Dow Jones Futures Rise On Another Key Inflation Report After CPI Sparks Market

Dow Jones futures rose after another key inflation report — the producer price index — arrived Wednesday in the wake of a stock market plunge from a hot consumer price index reading. Meanwhile, the 10-year Treasury yield is on the cusp of hitting June’s 11-year high.

X

The U.S. Labor Department said the producer index, or PPI, fell 0.1% in August vs. the previous month, matching estimates. Wholesale inflation rose 8.7% from a year ago, down from July’s 9.8% surge and in line with Econoday estimates.

On Tuesday, the CPI inflation rate eased to 8.3%, retreating from July’s 8.5% and June’s 9.1% rate, amid falling gas prices. The consumer price index rose 0.1% on the month. But Wall Street economists had expected the CPI to show a 0.1% monthly decline, bringing the CPI inflation rate down to 8%. Worse, core inflation accelerated more than expected, to 6.3%.

As a result, markets now believe there is a 38% chance of a full percentage point increase at the Federal Reserve’s next meeting. Before Tuesday, Wall Street did not place odds on that possibility at all.

Meanwhile, electric-vehicle leader Tesla (TSLA) traded down a fraction Wednesday. Among the Dow Jones industrials, tech titans Apple (AAPL) and Microsoft (MSFT) were little changed ahead of today’s stock market open. Merck (MRK) rose 0.7% after Berenberg upgraded the stock to buy.

In the market’s current volatility, Arista Networks (ANET), DoubleVerify (DV), Palo Alto Networks (PANW) and Pure Storage (PSTG)  — as well as Dow Jones stock Chevron (CVX) — are among the top stocks to buy and watch. Keep in mind the market’s increased volatility is a good reason for investors to be more defensive, especially after Tuesday’s market dive.

DoubleVerify is an IBD Leaderboard stock. Chevron and Palo Alto were featured in this week’s Stocks Near A Buy Zone column.

Dow Jones Today: Treasury Yields, Oil Prices

Ahead of Wednesday’s opening bell, Dow Jones futures rose 0.2% vs. fair value, while S&P 500 futures moved up 0.3%. Nasdaq 100 futures gained 0.4% in morning action. Remember that overnight activity in Dow Jones futures and elsewhere doesn’t necessarily translate into actual trading in the next regular stock market session.

Among exchange-traded funds, the Nasdaq 100 tracker Invesco QQQ Trust (QQQ) was up 0.25%, and the SPDR S&P 500 ETF (SPY) rose 0.2% in early trade.

The 10-year Treasury yield ticked higher to 3.46% Wednesday morning. On Tuesday, the 10-year Treasury yield notched its highest closing level since June 14 and is just shy of the 11-year high of 3.48% set on June 14.

U.S. oil prices inched lower Wednesday, as they continue to consolidate after recent gains. West Texas Intermediate futures traded back to below $87 a barrel.

Get Free Access To IBD MarketSmith For One Week

Stock Market Rally Under Pressure

On Tuesday, all three major stock indexes gapped below their 50-day moving averages, bringing a return trip to their Sept. 6 lows into play. The Dow Jones Industrial Average fell 3.9%, while the Nasdaq dived 5.2%.

Ahead of the inflation report, Tuesday’s The Big Picture column commented, “It’s best to stay out of the market’s way at this point. Assess your…