Stock market indexes traded near intraday lows midday Tuesday after the January CPI report showed persistent inflation. Dow Jones component Boeing tested the top of a flat base and could break out to 52-week highs.
January CPI data perfectly matched the 0.5% increase consensus. Core CPI hit the expected mark as well, with a 0.4% uptick. However, there's a big problem.
The data extrapolates to a 5.5% to 6.5% annual inflation rate, well above the Federal Reserve's quixotic 2.0% inflation target. Odds for a 0.25% rate hike at the March meeting surged to almost 94% after the news release, according to CME FedWatch.
The 10-year Treasury note yield added 7 basis points to 3.79%.
The stock market reaction was healthy despite the red glow, with two-sided price action and limited downside a welcome relief after furious declines following 2022 inflation data.
The Dow Jones Industrial Average traded lower by 1.1% while the S&P 500 lost 0.9%. The Nasdaq held up better, dropping 0.8%. The Russell 2000 small-cap index matched blue chip losses, down 1.0% at this hour.
NYSE and Nasdaq volume rose by double-digit percentages compared to the first half of Monday's session.
Crude oil slid more than 1% to $78.80 per barrel. Asian markets were higher, with the exception of the Nikkei, while European bourses shed early gains in late trading.
In the crypto world, Bitcoin ticked higher near $21,900.
Boeing Buy Signal Ahead
The White House announced that Air India agreed to buy more than 200 planes from Boeing, plus options. Shares lifted to the top of a six-week flat base midday Tuesday, probing a 219.07 buy point.
This price action could presage a stairstep rally toward the aerospace giant's next major resistance in the 230s. Shares of the Dow component topped out above 400 in March 2019, just ahead of the Ethiopian 737-MAX crash.
BA stock rallied 0.3% in the first half of Tuesday's stock market trading.
Cathie Wood ETF Breakout Pattern
Cathie Wood's ARK innovation ETF has gained a remarkable 28% so far in 2023.
ARKK fund topped 200-day moving average resistance earlier this month and reversed, undercutting that key level. It has now settled on the 21-day exponential moving average, with two-week price action forming the handle of a cup-with-handle pattern. The fund traded 1.1% lower midday Tuesday.
IBD's "handle" has similar characteristics to the classic bull flag continuation pattern. This is different than the high, tight flag pattern found in IBD's trading education.
MarketSmith now shows an intriguing 45.56 buy point that could signal a breakout and rally into the August 2022 high near 54.
Stock Market Today: IBD 50
IBD 50 tech component Cadence Design Systems traded higher by 4.5% after beating Q4 top- and bottom-line estimates. The chip designer posted a profit of 96 cents per share on a 16.4% rise in revenue to $900 million. CDNS stock mounted the 195.07 buy point from a 125-day base and is in the buy zone, trading at an all-time high.
Shares also flashed daily and weekly blue dots in MarketSmith, indicating exceptional relative strength.
The Innovator IBD 50 ETF outperformed major benchmarks, rising 0.5%.
Also in the IBD 50, Axon Enterprise fell out the buy zone earlier this month and bounced at the 50-day line. It has now cleared the 21-day line and traded back within 2% of the 193.95 buy point. The Taser parent is expected to grow earnings 34% in 2023. AXON stock rose 0.2%.
Marriott rose 1.3% after beating Q4 top and bottom-line estimates and raising Q1 EPS guidance. The lodging giant is trading near a nine-month high.
Follow Alan Farley on Twitter at @msttrader.
