Stocks faded Tuesday morning after the latest inflation report brought a sliver of relief and Treasury yields eased.
The Nasdaq composite led with a 2% jump around 10 a.m. ET, but pared its gain to 0.8% an hour later. The index remains below its 50-day moving average. The S&P 500, which was up more than 1%, trimmed its gain to 0.6%. Yet, it is right back above the 50-day moving average after slipping below it late Monday.
The Dow Jones Industrial Average rose 0.5% although Cisco Systems weighed on the Dow with a 2% loss, and it fell to the lowest price since Nov. 18. Citigroup downgraded the stock from neutral to sell and cut the price target from 65 to 45. An analyst said supply chains are a bigger problem for Cisco than its peers, Barron's reported.
Small caps participated in the rally, with the Russell 2000 up 1.7%.
Volume fell on the NYSE and rose on the Nasdaq compared with the same time on Monday. Advancers led decliners by nearly 6-to-1 on the NYSE and by more than 4-to-1 on the Nasdaq.
Core Inflation Eases As CPI Hits 40-Year High
The consumer price index climbed 1.2% in March from the prior month and 8.5% from a year ago. It was the biggest annual gain since December 1981. The core CPI, which excludes food and energy categories, climbed a more moderate 0.3% from February. Economists expected that number to rise 0.5%.
The annual core inflation rate rose to 6.5%, the highest since August 1982 and slightly below views. Economists expected CPI to rise 1.1% on the month, to an annual inflation rate of 8.4%.
While the stock market took it as a good sign, some economists remain concerned.
"The good news here is that core inflation slowed on a month-on-month basis to 0.3% in March from 0.5% in February," Brian Coulton, Fitch chief economist, said in an analysis. "But nearly all of this slowdown was explained by the fall in auto prices. Core goods prices excluding autos continued to rise quickly and services prices accelerated."
Bill Adams, chief economist for Comerica Bank, said momentum in core inflation remains quite strong. "The biggest part of this is surging costs of rents and owners' equivalent rent of primary residence. These CPI components are stickier than other consumer prices. They rose at the fastest rates in 20 years in March, and they are accelerating."
After the inflation news, the yield on the 10 year Treasury note fell 6 basis points to 2.72%. If that holds, it would be the first decline in the benchmark yield in seven sessions.
IBD 50 Outperforms S&P 500
The Innovator IBD 50 ETF rebounded 2%, beating the S&P 500 and matching the Nasdaq.
Matador Resources led the IBD 50 with a nearly 5% gain and it is on track for a new closing high. The oil and gas exploration company, discussed in IBD 50 Stocks To Watch Monday, is now closer to the 57.79 buy point of a three-weeks-tight pattern.
Tesla rose 4.5% and is now forming a cup-with-handle base with a 1,152.97 buy point. Tesla is set to report earnings next week.
Qualys rose 2.2% to a new high in active trading. The cybersecurity stock topped a handle that offers a 145.60 buy point.
Among big movers this morning, CrowdStrike climbed back above its 200-day moving average as shares rallied more than 8% on an analyst upgrade. Goldman Sachs raised the cybersecurity stock from neutral to buy and lifted the price target from 241 to 285.
CarMax fell more than 5% after the auto retailer's earnings fell 23% in the February-ended quarter. EPS missed analysts' estimates. But sales growth remained strong, up 49% in the period. CarMax stock remained in a trading range around 52-week lows.
