Dow Jones Falls As Inflation Hits 40-Year High; This Warren Buffett Stock Spikes As Oil Jumps

The Dow Jones Industrial Average saw early gains fade as inflation hit a 40-year high. Energy plays such as Warren Buffett stock Occidental Petroleum (OXY) spiked higher as the cost of oil rose again. Dow. Inc (DOW), Chevron (CVX) and Apple (AAPL) were among the top blue chips.

A couple of stocks attempted breakouts amid the positive action. American Homes 4 Rent (AMH) and Vector Group (VGR) tested buy points. Murphy Oil (MUR) is also carving a bullish base.

X

Volume was mixed, falling on the New York Stock Exchange but rising on the Nasdaq according to early data. Volatility was also lower, with the Cboe Volatility Index, or VIX, down 0.5%.

Meanwhile, the yield on the benchmark 10-year Treasury note fell less than one basis point to 2.73%. Oil rose, with West Texas Intermediate crude up almost 7% to just about $101 per barrel.

Inflation Hits 40-Year High, Runs Hotter Than Feared

The consumer price index for March came above analyst views as it rose 1.2% from the prior month and 8.5% vs. a year ago. The latter figure was the biggest annual gain since December 1981.

Initially stocks rallied after core prices came in tamer than expected. That gauge rose 0.3% from February, less than the 0.5% estimate. Nevertheless, the annual core inflation rate rose to 6.5%, highest since August 1982.

Economists expected the overall CPI to rise 1.1% on the month, lifting the annual CPI inflation rate to 8.4%. The core CPI was seen rising 0.5% vs. February and 6.6% from a year ago.

Still, inflation is expected to stay way above the Federal Reserve’s comfort level for an extended period, partly as a result of strong rent inflation trends. But Oanda senior market analyst Edward Moya said there are reasons for optimism.

“Inflation will take care of itself if geopolitical risks improve and expectations should remain that the Fed won’t have to aggressively tighten policy and send the U.S. economy into a recession,” he said in a note to clients.

Nasdaq Reverses But Growth Stocks Excel

The Nasdaq saw early gains melt away as it slid 0.3%. CrowdStrike (CRWD) was a top gainer as it rose 3.2% after an analyst upgrade. Idexx Laboratories (IDXX) lagged, falling 3.4%, deepening a long decline.

The S&P 500 also reversed lower as it gave up 0.3%. Marathon Oil (MRO) was a top performer here, popping 4.2%. CarMax (KMX) lagged on an earnings miss, falling 9.5%.

A majority of the S&P sectors closed negative. Energy and consumer discretionary performed best while technology and health care were the worst areas.

Small caps outperformed the major indexes, with the Russell 2000 rising 0.3%.

But it was growth stocks that gave the bears the bloodiest nose. The Innovator IBD 50 ETF (FFTY), a bellwether for growth stocks, climbed 0.6%.

Dow Jones Gains As Apple Stock Shines

The Dow Jones Industrial Average saw early gains melt away and ended up closing lower. It surrendered 88 points, or 0.3%.

Apple stock was one of the top performers, rising 1.2% after paring gains. This helped it make up ground on a double-bottom pattern entry. The ideal buy point here is 176.75, according to MarketSmith analysis. It has also formed a new handle, which offers an alternate 179.71 buy point.

Apple‘s EPS growth has averaged 65% over the past three quarters. This is comfortably clear of the 25% earnings growth sought by the CAN SLIM cognoscenti. Analysts see earnings growth of 10% in fiscal 2022 and 7% growth in 2023.

But Apple stock was left in the shade by Chevron and Dow, which both gained 2.1%. Chevron stock remains well extended from its most recent base.

Cisco Systems (CSCO) led the down side as it dipped 2%, with American Express (AXP) and Visa (V) were among the other worst performers.

Warren Buffett Stock Among Oil Plays Surging

The pop in oil prices was benefiting energy stocks. Warren Buffett stock Occidental Petroleum finished the session up 2.1%, though it backed off highs for the day.

The stock has been trading tightly in recent weeks but has yet to offer up a new entry. It has been leading its 10-week moving average higher.

Buffett’s firm Berkshire Hathaway (BRKB) holds 136.4 million common shares of the oil stock.

Callon Petroleum, which is below a 65.55 entry, saw early gains fade as it rose 1.4%. Diamondback Energy (FANG) gained 3% while Apache parent APA (APA) rose 2.7%.

The Vanguard Energy Index Fund ETF (VDE) ended the day up 1.7%. Underlining the strong progress in this area in 2022, it is up around 37% since the start of the year.

The VanEck Oil Services ETF (OIH) also had a good day, rising 2.4%. It is looking to form a new base with a 306.29 entry point.

Market Rally Fizzles On Hawkish Fed; What To Do Now

These Stocks Make Bullish Moves

American Homes 4 Rent stock impressed by racing past a 41.20 buy point in a cup with handle, according to MarketSmith analysis. The relative strength line has been moving toward new highs, which is encouraging.

The real estate investment trust buys, renovates and leases single-family homes across 22 states, a rising trend in the housing market.

Tobacco stock Vector Group powered past a 12.72 buy point, though it has backed away from this entry. This is also a cup-with-handle pattern.

The relative strength line is spiking higher while big money has been getting behind the stock of late.

Murphy Oil stock is worth watching as it climbs toward an ascending base buy point of 43.30. The stock was up about almost 3%, though it was off session highs.

Encouragingly, the RS line is sitting near its old highs. Overall performance is strong, netting it a perfect 99 IBD Composite Rating.

Analysts expect the firm, which is ranked near the top of the international oil & gas exploration and production industry group, to see earnings swell 223% this year and by a further 38% in 2023.

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

YOU MIGHT ALSO LIKE:

MarketSmith: Research, Charts, Data And Coaching All In One Place

These Are The 5 Best Stocks To Buy And Watch Now

This Is The Ultimate Warren Buffett Stock, But Should You Buy It?

Software Growth Stocks To Buy, Watch Or Sell

This Is The Ultimate Donald Trump Stock: Is DWAC A Buy