The major indexes showed bigger losses than gains in the stock market today. But the Dow Jones Industrial Average tried hard to stay in the green. Small caps outperformed.
Overall, the generally quiet trading comes ahead another key inflation report due Wednesday before the market open. The Econoday forecast calls for a 0.6% rise month on month in U.S. consumer prices for August and a 3.6% rise year over year. Core prices, stripping out food and energy, are seen up 0.2% vs. July and up 4.3% vs. a year earlier.
The Dow Jones industrials edged down than 0.1% at day's end. At one point, the 30-stock index held a gain of around 0.5%. The Russell 2000 eked out a 0.1% advance. But the Nasdaq composite fell nearly 1.1% in the wake of a sell-off in the enterprise and database software sector.
The iShares Expanded Tech-Software exchange traded fund gapped lower at the start and dropped 2.9%, hitting a two-week low.
IGV maintains a very healthy 39% gain year to date after getting smashed with a 35.7% loss in 2022.
Banking and cyclical plays helped bolster the Dow Jones industrials. At least seven of the 30 components rallied 1 point or more, including JPMorgan Chase and Goldman Sachs.
Outside the stock market, fossil fuel markets enjoyed nice gains.
Light sweet crude oil futures powered 1.8% higher to $88.90 per barrel. Natural gas ballooned 5.2% to $2.74 per million BTUs.
Copper edged 0.5% lower to $3.79 per pound. Gold cooled 0.6% to $1,935 an ounce.
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Inside Dow Jones
Among those seven Dow Jones stocks leading the upside, none of them hold a Relative Strength Rating of 80 or higher. JPM has the best at 77.
As seen on the daily chart, JPMorgan is trading between its slowly rising 50-day and 200-day moving averages. This makes its near-term price trend unclear.
However, smaller banks outperformed. SPDR S&P Regional Banking ETF rallied slightly more than 0.8%. The fund has been a disappointment in 2023, however, still down more than 25% since Jan. 1.
In contrast, the S&P 500 boasts a roughly 16.5% gain year to date. The Russell 2000 is lagging its large-cap siblings, up just 5.3%.
The S&P 500 halted a two-day win streak. It slipped nearly 0.6% and was trading modestly below its 50-day line. Strength in oil and gas firms, coal, and select defensive retail industry groups offset big declines in the desktop software industry group (down more than 2% on a price-weighted basis), specialty consumer products, homebuilders, paint, design software and cybersecurity areas of the stock market.
On Sept. 7, IBD's current outlook for stocks got a downgrade to "Uptrend under pressure."
This means all new buys in top stocks must be made with great care.
Meanwhile, the NYSE composite index hit its head against its rising 50-day moving average near 16,000. At 15,954, the NYSE composite still rose less than 0.1%. It remains up roughly 0.5% for the quarter.
Volume edged up vs. Monday on the Nasdaq, according to early data. Turnover on the NYSE eased a touch.
CAT Is Prowling Near A Buy Point
Meanwhile, Caterpillar got airplay during the final minutes of Tuesday's IBD Live show on Zoom. CAT shares have been trading tightly lately, a good sign especially after the stock vaulted 8.9% in heavy turnover on Aug. 1.
The stock has made nice and steady progress since clearing a 250.89 perfect buy point in a nearly six-month cup with handle on July 11. For sure, volume was not screaming during that breakout. But volume picked up generally on the ensuing up days and declined in down days, a good sign. Then came heavy turnover on its earnings news on Aug. 1. More than 11.8 million shares exchanged hands that day, a whopping 272% above the stock's 50-day average.
David Ryan, three-time winner of the U.S. Investing Championships, noted the bullish chart action lately in the giant in equipment for mining, construction and oil field industries. CAT has been building a flat base that shows a 293.88 standard entry.
That new base appears to be the upper portion of a base-on-base pattern, which often leads to bullish breakouts — but mainly when the stock market uptrend is robust.
CAT has one of the best RS scores within the Dow Jones. Its 92 rating means the megacap cyclical giant is outperforming 92% of all stocks in the IBD database over the past 12 months. Among fellow stocks in the Dow Jones industrials, only Salesforce, which is holding its annual Dreamforce conference this week, owns an even better Relative Strength Rating at 93.
CRM has been crafting a cup with handle since topping at 238.22 in July. The new buy point of 228.79 remains intact, even though Salesforce shares slid 1.6% on Tuesday in light turnover.
Analysts polled by FactSet see the cloud-based enterprise software innovator's earnings lifting 40% in fiscal 2024 to $7.35 a share and up another 8% to $7.97 in FY 2025.
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A Good Earnings Record
The 93 Earnings Per Share Rating for CAT stock reflects big profit increases lately. Caterpillar has grown earnings per share by 48%, 43%, 70% and 75% vs. year-ago levels in the past four quarters. Wall Street holds a consensus EPS estimate of $19.97 a share this year, up 44%, and $20.94 for 2024, up 5%.
Overall, these numbers reflect acceleration in the bottom line vs. CAT's five-year annualized earnings growth rate of 7%.
CAT's gross margin has improved in recent quarters, rising to 36.3% in Q1 this year and 36.1% in Q2. That compares favorably with 32% and 30% in the last two quarters of 2022.
The improved margins reflect either strong pricing for Caterpillar's earth movers, lower costs to manufacture its products, or a combination of both.
Please follow Chung on X/Twitter: @saitochung and @IBD_DChung
