Stocks Fluctuate Amid Economic Uncertainty and Political Debate

The stock market experienced a mixed session on Tuesday, with the Nasdaq leading the way while the S&P 500 hovered near a key level. Investors were closely watching the presidential debate between former President Donald Trump and Vice President Kamala Harris, as well as the upcoming release of the Consumer Price Index (CPI) inflation report. Meanwhile, Dow Jones futures and other major indexes declined modestly overnight, reflecting the ongoing economic and political uncertainties.

Navigating the Volatile Market Landscape

Dow Jones Futures and Market Movers

Dow Jones futures fell 0.4% overnight, while S&P 500 futures declined 0.5% and Nasdaq 100 futures dropped 0.6%. The Japanese yen reached its highest level against the dollar since January 2022, following a signal from a Bank of Japan policymaker supporting further rate hikes. This unwinding of the yen-carry trade has been a negative factor for the markets.Crude oil futures rose slightly, but the overall market sentiment remained cautious. It's important to note that the overnight movements in futures markets may not necessarily translate into actual trading in the next regular stock market session.

The Trump-Harris Presidential Debate

The highly anticipated presidential debate between former President Donald Trump and Vice President Kamala Harris took place on Tuesday evening, lasting over 90 minutes. The tight race for the White House has heightened the significance of this event, as even a small post-debate shift could have outsized implications.During the debate, Harris emphasized her "plan to lift up the middle class," while Trump claimed that his tariffs generated billions of dollars from China without causing inflation, in contrast to the spike seen under the Biden-Harris administration. Harris also expressed support for "diverse sources" of energy, while Trump argued that she would never allow fracking in Pennsylvania.Interestingly, the debate did not cover tax policy, which is often considered one of the most important issues for financial markets. Prediction markets generally showed Harris gaining ground and Trump slipping in terms of their perceived chances of winning the election.

The CPI Inflation Report

Investors are eagerly awaiting the release of the August Consumer Price Index (CPI) report on Wednesday morning. Economists expect a 0.2% monthly gain for both the headline CPI and the core CPI, which excludes volatile food and energy prices. The annual CPI inflation rate is projected to decline to 2.6%, while core inflation is expected to hold steady at 2.9%.The Producer Price Index (PPI) report, scheduled for release on Thursday, will also be closely watched. These inflation data points will be crucial in shaping the Federal Reserve's monetary policy decisions, as the central bank has shifted its focus from inflation risks to economic growth concerns.A tame CPI and PPI could provide the Fed with more room to cut interest rates by 50 basis points at its September meeting, although markets currently expect only a 25-basis-point reduction.

Stock Market Performance and Sector Highlights

The stock market rally had a mixed session on Tuesday, with the Nasdaq leading the way and the S&P 500 hovering just below a key level. The Dow Jones Industrial Average dipped 0.2%, but managed to close above its 21-day moving average. The S&P 500 index rose 0.45%, just below its 50-day line, while the Nasdaq Composite advanced 0.8%, still well below its 50-day line.The Invesco S&P 500 Equal Weight ETF (RSP) edged higher, just above its 21-day moving average, indicating that the broader market is holding up relatively well, with non-tech sectors performing better than the tech-heavy Nasdaq.Sector-wise, the Energy Select Sector SPDR ETF (XLE) slumped 1.7% as oil prices tumbled 4.3% to $65.75 per barrel, the lowest settlement since December 2021. OPEC's decision to delay a planned production hike and weaker China imports contributed to the decline in crude oil prices.In contrast, the Invesco S&P 500 Equal Weight ETF (IGV) rose 1.6%, buoyed by strong performances from software giants like Oracle, Microsoft, and a few other notable names. The VanEck Vectors Semiconductor ETF (SMH) also climbed 0.95%, with Nvidia being a top holding.Investors in more speculative growth stocks saw some relief, as the ARK Innovation ETF (ARKK) rallied 1.5% and the ARK Genomics ETF (ARKG) gained 1.8%. Tesla, a major holding across Ark Invest's ETFs, contributed to these gains, along with Nvidia, which Cathie Wood has been actively accumulating in recent months.

Stocks in Focus: Exelixis, DaVita, and On Holding

Amidst the market's mixed performance, several stocks stood out as potential opportunities for investors. Exelixis (EXEL), DaVita (DVA), and On Holding (ONON) all bounced slightly off their 21-day moving averages, placing them in buy zones.Exelixis rose 3.1%, breaking a short-term downtrend and emerging from a base after an early August earnings breakout. DaVita stock climbed 2.2%, continuing to trade within a flat-base buy zone. On Holding, the Swiss athletic footwear and apparel company, advanced 2%, holding above a 44.30 buy point.These stocks, along with Nvidia and DaVita, which are on IBD Leaderboard, are worth monitoring as potential investment opportunities in the current market environment.

Challenges in the Banking Sector

The banking and lending sectors faced significant headwinds on Tuesday, with several Dow components and industry leaders reporting concerning news.JPMorgan Chase (JPM) and Goldman Sachs (GS) both tumbled, falling below their buy points and 50-day moving averages. JPMorgan warned of lower net interest income, while Goldman Sachs expects weaker trading revenue.Adding to the sector's woes, Ally Financial (ALLY) issued a warning about weaker credit and net interest income trends, causing the stock to plummet 17.6%. This news also had a ripple effect, negatively impacting auto dealers like Carvana (CVNA) and automakers such as General Motors (GM).The challenges faced by the banking and lending sectors highlight the broader economic uncertainties and the potential impact on various industries. Investors will need to closely monitor these developments and their implications for the overall market.

Tesla's Performance and Outlook

Tesla (TSLA) stock rose 4.6% to $226.17, moving above its 50-day moving average. The electric vehicle manufacturer's latest weekly sales data from China showed continued strong performance, turning positive year-to-date. Additionally, Deutsche Bank initiated coverage on Tesla with a buy rating and a $295 price target.However, Tesla's gains were tempered as the broader market wavered and Ally Financial's warning may have had a spillover effect. Nonetheless, Tesla stock remains in a position to potentially challenge its official buy point of $271, with investors also considering the September 5th high of $235 as a new early entry point.The resilience and growth potential of Tesla, along with the company's strong performance in the Chinese market, continue to be closely watched by investors. As the electric vehicle industry evolves, Tesla's ability to maintain its market leadership will be a key factor in the stock's future performance.