Quiet market session ahead of inflation report; Crude oil plunges

Stock indexes are up in quiet trading on Tuesday afternoon as investors await Wednesday’s June inflation report. The Dow Jones Industrial Average leads the broad benchmarks, gaining 0.3%. The S&P 500 has crisscrossed the flatline several times and is now nearly flat, less than 0.1% lower. The Nasdaq Composite tells a similar story, down slightly at this hour.


Market volume is mixed across major benchmarks, compared to the same time in Monday’s session, despite meager gains. Nasdaq volume fell 1.60% while NYSE posted a volume spike of 15.01%.

Overnight, the euro against the US dollar fell to “parity” for the first time since 2002. Parity means that one euro is worth one dollar. Recession fears in Germany are driving much of the selling pressure.

West Texas Intermediate crude oil sold off more than 7%, signaling growing concern in futures markets about demand destruction.

The SPDR Energy Select Sector Fund (XLE) is trading down more than 2% on falling crude prices. The ETF has been losing relative strength at a rapid pace since mid-June, when it hit an all-time high. It tests the 200-day moving average.

Gap inc. (GPS) sold 3.1% and is testing the March 2020 pandemic low after a Wells Fargo downgrade and CEO resignation.

IBD 50 component Therapeutic Corcept (CORT) sold back to the buy point after last week’s break above the April entry at 25.78. A pullback to new support can provide a second chance for traders who missed the first opportunity.

Second-quarter inflation and earnings: The calm before the storm

Low stock market volume after Independence Day signals the start of the summer slump. It also underscores growing investor caution ahead of this week’s key events.

Only a handful of companies are expected to report earnings through Friday’s close, but results from commercial banks often trigger large-scale rotation between stocks, bonds, currencies and other assets. Third-quarter and full-year margin guidance should be the main market drivers as fund managers pull out spreadsheets and re-evaluate second-half and 2023 assumptions.

Citigroup (C) and Dow component JPMorgan Chase (JMP) should have more weight than Wells Fargo in this analysis due to their larger international footprint.

Delta Airlines (DAL) is expected to post earnings of $1.65 per share in Wednesday’s premarket earnings release. That would mark a major turnaround, from the $1.07 loss recorded in the same quarter in 2021.

Airline stocks have fared poorly since April, despite bumper passenger numbers, as soaring fuel prices squeeze margins. Analysts also fear high prices could force customers to cancel future travel plans to raise funds for day-to-day needs. On the bright side, the current drop in oil could mark a bottom for the energy sector.

Tuesday Stock Market Highlights

IBD 50 component monster drink (MNST) consolidates less than two points below the buy point of 98.83. The stock has never traded in triple digits, so a breakout could be significant. MNST boasts a solid composite rating of 98, along with an A/Dist rating. and SMR ratings.

Health Acadia (ACHC) rose within three points of the buy point of 76.79 in a three-month consolidation pattern and just hit a 52-week high of relative strength. The ACHC’s 93 composite rating and A-rated RS group make it a great stock to watch in future sessions.

Invesco Solar (TAN) is trading lower for the second day after encountering resistance at the 200-day moving average, losing 3.4%. Timekeepers are selling off solar stocks in reaction to the sharp drop in crude oil prices. Solar is a less attractive alternative energy when fossil fuel prices drop.

Please follow Alan Farley on Twitter @mstrader for daily stock action.


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