S&P 500 Sells Off, But Damage Is Far Worse; Key Inflation Data Due

Stocks Sell Off On Hot Inflation Report

The Dow Jones Industrial Average dived more than 390 points before trimming losses Wednesday morning on a hotter-than-expected inflation report, the consumer price index. Key earnings movers were Delta Air Lines (DAL) and Fastenal (FAST).




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Delta shares dropped 6% after missing earnings targets. Fastenal moved down more than 5% after its results showed early signs of inflation impact.

Tesla (TSLA) erased sharp losses Wednesday. Elsewhere, Dow Jones tech leaders Apple (AAPL) and Microsoft (MSFT) were squarely lower after today’s stock market open.

In a volatile stock market environment, Dow Jones leaders Johnson & Johnson (JNJ), Merck (MRK) and UnitedHealth (UNH) — as well as BJ’s Wholesale Club (BJ), Evolent Health (EVH), Funko (FNKO) and Quanta Services (PWR) — are among the stocks to watch. Keep in mind that ongoing stock market volatility is a reason to stay defensive.


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Northrop and UnitedHealth are IBD Leaderboard stocks. Dollar Tree is an IBD SwingTrader stock. BJ’s is an IBD 50 stock. Evolent Health was the Stock Of The Day on Wednesday. Quanta was Thursday’s IBD Stock Of The Day. Northrop was featured in this week’s Stocks Near A Buy Zone column.

Dow Jones Today: Treasury Yields, Oil Prices, Inflation Report

After Wednesday’s open, the Dow Jones Industrial Average sold off 1.1%, and the S&P 500 lost 1.1%. The tech-heavy Nasdaq composite pared losses to 1% in morning trade.

Among exchange-traded funds, the Nasdaq 100 tracker Invesco QQQ Trust (QQQ) moved down 1%. The SPDR S&P 500 ETF (SPY) fell 1.1%.

The 10-year Treasury yield ticked higher to 3.02% Wednesday morning, looking to halt a two-day skid. Meanwhile, U.S. oil prices extended recent losses, falling another 1% in early action, with West Texas Intermediate trading just below $95 per barrel. WTI briefly fell below $94 a barrel in overnight trade.

The Labor Department’s consumer price index came out early Wednesday. Consumer prices rose 1.3% in June, higher than estimates for a 1.1% rise. Inflation surged 9.1% in June from a year ago, hotter than the 8.8% estimate and up from May’s 8.6% year-over-year rise.

Stock Market Rally

On Tuesday, the Dow Jones Industrial Average fell 0.6%, while the S&P 500 moved down 0.9%. The tech-heavy Nasdaq composite lost 0.95%.

Tuesday’s The Big Picture column commented, “Even if the distribution-day count remains almost minimal, it doesn’t mean the stock market is doing fine. It’s entirely reasonable to think volume is lighter because institutional investors are reluctant to trade before Wednesday’s consumer inflation report. Without that brake on trading, volume could easily have increased Monday and Tuesday, and we’d be looking at multiple distribution days now.”

If you’re new to IBD, consider taking a look at its stock trading system and CAN SLIM basics. Recognizing chart patterns is one key to the investment guidelines. IBD offers a broad range of growth stock lists, such as Leaderboard and SwingTrader.

Investors also can create watchlists, find companies nearing a buy point, or develop custom screens at IBD MarketSmith.


Four Dow Jones Stocks To Watch Now


Dow Jones Stocks To Watch: Johnson & Johnson, Merck, UnitedHealth

Dow Jones leader Johnson & Johnson remains about 2% below a double-bottom base’s 181.84 buy point, according to IBD MarketSmith chart analysis. The company reports earnings on July 19. JNJ shares were flat Wednesday morning.

Drug giant Merck dropped 0.7% Tuesday, and is right below its flat base’s 95.02 buy point. Medical stocks in general, and biotechs in particular, have shown rising strength in recent stock market action. Merck shares traded up a fraction early Wednesday.

Health insurance giant and IBD Leaderboard stock UnitedHealth remains above its double bottom’s 507.36 buy point after Tuesday’s 0.5% fall. Shares are in buy range. UNH reports second-quarter results Friday morning. The stock was down 1% Wednesday morning.

UNH stock shows a strong 96 out of a perfect 99 IBD Composite Rating, per the IBD Stock Checkup. Investors can use the IBD Composite Rating to easily gauge the quality of a stock’s fundamental and technical metrics.


3 Top Growth Stocks To Watch In The Current Stock Market Rally


Top Stocks To Watch: BJs, Dollar Tree, Northrop, Quanta

IBD 50 stock BJ’s Wholesale is still in the 5% buy range above a cup-with-handle’s 67 buy point despite Tuesday’s 0.8% drop. The stock’s relative strength line is at new highs, which is a sign of big stock market outperformance. Shares were down 1% early Wednesday.

IBD SwingTrader stock Dollar Tree fell further below its cup-with-handle’s 166.45 buy point Tuesday, losing 1.2%. On a positive note, the discount retailer’s RS line is right at a new high. Dollar Tree stock shows a strong 97 out of a best-possible 99 IBD Composite Rating, per the IBD Stock Checkup. Dollar Tree shares were flat Wednesday morning.

IBD Leaderboard stock Northrop Grumman is building a new flat base that has a 492.40 buy point. NOC shares were up a fraction Wednesday.

Quanta Services is putting the finishing touches on a cup with handle that has a 138.56 buy point, according to IBD MarketSmith chart analysis. Shares are about 5% away from the latest entry after Tuesday’s 2.6% fall. Shares traded down 1% in morning trade.


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Tesla Stock

Tesla stock declined 0.5% Tuesday, extending losses after Monday’s 6.55% skid. Shares erased heavy losses in morning trade Wednesday.

Shares fell further below their 50-day line and remain deeply below their 200-day line ahead of the company’s July 20 earnings report date. Tesla stock traded as high as 1,243.49 on Nov. 4. Shares are about 44% off that record high.

Dow Jones Leaders: Apple, Microsoft

Among Dow Jones stocks, Apple shares rose 0.7% Tuesday, recovering a portion of Monday’s 1.5% decline. Apple reclaimed its 50-day line last week, but is now testing that key level. Shares remain far below their long-term 200-day line and are about 20% off their 52-week high. Apple earnings are due out July 28. Apple shares fell 0.5% Wednesday.

Microsoft slid 4.1% Tuesday, giving up its recently reclaimed 50-day line. The stock closed about 24% off its 52-week high. The software giant will report quarterly results on July 26. Microsoft shares lost 1.2% early Wednesday.

Be sure to follow Scott Lehtonen on Twitter at @IBD_SLehtonen for more on growth stocks and the Dow Jones Industrial Average.

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