U.S. stock futures saw modest declines overnight, with Dow Jones, S&P 500, and Nasdaq futures edging lower ahead of the October Consumer Price Index (CPI) inflation report. Key earnings reports from companies such as Cava Group (CAVA), Spotify (SPOT), and Nvidia-backed AI startup Soundhound AI (SOUN) dominated market focus following Tuesday’s stock market session.
After a strong run, the stock market rally experienced a pullback on Tuesday, while Treasury yields climbed. The Nasdaq and S&P 500 indices saw only slight losses, while the Dow Jones Industrial Average and small-cap stocks faced more significant declines. Notable earnings reports came from companies like Shopify (SHOP), which surged, and Zeta Global (ZETA), which saw its stock plummet. Tesla (TSLA) also took a step back after a substantial rally, although it continued to ride the wave of a significant surge from the previous week. In a late announcement, President-elect Donald Trump appointed Tesla CEO Elon Musk to co-lead an initiative aimed at improving government efficiency.
Mixed Earnings Results
Several companies reported earnings late Tuesday, including Cava, Spotify, Flutter Entertainment (FLUT), Instacart parent Maplebear (CART), Rocket Lab (RKLB), and Soundhound AI. Spotify, Cava, and Rocket Lab stocks surged in after-hours trading, with Flutter’s stock seeing modest gains. Conversely, Instacart and Soundhound AI stocks experienced sharp declines, with the latter also impacted by Nvidia’s stake in the AI startup.
CyberArk Software (CYBR) and Loar Holdings (LOAR) are set to report earnings early Wednesday.
CPI Inflation Report Awaited
The highly anticipated CPI report, set for release at 8:30 a.m. ET on Wednesday, is expected to show a 0.2% rise in overall CPI, with core CPI rising 0.3%. Year-over-year, CPI inflation is forecasted to climb to 2.6%, while core inflation remains steady at 3.3%.
Stock Market Performance
On Tuesday, the major stock indices retreated modestly following a period of strong gains. The Dow Jones Industrial Average closed down by 0.1%, the S&P 500 dropped 0.3%, and the Nasdaq Composite fell 0.1%. This marked their first losses in six sessions. Small-cap stocks fared worse, with the Russell 2000 index dropping 1.8% following a 9.7% rally in the previous five sessions.
U.S. crude oil prices increased slightly, rising 8 cents to $68.12 per barrel, while the 10-year Treasury yield surged by 12 basis points to 4.43%, nearing recent four-month highs after U.S. bond markets were closed on Monday.
ETF and Sector Performance
Growth-focused ETFs saw mixed results, with the Innovator IBD 50 ETF (FFTY) falling 1.7%. Meanwhile, the iShares Expanded Tech-Software Sector ETF (IGV) rose by 0.5%, buoyed by strong performances from holdings like Zeta Global. The VanEck Vectors Semiconductor ETF (SMH) fell 0.7%, while Nvidia remains the top holding in the fund. Other sector ETFs also posted losses, including the SPDR S&P Metals & Mining ETF (XME), which dropped 2.5%, and the SPDR S&P Homebuilders ETF (XHB), which lost 2.6%.
Tesla’s Rollercoaster Ride
Tesla’s stock dropped 6.1% to $328.64 on Tuesday, following a dramatic 44.1% increase over the previous five sessions, spurred by Donald Trump’s election victory. Despite the recent losses, Tesla remains 21% above its 21-day moving average, highlighting the volatility that often accompanies stocks after substantial gains.
Tesla investors are closely watching the company’s future amid recent political developments. Late on Tuesday, President-elect Trump announced that Musk, along with Vivek Ramaswamy, would lead a new government initiative aimed at reducing bureaucracy and cutting wasteful expenditures in federal agencies. This announcement initially provided a boost to Tesla’s stock, with shares rising 1% in after-hours trading on Robinhood.
Market Outlook and Strategy
Despite the recent pullback, the stock market rally remains intact, and Tuesday’s modest losses are not cause for significant concern. Investors are advised to avoid purchasing stocks that are already extended and to wait for pullbacks to key technical levels before entering new positions.
Earnings reports, particularly from Nvidia, will be crucial in determining the future direction of the market, especially for AI-related stocks. Investors should keep watchlists updated and monitor earnings releases for any potential market-moving developments.
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How Does Inflation Affect the Stock Market?