Dow Jones futures bounce on in line US CPI data

• Dow Jones futures bounce as US CPI data misses the worst-case scenario.
• Investors had been fearful of another CPI spike, so DJIA futures should see a relief rally.
• Stock markets rallying after the inflation release.

Dow Jones futures closed lower on Monday as continued fears over the global economy and an increasingly hawkish Fed weights on investors' sentiment. In particular, the more risker equity assets took the worst hit with the Nasdaq being the worst performer while the Dow Jones futures closed just over 1% lower. Bond yields continued to spike on Monday with more hawkish commentary from Fed members adding to an already risk-averse climate. Chicago Fed President another noted hawk said a 50bps hike in May is now likely.

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That was enough to push yields higher with the US 10Year spike up to 2.836% on Tuesday morning before the CPI release. At the time of writing, it is back to 2.71% as the US inflation data missed its worst-case scenario. News of reduced Chinese covid cases was overlooked as investors fretted over the health of the Chinese economy instead. China car sales data was poor and saw Tesla and other automakers suffer sharp falls on Monday. 

Dow Jones futures news: US inflation calms market mood

The US CPI data was the key event of the week and clears the way for bank earnings season to kick off starting tomorrow. The CPI was high coming in at the highest level since 1981, but positioning data is the key here and the market was already pricing in a shockingly high number. When the CPI came in more or less in line and slightly lower for the core number equity markets rallied. We expect that trend to continue for the remainder of Tuesday as the market is short equities, especially tech and growth sectors. Monday saw sharp falls for semiconductor chip stocks so expect a strong bounce from that sector, AMD and NVDA for example. 

Dow Jones futures forecast: Range-trading likely until earnings season

We remain in a current bearish setup with a series of lower lows, 35,281 being the most recent. This is the medium-term pivot. Shorter-term the pivot is Monday's high at 34,668. Below and more losses are likely, break above and we feel a rally to 35,752 is likely given the short positioning in tech stocks. But range trading is the likely outcome until we get through earnings the season so adjust accordingly. 

Dow Jones futures chart, daily

*The author is short Tesla.