The Dow Jones Industrial Average fell sharply after hot inflation data, closing near session lows. Twitter stock rose after shareholders voted on the offer by Tesla (TSLA) CEO Elon Musk to buy the firm. Coinbase (COIN) and Riot Blockchain (RIOT) sank as Bitcoin melted. Apple (AAPL) dived.
With the market under pressure, investors should look for stocks forming bases that could be good opportunities when the market improves. CMS Energy (CMS) and Comstock Resources (CRK) are solid examples.
Volume was higher on the Nasdaq and the New York Stock Exchange according to early data. This is a bad sign on a down day.
The yield on the benchmark 10-year Treasury note rose five basis points to 3.42%. West Texas Intermediate crude oil fell marginally to trade at nearly $88 per barrel, but closed well off lows for the day.
Inflation Data Hurts Stock Market
Stocks in general were tumbling after the consumer price index showed prices rose 0.1% in August vs. the previous month. That proved hotter than estimates for a 0.1% monthly fall. Inflation rose 8.3% in August from a year ago, higher than the expected 8.1% rise. Core inflation was up 0.6% vs. the previous month.
The move saw Nomura predict a possible 100-basis-point rate hike at the September Federal Reserve Open Market Committee meeting. It had previously forecast a 75-basis-point hike. It also expects a terminal rate of 4.50%-4.75% by February 2023.
“The Fed will likely have to be even more aggressive with raising rates and that is bad news for risky assets,” Oanda senior market analyst Edward Moya said in a note to clients.
Nasdaq Slammed As Small Caps Struggle
The Nasdaq struggled most out of the major indexes, closing near session lows after it fell 5.2%. Nvidia (NVDA) was a major loser as it fell 9.5%.
The S&P 500 also struggled, sliding 4.3%. Eastman Chemical (EMN) suffered most as it fell 11.3%.
The S&P 500 sectors were all negative, with technology and communication services the worst performers. Energy gave up the least ground but still dipped sharply.
Small caps were also getting mauled by the bears, with the Russell 2000 3.8% lower.
The Innovator IBD 50 ETF (FFTY), a bellwether for growth stocks, dropped 3%.
Dow Jones Today: Apple Stock Reverses Sharply
The Dow Jones Industrial Average was crushed. It dived just shy of 1,300 points, or 3.9%. This was its worst session since June 2020.
Aggressive investors who moved into Apple stock were ruing the decision after it fell 5.9%. It had been the previous session’s top performer but has now reversed back below its 50-day and 200-day moving averages.
AAPL stock also lost ground on an aggressive trendline entry and a handle entry of 176.25.
But Apple’s losses were not as severe as those of Boeing (BA) and Intel (INTC). They were the worst performers on the Dow Jones industrials today as both slid 7.2%.
Twitter Stock Gains After Elon Musk Vote
Twitter shareholders voted Tuesday to approve Elon Musk’s takeover bid despite the fact he is currently attempting to get out of the agreement.
It comes after the social media firm slammed the eccentric executive’s latest attempt to scupper the $44 billion deal.
While Musk has claimed an alleged $7.75 million severance payment to whistleblower Peiter Zatko is a breach of the takeover agreement, the firm said his latest letter regarding the termination deal is “invalid and wrongful.”
Meanwhile, Zatko, told the Senate Judiciary Committee Tuesday that Twitter executives’ incentives “led them to prioritize profits over security.”
While he claims he was fired after raising security concerns, Twitter says he was axed for “ineffective leadership and poor performance.”
Twitter stock popped after the vote but gave back some gains amid broad pressure. It closed 0.7% higher and pulled away from its 50-day line.
Tesla stock finished sharply lower, giving up 4%. It lost ground on a short pattern buy point of 314.74. It has now slipped back below its 200-day moving average, according to MarketSmith analysis.
Coinbase Stock, RIOT Plunge As Bitcoin Melts
Coinbase ended the day at lows as it plunged 8.8%. Volume was lighter, a mere crumb of comfort.
The stock, which slashed its full-year forecast last month, managed to hold above the 21-day exponential moving average and its 50-day line. COIN shares are down 70% since the beginning of the year.
Bitcoin took a dive as risky assets struggled. It is just above the $20,000 mark after giving up more than 9% in the past 24 hours, according to CoinDesk.
Other cryptocurrency plays also fell sharply. The Grayscale Bitcoin Trust (GBTC) fell 10.6% while Bitcoin mining play Riot Blockchain (RIOT) plunged 9.9%.
Outside Dow Jones: These 2 Stocks Eye Buy Points
Utility stock CMS Energy is showing relative strength as it eyes a handle entry of 71.29. CMS is in the top 15% of stocks in terms of price performance over the past 12 months. Big Money is also getting behind the stock, with its Accumulation/Distribution Rating coming in at a solid B-.
CMS energy offers a dividend yield of 2.7%.
Comstock Resources is forming a cup-with-handle base. It is shooting for a 21.28 buy point. It has battled back above the 21-day exponential moving average, an encouraging sign.
The oil and gas explorer is a member of the IBD Sector Leaders list. This is our most stringent and powerful screen.
Please follow Michael Larkin on Twitter at @IBD_MLarkin for more analysis of growth stocks.
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