Dow Jones Futures: Market Rally Eyes Inflation Data; GME Stock Falls On Share Sale Plans As RH Earnings Surge

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Dow Jones futures rose slightly Wednesday night, along with S&P 500 futures and Nasdaq futures. The stock market rally fell slightly Wednesday, while Treasury yields touched recent lows ahead of key inflation data. GME stock and RH earnings were in focus after the close.




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GameStop (GME), the original meme stock, topped Q1 earnings forecasts and named a new CEO and CFO, adding to its stable of former ex-Amazon.com (AMZN) executives. The company also said it plans to sell up to 5 million shares „at the market“ and announced an SEC probe into the trading of its shares. GME stock fell solidly overnight.

That followed a generally weak session for Reddit-fueled stocks. Clover Health (CLOV) reversed lower and AMC Entertainment (AMC), Wendy’s (WEN) and Bed Bath & Beyond (BBBY) all retreated. Lordstown Motors (RIDE) whipsawed to unchanged. Some new meme stocks took off including already-hot steelmaker Cleveland-Cliffs (CLF).

RH (RH) nearly quadrupled earnings in the first quarter, with sales soaring. RH stock jumped, flashing early buy signals.

Signet Jewelers (SIG) is due early Thursday. SIG stock closed just below its 50-day line. A strong post-earnings move would offer an early entry as Signet works toward a flat-base buy point.


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CPI Report On Tap

The Labor Department will release the May consumer price index at 8:30 a.m. ET. Economists expect a 0.4% rise in consumer prices overall and excluding food and energy, following big spikes in April. Consumer inflation is expected to climb to 4.6%, up from April’s 4.2%. Core inflation should hit 3.4%, up from April’s 3%. Both would be long-term highs.

The Federal Reserve has said it expects an inflation spike to be transitory, cooling down next year. The next Fed meeting is June 15-16. Investors will be waiting for any signs that Fed policymakers are starting to talk about tapering asset purchases, though actually curbing bond buys may not occur until year-end.


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Treasury Yields

The 10-year Treasury yield fell four basis points on Wednesday to 1.49% after matching a three-month low of 1.47% intraday.

A hot inflation report has the potential for pushing up the 10-year yield, if only as a reversion to the mean.

Why have Treasury yields fallen sharply over the past week and month? Wall Street is lowering expectations for how much extra spending Congress may approve in the coming months. Also, job growth, while improving in May, still isn’t rip-roaring. Job openings are skyrocketing, but employers are struggling to find workers even with substantial pay hikes. Generous jobless benefits, desire to continue staying at home and structural shifts in the jobs available are all possible factors.

Dow Jones Futures Today

Dow Jones futures rose 0.1% vs fair value. S&P 500 futures advanced 0.15% and Nasdaq 100 futures climbed 0.2%.

The CPI report and Treasury yield response will likely influence Dow Jones futures just before Thursday’s market open.

Remember that overnight action in Dow futures and elsewhere doesn’t necessarily translate into actual trading in the next regular stock market session.


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Stock Market Rally

The stock market rally faded into Wednesday’s close but the major indexes are still at record highs.

The Dow Jones Industrial Average fell 0.4% in Wednesday’s stock market trading, its third straight modest decline. The S&P 500 index dipped 0.2%. The Nasdaq composite edged down 0.1% after being slightly higher for most of the day. The Russell 2000 pulled back 0.7%.

Among the best ETFs, the Innovator IBD 50 ETF (FFTY) dipped 0.3%, while the Innovator IBD Breakout Opportunities ETF (BOUT) sank 0.8%. The iShares Expanded Tech-Software Sector ETF (IGV) was essentially flat. The VanEck Vectors Semiconductor ETF (SMH) retreated 0.3%.

SPDR S&P Metals & Mining ETF (XME) lost 0.4% and Global X U.S. Infrastructure Development ETF (PAVE) gave up 0.8%. U.S. Global Jets ETF (JETS) descended 0.6%. SPDR S&P Homebuilders ETF (XHB) fell 1.5%, continuing to struggle despite sliding Treasury yields.

Reflecting more-speculative story stocks, ARK Innovation ETF (ARKK) edged down 0.25% and ARK Genomics ETF (ARKG) rose 1.2%. ARKK remains below its 50-day and 200-day lines while ARKG reclaimed both Wednesday.


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RH Earnings

RH earnings shot up 385% while revenue jumped 78%. While comparisons were easy — earnings and sales fell in the year-earlier quarter as the pandemic hit — RH breezed past views. The upscale furniture retailer also gave bullish Q2 sales forecasts and raised full-year revenue and margin targets.

RH stock jumped 7% in late trading. That signals an early entry above the 50-day line and above a downward-sloping trend line. RH stock has been hitting resistance at the 50-day line.

Shares fell 2.8% to 611.33 on Wednesday.

GameStop Earnings Top, CEO Named

GameStop earnings topped views, with a smaller-than-expected loss and a 25% revenue gain vs. pandemic-hit year-earlier quarter.

GameStop named Matt Furlong as CEO and Mike Recupero as CFO, both former Amazon executives, effective June 21. They join three other Amazon execs that have taken top GameStop positions.

Earlier Wednesday, Ryan Cohen formally became chairman at GameStop’s annual shareholder meeting. The Chewy (CHWY) co-founder, who owns 12% of GME stock as he’s touted a digital future for the long-ailing mall-based video game retailer, says he’s got big plans but didn’t spell out his vision.

„You won’t find us talking a big game, making a bunch of lofty promises or telegraphing our strategy to the competition,“ Cohen said.

To that point, GameStop once again took no questions in its 12-minute earnings call.

GME did disclose — not on the call — an SEC probe into the trading of its shares, saying it’s fully cooperating. „This inquiry is not expected to adversely impact us.“

GME stock slumped 5% in overnight action, well off after-hours lows. Shares edged up 0.85% to 302.56 on Wednesday. GME stock is up 122% from its May 11 intraday low of 136.50 and 1,500% so far this year. It hit a record 483 on Jan. 28.

Meme Stocks

Meme stocks were a mixed bag Wednesday.

CLOV stock tumbled 24% to 16.92 on Wednesday after hitting a record 28.85 intraday. That follows an 86% spike on Wednesday. Clover Health came public on Jan. 8 via a special-purpose acquisition company, or SPAC, run by venture capitalist Chamath Palihapitiya.

Wendy’s stock slumped 13% to 25.21. While that didn’t wipe out WEN stock’s 26% gain Tuesday, it did undercut Tuesday’s intraday. So anyone who bought Wendy’s stock on Tuesday is losing money.

AMC stock retreated 10% to 49.34. Shares of the theater owner have been consolidating since AMC stock shot up 95% on June 2.

Lordstown Motors stock edged up 0.1% to 11.23 after a wild session. Lordstown rebounded from steep losses after saying it has adequate capital to continue operating and that it’s in active talks to obtain new funding. On Wednesday, RIDE stock jumped to 15.80 but then reversed for a 16% loss to 11.22 after the EV pickup startup gave a „going concern“ notice.

Reddit investors can be fickle, moving quickly from „old“ meme stocks such as AMC.

Clean Energy Fuels (CLNE) and Geo Group (GEO), two newer meme stocks, shot up 31.5% and 39%, respectively.

Cleveland-Cliffs, which has had a huge run over the past year, shot up nearly 15% to 23.22, blasting out of a short consolidation amid reports of social media chatter. A cyclical steelmaker experiencing booming earnings and sales growth is a departure for Reddit-fueled meme stock mania.

Coronavirus News

Coronavirus cases worldwide reached 175.16 million. Covid-19 deaths topped 3.77 million.

Coronavirus cases in the U.S. have hit 34.26 million, with deaths above 613,000.

Market Rally Analysis

The stock market rally is trading just below all-time levels. S&P 500 could easily hit a record high, along with the Russell 2000, Dow Jones and Nasdaq. It’s unclear if the key indexes are just pausing or if record highs will serve as real resistance.

Don’t be lulled by a few quiet days. The major indexes could easily move 1% or more to the upside or downside.

Growth stocks are looking stronger. But is this the start of an extended growth-led rally, or just the latest sector rotation? Falling Treasury yields have been a tailwind for growth stocks, especially highly valued techs trying to rebound from deep sell-offs. But if the 10-year Treasury yield recovers much of its recent losses — via a hot inflation report or Fed taper talks — growth names could come under pressure once again.

So don’t ignore top stocks from other sectors. Miners are digging out bases after strong runs, along with several mall-based retailers. Financials have held up reasonably well as the 10-year yield has retreated. Higher rates could revive their fortunes quickly.

Read The Big Picture every day to stay in sync with the market direction and leading stocks and sectors.

Please follow Ed Carson on Twitter at @IBD_ECarson for stock market updates and more.

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