For a moment, the profit-taking in Dow Jones Industrial Average (DJI), Nasdaq (QQQ), and S&P 500 (SPY) looked like it would intensify. However, by the end of the day on Tuesday, markets traded nearly flat but the Dow gave up a 382-point drop on the day.
Markets might lose momentum from the post-election rally. The consumer price index report will bring the stock market’s focus back on the Federal Reserve. Markets widely expect the Fed will cut interest rates by 25 bps next month. It would take rising inflation trends in October and this month to force the Fed to set a rate pause policy.
In response, Tesla (TSLA) fell by 6.1%, while residential construction stocks continued their downtrend. Lennar (LEN), D.H. Horton (DHI), and PulteGroup (PHM) are bracing for mortgage rates to rise. The Fed is not in a good position to lower rates if that increases home prices and adds to inflationary risks.
Chip stocks could fall further if markets stage a valuation correction. Micron (MU), Qualcomm (QCOM), and Intel (INTC) are at risk of falling further today. On November 20, after markets close, Nvidia (NVDA) will post quarterly results. As NVDA stock continues its uptrend, an impressive report on growth could lift the entire chip sector.