The major stock market indexes losses mounted in the noon hour of trading on Tuesday, and were at the lows of the day. The stock market punished investors on higher-than-expected August CPI (consumer price index) inflation results.
The Nasdaq dropped 4%, leading the losses. The S&P 500 lost 3.2%. The Dow Jones Industrial Average shed 2.8%. Small caps also retreated, with the Russell 2000 index sinking 3.1%. The major indexes gapped below their 50-day moving averages.
Stock Market Volume Up, Prices Down
NYSE volume was up 5.5% and Nasdaq volume rose 16%, compared to the same time Monday.
The Nasdaq 100-tracking Invesco QQQ Trust lost 4.2%.
Crude oil retreated 1.3%, trading at $86.66 per barrel. Natural gas gained, up 0.6%. The SPDR Select Energy ETF lost 1.7%.
Bitcoin futures sold off 7.5% to $20,795. The yield on the 10-year U.S. Treasury note held at 3.44%.
The German DAX stock index lost 1.6%, the London FTSE 100 dipped 1.2% and the Paris CAC 40 trimmed 1.4% in afternoon trading.
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Core CPI Numbers Rock Investors
The August month-over-month core consumer prices came in worse than expected with a 0.1% increase when analysts' consensus was a negative 0.1%. The CPI excluding food and energy rose 0.6% versus the 0.3% expected. The annualized core CPI calculates to 8.3%, compared to 8.1% expected. The annual rate is an improvement over July's 8.5% and June's 9.1% numbers.
"Rising food costs are a growing concern. The food index rose 11.4% from a year ago, the largest year-over-year increase since 1979," said Jeffrey Roach, chief economist for LPL Financial.
Markets project an 82% chance the Fed will raise interest rates by 75 basis points at this month's meeting. Only 18% of market watchers expect a 50-basis-point hike. Today's CPI data solidified this high conviction of the third consecutive 75-basis-point Fed Funds rate hike, to be announced at next week's FOMC meeting.
The August NFIB Small Business Optimism Index came in at 91.8 vs. the 90.5 consensus, showing optimism by small business leaders. Small businesses are key to creating for new jobs and can be a leading indicator to changes in the stock market, especially small-cap stocks.
Energy Stock Rises On Buyback And Guidance
Cheniere Energy gained 3.1% after the company reported a $4 billion increase in its long-term stock buyback plan and raised its full-year 2022 adjusted EBITDA guidance.
Agriculture Stock Breaks Out Of Base
Plant and seed solutions company Corteva gained 1.8% and broke out of a cup-with-handle base with a buy point of 63.87 on heavy volume, on the MarketSmith chart. The relative strength line hit a new high as indicated by a blue dot on the chart.
Corteva announced an additional $2 billion stock buyback on top of its current $1.5 billion program. The company holds the No. 2 spot in the Agricultural Operations group, which is ranked No. 70 from the top of the 197 industries IBD tracks.
Corteva has a strong Composite rating of 86, of 99, but a suboptimal 66 EPS Rating. Mutual funds have been adding the stock, with 1,974 owning it in June, up from 1,859 in March and 1,773 in December.
Drugmaker Akero Therapeutics skyrocketed over 110% on heavy volume after it reported meeting primary and secondary endpoints on its Phase 2b liver fibrosis treatment trials.
Oracle reversed earlier gains and was down 0.8% after reporting a miss on fiscal Q1 2023 EPS and sales numbers Tuesday after the market closed. The company cited a strong dollar as a strain on earnings. CEO Safra Catz gave lower than expected fiscal Q2 guidance for sales and earnings, again citing the strong dollar as a factor.
Oracle completed an acquisition of Cerner, a hospital software company, in June for $28.3 billion. JP Morgan raised its stock price target to 84 from 82.
Peloton shed another 12% on Monday's news that the co-founders John Foley and Hisao Kushi resigned. Foley stepped down from his CEO position in February but remained on as the board's executive chair. Hisao Kushi was the chief legal officer. Peloton's chief commercial officer, Kevin Cornils, is also leaving. The company reported disappointing fiscal Q4 earnings and sales numbers on Aug. 25.
Stock Market Today: IBD 50 Stocks On The Move
The IBD 50 ETF, a measure of growth stocks, faded 1.9%, holding up better than the major indexes.
Rare-disease-drug maker Catalyst Pharmaceuticals soared 10.7% on huge volume on news that it will join the S&P SmallCap 600 Index. The company has perfect 99 scores on Composite Rating and Relative Strength Ratings, and a 98 EPS Rating.
Diamondback Energy shed earlier gains, and was down 0.9%. Natural gas producer Comstock Resources added 0.3% and is trading above its 21-day exponential moving average.
Sarepta Therapeutics dropped 4.2% and briefly dipped below its 21-day line.
