily gauge the quality of a stock’s fundamental and technical indicators.
Top stocks to watch: Arista, DoubleVerify, Palo Alto Networks, Pure Storage
Arista Networks added a handle to a double-bottom base, putting the correct entry at 132.97, according to IBD MarketSmith graph analysis. Arista’s relative strength line is near the highs. Shares of ANET gained 0.1% early Wednesday.
Stocks in the IBD Ranking DoubleVerify is holding above 28.07 buy point in bottom base. Shares are in a 5% buy zone that reaches 29.47. DV shares were down 0.1% Wednesday morning.
Cybersecurity leader Palo Alto Networks edged closer to a 578.89 buy point in a cup-handle despite Tuesday’s 3.4% decline. An early entry around 560 is also in play due to a trend line, according to IBD ranking comment. Shares rose 0.5% on Wednesday.
Pure Storage closes in at 31.62 buy points in a mug with a handle. Meanwhile, an early entry is also in play after the stock moves above a downtrend line within this handle. Shares fell 0.3% on Wednesday.
Tesla shares fell 4% on Tuesday, snapping a five-day winning streak. The stock gave up its 200-day line, which it had just recovered. The electric vehicle giant rose 2% on Wednesday morning.
The stock is about 30% off its 52-week high.
Dow Jones Leaders: Apple, Microsoft
Between Dow Jones Stocks, Apple shares stumbled 5.9% on Tuesday, falling back below its 50- and 200-day lines. Shares are about 14% away from a 176.25 cup discount buy point. Apple shares rose 0.3% on Wednesday.
Microsoft fell 5.5% on Tuesday, ending a four-day winning streak. The software giant remains sharply below its 50- and 200-day lines. Shares are about 28% off their 52-week high. Microsoft shares were up 0.1% Wednesday morning.
Be sure to follow Scott Lehtonen on Twitter at @IBD_SLehtonen for more information on growth stocks and the Dow Jones Industrial Average.
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