Nasdaq Index: Chip Stocks Lift Tech as Soft CPI Boosts US Stocks

Nasdaq Leads on CPI, Dow Can’t Follow

The Nasdaq Composite was trading at 26,054.98 at the mid-session Tuesday, up 181.81 points or 0.70%. Chip stocks bounced hard from Monday’s selloff and Goldman Sachs ran on earnings. The S&P 500 added 15.20 or 0.20% to 7,530.54. The Dow lagged, down 99.25 or 0.19% at 52,399.39. IBM took care of that.

June CPI came in soft enough to take July off the table. The buying stayed in tech and financials and the rest of the market watched.

Daily S&P 500 Index (SPX) Technical Analysis

The S&P 500 Index is trading higher as it approaches the mid-session on Tuesday. The benchmark is still trading on the strong side of the more than one-month short-term support zone at 7474.57 to 7429.38, which is its best pivot price support. Helping to provide additional support and trend guidance is the 50-day moving average at 7446.50.

Standing in the way of a new record is last week’s high at 7579.93. Investors seem a little tentative to buy strength at current lofty price levels, but that may be what it’s going to take to reach 7620.90 and beyond.

Investors are going to have to continue to defend the 50-day MA because it’s starting to look like the least resistance is down. If the indicator fails then swing bottoms at 7421.82, 7294.18 and 7237.85 could fall like dominos with the 200-day MA at 6973.70 the next major target.

Daily Nasdaq Composite (IXIC) Technical Analysis

The Nasdaq Composite Index is trading higher, building on earlier gains. Although the index started the day in a weak position, buyers didn’t flinch and have been in command since the overnight opening. This shift in momentum could give traders the confidence to overtake the 50-day moving average at 26097.66 and perhaps launch a breakout over the short-term retracement zone at 26085.30 to 26346.03.

The upper level of this range could be the trigger point for a breakout into the secondary lower top at 26788.62, followed by the record high at 27190.21.

A failure to overcome the 50-day MA will mean that traders are not buying strength. This could turn out to be the start of a major break if the index closes lower today.

Daily Dow Jones Industrial Average (DJI) Technical Analysis

The Dow Jones Industrial Average is under pressure on Tuesday. The new secondary lower top at 52846.51 suggests a corrective move may be building.

The series of 50% levels at 52295.54, 52452.02 and 52679.59 is providing the resistance. If the blue chip average is rolling over then investors could begin looking for the selling to extend into another pivot at 51599.19 and the 50-day moving average at 51022.71.

It’s going to take new buying at support or a breakout over 52846.51 to resume the bullish tone.

CPI Cooled and the July Hike Went With It

June inflation came in softer than anyone expected. Headline and core both beat to the downside and the monthly number fell harder than forecast. July rate hike odds went from 42% to 17% on one print. September is still live but the immediate pressure is gone.

Warsh stayed hawkish in his first Congressional testimony as Fed Chair. Inflation is still the priority and the Fed is not signaling any easing. But the data moved the market before he sat down. Treasury yields dropped on the print and then bounced off session lows as crude pushed back into focus. That recovery in yields is the tell. The rate relief from one CPI may not last if oil keeps running.

Goldman Rallied but IBM Sank the Dow

Goldman Sachs surged on stronger-than-expected earnings. IBM fell sharply after warning second-quarter profits would miss. Consumer staples, energy, and real estate also traded lower. The buying stayed concentrated in two sectors and nowhere else.

Crude Pulled Back After Trump Dropped the Fee

Trump backed off the 20% Hormuz cargo fee and said Gulf nations would increase trade and investment instead. Crude had been above $80 per barrel earlier but gave back most of that move on the reversal. The CPI may have cooled in June but crude at current levels is already building the case against the next print.

Stocks in the News

Bank of America and Wells Fargo both beat expectations, with Wells Fargo posting a solid gain. JPMorgan posted better-than-expected results but slipped slightly at midday. The VanEck Semiconductor ETF rose as Applied Materials, Teradyne, Lam Research, Micron, and STMicroelectronics all posted gains. The tech sector was higher on the session. Healthcare led to the downside.

What to Watch

The CPI already repriced the July meeting but September is still a live decision and crude is the variable that decides it. One soft print does not settle anything with oil above $80 and the next report five weeks away.

The Nasdaq needs to reclaim its 50-day moving average to confirm the chip bounce has legs beyond one session. The Dow posted a secondary lower top and if the selling pressure resumes in the afternoon those support levels underneath could open up fast. The benchmark S&P 500 Index is in a strong position to resume its uptrend.

More Information in our Economic Calendar.