US Stocks Priming For Relief Rally After Inflation-Driven Selloff: Strategist Expects To Be Among 'Buyers Of Pullback' Over Next 2-5 Days

With January’s inflation data in the rearview mirror, U.S. stocks could strive to find their footing on Wednesday after hotter-than-expected January inflation data spooked traders in the previous session. The earnings news flow continues to be mixed, although there have been notable upward moves in certain stocks in reaction to quarterly numbers. The lone piece of Main Street catalyst due for the day is a speech by a supposedly “centrist” Fed official.

Cues From Tuesday’s Trading:

All of January’s headline inflation readings came in more than expected, sending bond yields soaring and stocks lower on Tuesday. The averages opened uniformly lower and moved roughly sideways before dropping to intraday lows by late afternoon trading. Although the indices trimmed some of their losses in late trading, they closed well below the flat line.

The “CPI report caught a lot of people off guard – many investors were expecting the Fed to begin cutting rates and were spending a lot of time arguing that the Fed was taking too long to get started – not appreciating that inflation could be sticky and not continue down in a straight line, said Independent Advisor Alliance Chief Investment Officer Chris Zaccarelli.

The Nasdaq Composite and the S&P 500 Index ended at their lowest level in about a week, with the latter dropping below the 5,000 mark, and the 30-stock Dow Industrials fell to its lowest level in February The worst-hit were the small-cap stocks as they plummeted in the session.

Tuesday’s sell-off was broad-based, with the consumer discretionary sector leading the slide.

US Index Performance On Tuesday

Tuesday’s pullback could be technical, said Blue Chip Daily Trend Report Chief Technical Strategist Larry Tentarelli. “We view this as standard technical pullback from recent highs and see support in the 36,950-37,700 range. We expect to be buyers of the pullback over the next 2-5 days,” he said.

LPL Financial’s  Chief Global Strategist Quincy Krosby said the path to rate cuts could be getting longer. “Even though rate cuts will probably begin in 2024, it's not if but when the last mile is getting longer,” he said.

Futures Today

Futures Performance On Wednesday

In premarket trading on Wednesday, the SPDR S&P 500 ETF Trust SPY rose 0.54% to $496.75 and the Invesco QQQ ETF QQQ gained 0.73% to $431.66, according to Benzinga Pro data.

Upcoming Economic Data:

Chicago Fed President Austan Goolsbee is scheduled to speak at 9:30 a.m. ET.

The Energy Information Administration is due to release its customary weekly petroleum status report at 10:30 a.m. ET.

Fed Vice Chair for Supervision Michael Barr will make a public appearance at 4 p.m. ET.

See Also: How To Trade Futures

Stocks In Focus:

• Lyft, Inc. LYFT jumped over 19.5% in premarket trading following its quarterly results announcement.
• Among other stocks moving on earnings are Airbnb, Inc. ABNB (down over 5%), Akamai Technologies, Inc. AKAM (down over 3.5%), IAC Inc. IAC (up over 5.5%), MGM Resorts International MGM (down over 3.5%), Robinhood Markets, Inc. HOOD (up over 11%), QuidelOrtho Corporation QDEL (down about 40%), and Upstart Holdings, Inc. UPST (down about 19%).
• Barrick Gold Corporation GOLD, Canadian Natural Resources Limited CNQ, CME Group Inc. CME, Global Payments Inc. GPN, The Kraft Heinz Company KHC, Louisiana-Pacific Corporation LPX and Williams Companies, Inc. WMB are among the companies due to report their quarterly results ahead of the market open.
• Notable names reporting after the close include Albemarle Corporation ALB, Cisco Systems, Inc. CSCO, Fastly, Inc. FSLY, HubSpot, Inc. HUBS, Kinross Gold Corporation KGC, Occidental Petroleum Corp. OXY, Tripadvisor, Inc. TRIP, Twilio Inc. TWLO and Upwork Inc. UPWK.
• Coinbase Global, Inc. COIN climbed over 7.5% in sympathy with Robinhood.

Commodities, Bonds, Other Global Equity Markets:

Crude oil futures slipped 0.15% to $77.75 in early European session on Wednesday after the commodity rallied 1.24% in the previous session. The dollar’s strength on Tuesday did not deter the commodity as it rose for a seventh straight session.

The benchmark 10-year Treasury note edged down 0.023 percentage points at 4.293%. The yield rose 3.51% on Tuesday, topping the 4.30% mark since early December.

Most Asian markets retreated on Wednesday even as the Chinese and Taiwanese markets continued to remain closed for the New Year holidays. Wall Street’s pullback on the back of the U.S. inflation data served as a negative trigger.

Bucking the downtrend were the Hong Kong market, which reopened after the long weekend, and the Indian market.

European markets rose moderately by late-morning deals as traders reacted to a slew of domestic economic data, including the eurozone GDP as well as the jobs and industrial output data. The Euro Stoxx 50 Index last traded up 0.35%. The second estimate released by Eurostat showed that the 20-nation economy skirted a recession by recording a stagnation in the fourth quarter.

Read Next: Emerging Markets Guru Says ‘Time To Go Shopping For Hidden Gems At A Steal’ As He Sees Opportunities In Bruised Chinese, Hong Kong Stocks

Photo via Shutterstock