Dow Jones Dips, Nasdaq Dives; Fed Official Makes Inflation Pledge; Bears Maul Tech Stocks

The Dow Jones Industrial Average was off lows, but remained deep in the red as inflation worries intensified. The Nasdaq was selling off hardest as the bears mauled tech stocks such as Nvidia (NVDA), Microsoft (MSFT) and Apple (AAPL). Meanwhile, a top Federal Reserve official spoke about how the central bank will respond to inflation.


On a down day it is a good idea to look for stocks showing signs of relative strength. Callaway Golf (ELY) and Dillard’s (DDS) are two such names. Meanwhile, PDC Energy (PDCE) came close to passing a buy point and remained above a 38.90 handle entry.

Fed Official Makes Pledge Amidst Inflation Worries

The Labor Department reported the consumer price index jumped 4.2% year over year. This was above economists’ forecast for a 3.6% increase. It was also the highest inflation rate since September 2008.

The core CPI, which strips out volatile food and energy categories, rose 0.9% from March vs. expectations for a 0.3% rise. It was the sharpest monthly increase since April 1982. The 10-year Treasury yield was up sharply, sitting at 1.69%. The 10-year Treasury yield late Tuesday was at 1.62%.

Fed Vice Chairman Richard Clarida admitted he was “surprised” at the scale of the CPI increase, and said the central bank will act to stop inflation getting out of control.

“If, contrary to our baseline view, demand relative to supply was excessive and persistent and pushed up inflation and inflation expectations to levels that were not potentially consistent with our mandate, we would not hesitate to act and to use our tools to bring inflation back down to our 2% longer-run goal,” he said.

Clarida spoke out during a virtual appearance at the National Association for Business Economics International Symposium.

Nasdaq Fares Worst

The Nasdaq was faring the worst as tech stocks got punished, falling almost 2%. The biggest laggards here were chip equipment stock Applied Materials (AMAT) and security software firm Okta (OKTA), with both falling over 5%. Biotechnology stock Seagen (SGEN) was bright spot, gaining almost 5%.

U.S. Stock Market Today Overview

Index Symbol Price Gain/Loss % Change
Dow Jones (0DJIA) 33870.23 -398.93 -1.16
S&P 500 (0S&P5) 4092.70 -59.40 -1.43
Nasdaq (0NDQC ) 13130.63 -258.80 -1.93
Russell 2000 (IWM) 216.23 -2.73 -1.25
IBD 50 (FFTY) 43.37 -1.10 -2.47
Last Update: 1:18 PM ET 5/12/2021

The S&P 500 fell around 1.4%. Major losers included casino stock Penn National Gaming (PENN) and homebuilder Lennar (LEN), with both dipping almost 6%.

The S&P sectors were all mostly red, with technology and consumer discretionary the biggest laggards. Energy was the only positive sector.

Volume was lower, which is a good sign on a down day. It fell 15% on the NYSE compared to the same time Tuesday. Trading was down around 13% on the Nasdaq.

Small caps were being mauled by the bears, with the Russell 2000 dipping almost 2%. But growth stocks were doing even worse, with the Innovator IBD 50 ETF (FFTY) tumbling around 2.5%.

Apple Stock Drops As Dow Jones Dips

The Dow Jones Industrial Average was off lows, and fared better than the other major indexes. Nevertheless, it was still down 1.4%.

Apple was one of the notable laggards, dipping around 2%. It is now looking for support at its 200-day line, while its relative strength line continues to slip.

Honeywell (HON) and Home Depot (HD) were having even worse luck however, with both plunging more than 3%.

Bears Maul These Tech Stocks

Tech stocks were having a tough time amid increase worries over inflation.

Software giant Microsoft was struggling, giving up nearly 3%. The move saw it fall below the 50-day moving average, and it is now below a 246 buy point.

Google parent Alphabet (GOOGL) was having similar price troubles, falling almost 3%. However it remains above the 50-day line, and is in a buy zone from a 2,306.22 entry.

Cloud computing play Adobe (ADBE) and chip play Nvidia also gave up almost 3%. Both are struggling to find support at their 50-day lines. These stocks are all members of the IBD Leaderboard list of leading growth stocks

These Stocks Show Strength

Recent IBD Stock Of The Day Callaway Golf saw its relative strength line hit a new high on its weekly chart. This is a bullish sign going forward.

Callaway Golf stock previously cleared a buy point of 31.46 on strong earnings. The Carlsbad, Calif.-based company makes golf clubs and accessories sold worldwide.

Department store play Dillard’s is forming a cup with handle base, MarketSmith analysis shows. The ideal entry point is 112.48.

PDC Energy saw its RS line rise as it came close to breaking past a cup base entry of 42.89. Last week, it topped a 38.90 buy point in a handle area.

Please follow Michael Larkin on Twitter at @IBD_MLarkin for more on growth stocks and analysis.


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