Stock Market Pares Gains As Inflation Hits 40-Year High; Microsoft, Tesla Lead

Key market indexes stayed positive after trimming early gains midday Wednesday, as Microsoft (MSFT) led the Dow Jones Industrial Average.

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The Nasdaq rose 0.2%, the S&P 500 was also up 0.2% and the Dow Jones industrials edged higher in the stock market today. Small caps tracked by the Russell 2000 lagged, down 0.8%. Volume was higher on both major exchanges vs. the same time Tuesday.

Real estate, technology and communication services were the biggest S&P sector gainers, while health, energy and financials lagged.

Among exchange traded funds, Innovator IBD 50 (FFTY) gained 0.7% but remains well below its 200-day moving average. The iShares Russell 1000 Growth ETF (IWF) and Invesco QQQ Trust (QQQ) climbed 0.3% each.

The U.S. consumer price index jumped 7% in December from a year ago, the Labor Department reported early Wednesday. That marked the fastest pace since 1982 and was just shy of Econoday’s forecast for a 7.1% increase. The core price index (excluding food and energy costs) rose 5.5% in December from the prior year, hitting a 31-year high.

“The market’s positive reaction to the hottest inflation report since the ’80s is a confirmation from investors that rate hikes are necessary for the economic rebound to stabilize,” Lindsey Bell, chief money & markets strategist for Ally, said in a note. “Between wage data last week and this inflation report, a March rate hike is becoming increasingly inevitable.”

The U.S. economy has been struggling to recover from the Covid-19 pandemic, which triggered nationwide lockdowns nearly two years ago. A resurgence in cases fueled by the more contagious delta variant had been slowing as vaccinations rise.

But the new omicron coronavirus variant is now spreading rapidly in the U.S. Currently available vaccinations and boosters may offer some protection against severe illness from the highly transmissible virus.

Globally, Covid-19 cases are approaching 315 million, with more than 5.5 million deaths, according to Worldometer. In the U.S., cases have topped 63 million with nearly 864,000 deaths.

Growth Stocks To Watch

Tesla (TSLA) cruised 3% higher in fast turnover, extending its advance for a third straight session and retaking its 50-day moving average. The IBD Leaderboard stock tried to clear a double-bottom base last week, but failed. It’s now added a deep handle with a 1,208.10 buy point.

Over in the IBD 50, SVB Financial (SIVB) climbed 2% to extend Tuesday’s 3% gain. It’s now about 2% away from a 763.32 buy point of a cup base, according to MarketSmith chart analysis. The Santa Clara, Calif.-based company’s 97 Composite Rating leads the 11-stock super regional bank group.

Zim Integrated Shipping Services (ZIM) added 1.7%, on track for a fifth straight gain. Shares are now extended past a 58.41 buy point of a cup with handle. Zim was featured as Tuesday’s IBD Stock Of The Day.

Houlihan Lokey (HLI) broke out past a 119.99 buy point of a cup without handle, but pared its gains midday to trade back below the entry. Volume was running about three times higher than usual. The relative strength line is close to a new high.

Jefferies Financial (JEF) gapped down and dived 11% in heavy trading after the investment bank’s earnings and revenue missed estimates. Revenue fell 3% for the November-ended quarter. Jefferies also raised its dividend 20% to 30 cents a share.

Dow Jones Movers

Microsoft, up 1.4% in heavy volume, led the blue chip index to extend a recent win streak. The stock continues to work on a flat base with a 349.77 buy point. It’s still below the 50-day line and about 9% away from the entry.

Among other Dow winners, Salesforce.com (CRM) gained 1.2%, while Honeywell (HON), Nike (NKE), UnitedHealth (UNH) and Boeing (BA) added nearly 1% each.

But Goldman Sachs (GS) fell 2.2% in heavy trade to test its 50-day line. It’s still shaping a cup with handle with a 412.76 buy point.

Walgreens Boots Alliance (WBA) gave up 1.2% as it builds a long cup with a 57.15 buy point. It’s about 6% away from the entry.

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Follow Nancy Gondo on Twitter at @IBD_NGondo

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The post Stock Market Pares Gains As Inflation Hits 40-Year High; Microsoft, Tesla Lead appeared first on Investor’s Business Daily.