Market Braces For Inflation Report; Twitter Rallies On This Musk Move

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Dow Jones futures rose slightly early Wednesday, along with S&P 500 futures and Nasdaq futures, with the July CPI inflation report on tap before the open. Elon Musk sold $6.9 billion worth of Tesla stock in the past three trading sessions, citing his possible Twitter takeover. Tesla and Twitter stock rose

The stock market rally lost ground, pulling back from resistance levels as Micron Technology (MU) triggered a sell-off in chip stocks.

On the upside, some natural gas-related stocks showed strength, including Range Resources (RRC), EQT Corp. (EQT) and Equinor (EQNR), which all broke downtrends in handles, flashing potential early entries. However, RRC stock was the only one moving on OK volume. Golar LNG (GLNG) cleared some short-term levels, still near its 50-day line, but earnings are due Thursday.

Apple (AAPL) and Microsoft stock edged higher Tuesday.

Elon Musk Sells Tesla Stock

Tesla (TSLA) CEO Elon Musk sold 7.9 million shares $6.9 billion, according to SEC filings released Tuesday night.

On the evening of Aug. 4, Tesla held its annual shareholder meeting, with Musk touting the EV giant’s growth prospects. Shareholders approved a 3-for-1 stock split, which will take place on Aug. 25.

The next day, Friday, Aug. 5, Musk sold 3.3 million shares. On Monday, he sold 1.58 million shares, followed by 3.04 million on Tuesday.

On Friday, TSLA stock skidded 6.6% to below its 200-day line. Tesla stock tried to reclaim its 200-day line on Monday but slashed big intraday gains to just 0.8%. On Tuesday, shares fell 2.4% to 850.

Musk said he is finished with stock sales for now. He said he was selling shares to avoid emergency stock sales if he has to go through with his $44 billion, $54.20-a-share Twitter (TWTR) takeover.

TSLA stock climbed 2% before the open. Twitter stock rose nearly 4%, to above 44, continuing to trend higher on the growing chance that the deal will go through. Wedbush analyst Dan Ives raised his TWTR price target to 50 from 30, on the odds that the deal ultimately goes forward. Musk and Twitter will face off before Delaware’s Chancery Court in October.

Meanwhile Tuesday, China’s Li Auto (LI) sold off hard. Li Auto stock tumbled 7%, undercutting its recent consolidation and nearing its 200-day. Li Auto vehicles had just 800 insurance registrations from Aug. 1-7, down 74% vs. the last week of July, according to a Chinese blog report. Li Auto earnings are on Aug. 15.

Among Li’s China EV rivals, Nio (NIO) slumped 5% Tuesday, knifing through its 50-day line, while giant BYD (BYDDF) lost 2.5%, starting to live below its rising 50-day. Both Nio and BYD saw roughly 25% declines from the last week of July, a more-normal drop after the end-of-month delivery crush.

BYD has begun supplying Blade batteries to Tesla at the latter’s Berlin-area plant, according to CnEVPost.com, citing local media.

Key Earnings

Celsius (CELH) and Exelixis (EXEL) headlined notable earnings after the close, along with fallen growth plays Coinbase (COIN), Roblox (RBLX) and Trade Desk (TTD).

CELH stock rose modestly early Wednesday after initially retreating. Celsius earnings’ triple-digit EPS and sales growth topped Q2 views. But gross margins came in a little light. Celsius stock tumbled 7.8% on Tuesday to 93.38 as it pulls back from the Aug. 2 high of 109.74. A huge three-month run was capped by the early August jump on a PepsiCo (PEP) investment and distribution deal.

EXEL stock rose modestly in extended trade after Exelixis earnings topped expectations. Shares fell 2.3% to 21.06 on Tuesday. Exelixis stock is working on a messy cup-with-handle base with a 22.57 buy point. Investors could use a downward-sloping trendline to find a slightly lower entry.

COIN stock fell solidly early Wednesday after Coinbase posted revenue below views and a loss that was much worse than expected. The cryptocurrency exchange skidded nearly 11% to 87.68 on Tuesday. Coinbase stock had doubled since late June, but is far below its April 2021 opening day peak of 429.54.

Cryptocurrency Prices And News

RBLX stock plunged in extended action as Roblox reported a wider-than-expected loss while revenue fell short. Bookings and user growth also missed. Shares fell 3.35% to 47.26 on Tuesday. RBLX stock had more than doubled since bottoming in early May. But shares of the video game platform are far below their November 2021 peak of 141.60.

TTD stock surged as Trade Desk met EPS views, but beat revenue views and gave bullish guidance. Trade Desk stock fell 0.9% to 54.50 on Tuesday, but has run up from a 52-week low of 39 on July 14.

EQNR stock is on the IBD Leaderboard watchlist. RRC stock is on SwingTrader and is Tuesday’s IBD Stock Of The Day. Microsoft (MSFT) is an IBD Long-Term Leader. CELH stock and Equinor are on the IBD 50.

The video embedded in the article discussed Tuesday’s market action and analyzed RRC stock, Costco Wholesale (COST) and Hyatt (H).

Dow Jones Futures Today

Dow Jones futures rose 0.3% vs. fair value. S&P 500 futures advanced 0.35% and Nasdaq 100 futures climbed 0.5%.

U.S. crude oil prices fell nearly 2%, below $90 a barrel.

The 10-year Treasury yield dipped 1 basis point to 2.79%.

The Labor Department releases the July CPI inflation report at 8:30 a.m. ET. The inflation data will surely have a big impact on Dow futures and Treasury yields.

Remember that overnight action in Dow futures and elsewhere doesn’t necessarily translate into actual trading in the next regular stock market session.

Join IBD experts as they analyze actionable stocks in the stock market rally on IBD Live

Inflation Report

Economists expect the July consumer price index to show a 0.2% increase vs. June, after the prior month’s 1.3% spike. The CPI inflation rate is expected to cool to 8.7% from June’s 40-year high of 9.1%. That reflects the decline in gasoline prices, which will also provide some relief in August.

But core CPI, which excludes food and energy, should show a 0.5% gain after June’s 0.7% advance. Core inflation is seen picking up to 6.1% from 5.9%.

Markets give a 67.5% chance of another 75-basis-point Fed rate hike on Sept. 21, followed by quarter-point moves in November and December.

Stock Market Rally

The stock market rally gave up ground Tuesday, led by chip stocks.

Micron warned on revenue and cutting capital spending. That came a day after Nvidia (NVDA) slashed sales forecasts. MU stock fell 3.7% while chip stocks were big losers Tuesday, especially memory-focused equipment makers such as Lam Research (LRCX).

Apple stock edged up 5 cents to 164.92, continuing to trade tightly above its 200-day line. Apple’s relative strength line is already at a new high. Microsoft rose 0.7% to 282.30, still below its 200-day.

The Dow Jones Industrial Average dipped 0.2% in Tuesday’s stock market trading. The S&P 500 index lost 0.4%. The Nasdaq composite gave up 1.2%. The small-cap Russell 2000 fell 1.3%.

U.S. crude oil prices reversed lower, closing down 0.3% to $90.50 a barrel. Natural gas prices rose 3.2%.

The 10-year Treasury yield rose 3 basis points to 2.8%. The 2-year Treasury yield climbed 5 basis points to 3.27%. The yield curve is inverted from the 1-year to the 10-year, often viewed as a recession warning.

ETFs

Among the best ETFs, the Innovator IBD 50 ETF (FFTY) fell 2%, while the Innovator IBD Breakout Opportunities ETF (BOUT) dipped 0.4%. The iShares Expanded Tech-Software Sector ETF (IGV) gave up 1.5%, with MSFT stock the top IGV holding. The VanEck Vectors Semiconductor ETF (SMH) tumbled 4.2%. MU stock is a notable SMH holding.

Reflecting more-speculative story stocks, ARK Innovation ETF (ARKK) skidded 5.45% and ARK Genomics ETF (ARKG) 5.4%. Tesla stock remains a major holding across Ark Invest’s ETFs.

SPDR S&P Metals & Mining ETF (XME) rose 0.8% and the Global X U.S. Infrastructure Development ETF (PAVE) dipped 0.5%. U.S. Global Jets ETF (JETS) descended 1.7%. SPDR S&P Homebuilders ETF (XHB) slumped 3.3%. The Energy Select SPDR ETF (XLE) climbed 1.8% and the Financial Select SPDR ETF (XLF) edged up 0.5%. The Health Care Select Sector SPDR Fund (XLV) dipped 0.3%.

Five Best Chinese Stocks To Watch Now

Market Rally Analysis

The stock market rally pulled back Tuesday, as the major indexes retreated from various resistance levels.

The Nasdaq, which erased strong morning gains on Monday, led Tuesday’s slide. It’s backed off a trendline going back to January, but is still above its early June highs. The Russell 2000, which cleared its June peaks on Monday, is back into that resistance area. The S&P 500 and Dow Jones, which tested those levels Monday morning, also are retreating.

A market rally pause around current levels could be positive. Many leading stocks that have run up the right side of bases could use handles and tighter action.

The major indexes also could be starting a sharper retreat. That doesn’t necessarily mean undercutting bear market lows. It’s also possible that the market pulls back, then slogs in a tricky range for a substantial period.

The sell-off in semis is a bad sign. Chip stocks usually play a significant role in any meaningful market rally. Chips’ recent advance had been encouraging.

On the upside, aerospace/defense, energy and health insurers held up well or kept advancing. Biotechs overall pulled back modestly after strong gains.

Wednesday’s inflation report will provide a short-term catalyst, but how stocks open won’t necessarily be how they close.

Time The Market With IBD’s ETF Market Strategy

What To Do Now

The market rally has hit some resistance. This could be temporary or the start of a bigger retreat. Either way, investors may want to pare exposure and take some partial profits. If it’s just a pause, new buying opportunities will soon present themselves.

There are some buying opportunities in natural gas plays such as Range Resources. If you nibble, that should probably be in the context of not increasing net exposure. And be nimble. Energy prices and market conditions could quickly change.

Keep working on watchlists. This is a confirmed market rally with a number of stocks trying to set up. You want to be ready.

Read The Big Picture every day to stay in sync with the market direction and leading stocks and sectors.

Please follow Ed Carson on Twitter at @IBD_ECarson for stock market updates and more.

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