Dow Jones Futures: Inflation Report and Federal Reserve Big Tests for Market Rally

Dow futures will open Sunday night, along with S&P 500 futures and Nasdaq futures, with the focus squarely on the CPI and Federal Reserve inflation report.

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Last week’s stock market rally has eased as major indices continue their trend of climbing to new highs and then fading again. It is a challenging environment to buy stocks.

Next week investors get a shot or two on important economic news. On Tuesday, the Labor Department will release its CPI inflation report for November. On Wednesday afternoon, the Federal Reserve will raise interest rates again with Federal Reserve Chairman Jerome Powell giving signals about further tightening in early 2023.

This may be a catalyst for large market gains or losses, or intermittent side actions may continue. Investors will likely wait for the inflation report and Fed news before adding exposure.

Breakout failures or failures are widespread, with DXCM stock pulling back on Friday after briefly vacating a buy point Thursday on FDA approval.

But there are five stocks to watch: the Dow Jones giants Larva (cat) And the Goldman Sachs (p), Sanmina (I will sleep), Makison (MCK) And the MercadoLibre (millie). To be clear, none of these stocks can be actioned, with MELI stock in particular in need of some work.

Microsoft (MSFT) performs relatively well for adults, with apple (AAPL) is less than the 50-day line and Tesla (TSLATry to avoid setting new bottoms for the bear market. But MSFT stock is still well below the 200-day line and hasn’t made much progress over the past month.

The video embedded in the article reviewed market movement in depth and analyzed it dexcom (DXCM) and MercadoLibre and CAT stocks.

Economy, the S&P 500 faces a hard landing – unless the Fed does

CPI inflation and the Fed meeting

Early Tuesday, the Labor Department will release the Consumer Price Index for November. Both headline and core inflation rates in the CPI should fall over the next several months, if only because comparisons are getting tougher. But prices for services have been stubbornly strong.

The Fed wants to see more substantive declines in service inflation, as well as wage gains, before halting interest rate hikes. At 2pm ET, the Fed is expected to raise the federal funds rate by 50 basis points, to 4.25%-4.5%, ending a series of four hikes of 75 basis points. Investors will want some clues about the February meeting, and how high the fed funds rate might eventually hit. Markets are currently pricing in another half point Fed rate hike in February, although there is a good chance of a quarter point move.

Fed Chair Powell’s comments at 2:30 PM ET, along with the Consumer Price Index inflation report, may set the tone for Fed policy heading into 2023.

Powell and many policymakers have indicated that a recession may be necessary to bring inflation under control.

Dow jones futures today

Dow Jones futures open at 6 p.m. ET on Sunday, along with S&P 500 futures and Nasdaq 100 futures.

Remember to work in overnight Dow Jones futures contracts and elsewhere that does not necessarily translate into actual trading in the next regular session Stock market session.

Join IBD experts as they analyze actionable shares in the bullish stock market on IBD Live

Stock market rise

The rally in the stock market has seen significant declines for major indices in the last week.

The Dow Jones Industrial Average fell 2.8% in the past week Stock market trading. The S&P 500 lost 3.4%. The Nasdaq Composite Index fell 4%. Small cap Russell 2000 fell 5.1%.

The 10-year Treasury yield rose 6 basis points to 3.57%, rebounding from 3.4% in the middle of the week.

US crude oil futures fell 11% to $71.02 a barrel last week, with gasoline futures down 9.8%. Both hit their lowest levels in 2022. Natural gas prices fell 0.6%.

Exchange Traded Funds

Among the major growth ETFs is the iShares Expanding Technology and Software Sector Fund (IGV) fell 4.6%, with Microsoft’s main share holding. VanEck Vectors Semiconductor Corporation (SMH) decreased by 1.7%.

Reflecting more speculative stories, the ARK Innovation ETF (ARK)ark(down 9.2% last week and the ARK Genomics ETF)ARKG) 8.1%. TSLA stock is a huge holding via Ark Invest ETFs.

SPDR S&P Metals & Mining ETFs (XME) lost 6.4% last week. Global Infrastructure Development Fund X US (cradle) decreased by 2.85%. US Global Gates Foundation ETF (Planes) fell 3.3%. SPDR S&P Homebuilders ETF (XHB) decreased by 2%. Energy Defined Fund SPDR ETF (xle) fell by 8.45%, decisively breaking the 50-day line. SPDR Financial Selection Fund (XLF) fell 3.9%. SPDR Health Care Sector Selection Fund (XLV) fell 1.3% after rising in eight of the previous nine weeks.

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Megacap shares

Apple stock is down 3.8% in the past week, falling below that key level on Tuesday and hitting resistance there on Friday. Bad news regarding iPhone production may be priced in, and AAPL stock is on the rebound.

Microsoft Dow tech titan also fell 3.8%, but held support at the 21-day line, modestly above the 50-day high. But it is well below the 200-day line. MSFT stock is basically flat against last month, as are the S&P 500 and Nasdaq.

Tesla stock is down 8.1% in the latest week, even as Friday traded up 3.2%. TSLA stock is jumping above the recent bear market lows. Tesla announced new incentives for China last week with widespread media reports that the Shanghai plant would cut production significantly over the next few weeks, even halting production of the Model Y.

Tesla vs. BYD: Which EV giant is the best to buy?

Stocks to watch

Caterpillar stock fell 3.7% to 227.29 last week, undercutting the 21-day line. Backtracking can end up being a constructive jolt. CAT stock contains Point purchase At 238″ or 239.95″ tall cup base. In another week, the heavy equipment giant may have a Dow Flat base With 239.95 points of purchase. A slightly longer pause could allow the rapidly rising 50-day line to narrow the gap with CAT stock.

Goldman stock fell 5.6% in the most recent week to 359.14, surpassing a breakout from a cup base With 358.72 buying points, before rising slightly above it. A strong bounce from here could provide a fresh entry, especially if the 50-day or 10-week line catches up. On the weekly chart, GS stock has a 13-month lead Cup base with handlewith 389.68 buy points, according to MarketSmith Analysis. The past week has now created more depth on this handle, which could also become a flat base in a week.

Sanmina fell 7.3 percent to 62.48 last week. SANM stock was firmly consolidating in profit-taking territory after the October breach from the base of the cup. Stocks could start to pull back to the 50 day/10 week line, offering a buying opportunity, although the weekly decline was surprising. The SANM stock also runs on a potentially flat base.

McKesson stock fell 4% to 371.37 last week, and on Friday it fell below its 50-day and 10-week lines. MCK stock is making a fresh consolidation after the November 10-11 sell-off that hit several defensive medical stocks. A move above 389.45 Dec 2 high could provide an early entry, still close to the moving averages.

MELI fell 5.1% to 896.48, its fourth consecutive weekly decline. The Latin American e-commerce and payments giant has 1,095.44 buy points, with a trend line entry around 1025. A violent entry could be a decisive retracement of the moving averages for MELI stock, with a December 2 high of 957. While MercadoLibre stock was trending lower, The weekly losses come in lighter volumes with some relatively strong positive closes.

Market rally analysis

A week ago, the stock market was hitting new highs, with the S&P 500 above its 200-day line for the first time in months. But as investors reassessed the jobs report and Fed Chair Powell’s comments, major indexes fell.

The S&P 500 fell below the 200-day line, while the Nasdaq tested the 50-day line. Both hit resistance at the 21-day line late in the week. The Russell 2000 fell below the 200-day and 21-day lines and reached the 50-day line, lowering its streak by 10 weeks.

The bullish Dow Jones index holds support near 21 days.

The S&P 500 was basically where it was after November 10, when the October CPI inflation report boosted stocks. The Nasdaq and Russell 2000 both returned to early November levels, but also in late October.

If you had to design a scenario to get investors to get into extreme situations frequently, this current bullish trend could be the blueprint: a market rally for some big gains in one day followed by a pullback over several sessions.

The market’s upside is still certain. However, more losses, like the Nasdaq or more specifically the S&P 500 breaking through the 50 day lines clearly, would be concerning.

The November CPI inflation report, the announcement of Wednesday’s Fed meeting and Powell’s comments could provide the catalyst for a sustained rally in the market, or a decisive sell-off. But it could also spur another big market that looks decisive, then followed by another downturn.

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What are you doing now

Investors should beware of adding exposure until the CPI inflation report and Fed meeting are in the rearview mirror. Even if markets jump on inflation data and Fed Chair Powell’s comments, investors should be selective about new purchases, in case major indexes simply decline over the next several sessions.

At some point, a sustained and steady rally in the market will take hold. When that happens, buying opportunities will be plentiful.

So get your stock market holiday shopping list ready. A large number of stocks from a variety of sectors are being created or about to be created.

Read The Big Picture Every day to keep up with the market trend, stocks and leading sectors.

Please follow Ed Carson on Twitter at @tweet For stock market updates and more.

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