The Daily Breakdown prepares for the latest batch of CPI data, while also keeping an eye on the charts for SOFI as it tries to break out.
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Wednesday’s TLDR
- CPI report drops this morning
- A closer look at SOFI’s chart
- CHWY, SJM fall on earnings
What’s Happening?
The monthly inflation report drops at 8:30 a.m. ET. Economists expect year-over-year inflation of 2.5%, up from 2.3% last month. A hotter-than-expected number could weigh on markets, raising concerns that tariffs are pushing prices higher.
Investors don’t want to see upside inflation surprises. A stronger print would likely keep the Fed on pause and raise fears of an economic slowdown — especially as growth already shows signs of softening.
On the flip side, a CPI report that comes in at or below expectations could reassure investors, much like last week’s solid jobs data and the prior Friday’s tame PCE report.
Right now, the market doesn’t expect a rate cut until September, meaning no change through the summer. But if inflation keeps cooling, it will be hard for the Fed to justify holding rates steady. Their concern has been a potential rebound in inflation due to tariffs — which hasn’t materialized, at least not yet.
One last thing: Today’s 10-year Treasury note auction at 1:00 p.m. ET might seem dull, but it can impact markets. For active investors, it’s worth keeping an eye on.
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The Setup — SoFi Technologies
Shares of SoFi have been volatile this year, but long-term investors have been happy with the results. The stock is up more than 100% over the past year and is up 27.8% over the past three months. However, it’s down about 6% so far this year.
Case in point? Shares cleared the $18 level in January, but traded below $9 in April.
Volatility with this name is clear. However, bulls are hoping it can clear a key resistance area around $14.50 to continue its recent rebound.
If SoFi can break out above this zone and clear $15, shares could gain momentum, potentially making a charge back up toward the $17 to $18 range.
However, if resistance holds or if the overall market goes through its own pullback, bulls may want to see if support comes into play in the $12.50 to $13 area, just as it did last month. Ultimately, investors would like to see SOFI hold its 200-day moving average if it pulls back in the short term.
Options
Investors who believe shares will break out — or those who are waiting for the potential breakout to happen first — can participate with calls or call spreads. If speculating on the breakout rather than waiting for it to happen first, investors might consider using adequate time until expiration.
For investors who would rather speculate on resistance holding, they could use puts or put spreads.
To learn more about options, consider visiting the eToro Academy.
What Wall Street Is Watching
Shares of Intel jumped yesterday, partly on hopes for easing trade tensions with China, and as semiconductor stocks rose, with the SMH ETF rallying 2%. Despite a less-than-inspiring update from CFO David Zinsner, Tuesday’s rally sent INTC stock above both its 50-day and 200-day moving averages on its highest volume since April. Check out the chart for INTC.
Peanut-butter-jelly time? Not so fast. Shares of J.M. Smucker tumbled more than 15% yesterday, with the stock hitting its lowest levels since the Covid selloff in 2020. The decline has the dividend yield up to 4.6%, but investors aren’t overlooking the earnings report. While SJM beat earnings, a disappointing outlook soured sentiment.
Shares of Chewy are in focus this morning, currently down in pre-market trading after the company reported earnings. Adjusted earnings of 35 cents a share beat estimates of 32 cents a share, while revenue of $3.11 billion topped expectations for $3.08 billion.
Disclaimer:
Please note that due to market volatility, some of the prices may have already been reached and scenarios played out.