Inflation report eases jitters in stock market; This ETF in play after Bitcoin rally 30% in 3 days

Stock market indices rose on Tuesday morning after the February CPI showed warm short-term but better long-term inflationary pressure. ONE United Airlines (UAL) profit warning sent shock waves through the air transport sector. Bitcoin contributed to huge weekly gains, rising another 7%, and could rise towards $35,000.

X

The mostly in-line CPI dampened stock market jitters, encouraged bottom fishermen to pick up big losers, and favored return plays. However, uncertainty about the current state of the US banking system should keep most investors on the sidelines, and it’s time to start planning for tough market conditions weeks and months ahead.

If you put it another way, it’s probably not a good idea to catch falling blades right now, except for quick turns. IBD’s outlook sees the market in a correction right now.

The Dow Jones Industrial Average rose 1.0% while the S&P 500 gained 1.5%. The Nasdaq jumped 1.8% while the Russell 2000 small-cap index attracted the most buying interest, rising nearly 3% on the hour.

NYSE and Nasdaq volume fell compared to early Monday levels.

The Nasdaq and S&P 500 returned to fresh resistance at their 200-day moving averages. Testing like this is common after breakdowns. Meanwhile, the Russell 2000 is lagging after a long period of outperformance, held down by concerns about pressure on start-up funding affecting growth.

The stock market shakes from the hot CPI report

The consumer price index (CPI) for February rose 0.4% in February, meeting consensus views, while the core inflation figure came in at 0.5%, above 0.4% expectations. However, the year-on-year numbers fell to 6.0% from 6.4% for the main reading, while the core fell to 5.5% from 5.6%. The market took the cues from improving long-term trends, at least in the first hour.

Spending on shelter drove the upside, with the steep 0.8% rise dismissed by economists who believe another downtrend is in place. Services inflation continued to rise, confirming stubborn inflationary pressures that have a large economic footprint.

The stock market rallied on the news, but buyers took control ahead of the opening bell and held gains through the first hour. Nevertheless, the risk is still high because the banking crisis may signal long-term stress on the world’s financial markets.

Crude oil fell more than 1% to $73.90. The futures contract is testing December lows. Asian markets were mixed while European bourses followed the US stock market to higher ground.

The 10-year Treasury yield bounced sharply off its 200-day moving average and a six-week low, trading at 3.62%.

Odds for a 0.25% rate hike at the March meeting rose to 81.9%, according to CME FedWatch.

Bitcoin On Fire

Bitcoin rallied another 7% to a nine-month high of $25,880, lifting three-day gains to around 30%. The vertical rally could signal the start of an uptrend at the May 2022 double breakout near $35,000. As a result, it marks the natural upside target for this energetic bounce.

ProShares bitcoin strategy ETF (BITO) is the most actively traded bitcoin-linked ETF, closely following the cryptocurrency since its inception, according to the provider. The fund invests “primarily in bitcoin futures contracts” and “does not invest directly in bitcoin.”

The stock market today: Airlines strong despite United Warning

United Airlines warned of rising labor costs due to a collective bargaining agreement in Monday’s aftermarket, falling 7% overnight. UAL shares were 6.2% lower in the first hour. The stock fell more than 13% from its breakout of 53.36, resulting in a sell signal.

Numerous rivals reiterated bullish guidance in the premarket, including Delta Air Lines (VALLEY), Southwest Airlines (LUV), JetBlue (JBLU) and Alaska Airliness (ALK).

The US global jets ETF ( JETS ) traded higher by 0.4%, despite the warning for its largest component.

IBD 50 and top lists

Many managers in the IBD 50 stock market dropped out as the banking crisis headlines subsided.

IBD 50 component Cadence design systems (CDNS) lifted back above the 195.07 buy point, which also marks world high territory; 203.06 may provide a fruitful alternative entry.

The technology stock has been testing the buy zone for about a month and has completed a bullish three-week tight pattern. The CDNS share rose 2.5 percent.

Also in IBD 50, Monolithic power systems ( MPWR ) moved back above the 21-day line on Monday, creating a reversal that could mark the final leg of a cup-with-handles pattern dating back to August 2022. MPWR shares rose 2.7% during the first hour and traded about 5% below the buy point of 530.75.

Follow Alan Farley on Twitter at @msttrader.

YOU MIGHT ALSO LIKE:

What is CAN SLIM? If you want to find winning stocks, you need to know better

IBD Live: Learn and analyze growth stocks with the pros

Looking for the next big stock market winners? Start with these 3 steps

Want more IBD insights? Subscribe to our investment podcast

Futures fall after market closes poorly; Tesla is lining up for the investor day