Inflation has knocked back the market. Here are the key S&P 500 and tech stock levels one strategist fears.

Read: Oil is the hottest sector, and Wall Street analysts see upside of up to 48% for favored stocks

Summing up Thursday’s “2 legs down” equity action, Mohamed A. El-Erian, chief economic adviser for Allianz, said inflation was, of course, the first arrow, but then stocks rebounded on “still strong behavioral conditions and confidence in earnings.”

“The second was driven by worries about a higher probability of a Fed policy mistake — that of first calling inflation wrong for so long, then not moving on policies, and now risking a ‘slamming of the policy brakes,’” he tweeted.

Read: Inflation’s on fire, and the Fed’s poised to act. Here’s how markets and the economy have reacted to the first hike in a cycle.

Our call of the day is from Mark Newton, Fundstrat’s head of technical strategy, who says the equity pullback Thursday doesn’t cancel the rally, but was a clear warning sign.

“Near-term, this dip should be bought until/unless SPX 4451 is broken, which would cause some downward volatility into late February, before a March rally. At present, insufficient damage has been done to warrant concern technically, but the risk levels are easily identifiable for this trend,” Newton told clients in a note, as he provided this chart:

As for technology stocks, they still haven’t suffered enough to “expect a meaningful period of lagging,” he said, but advised keeping watch on the $157.44 level for the Technology Select Sector SPDR ETF XLK, -3.05% and $287.90 for the Invesco S&P 500 Equal Weight Technology RYT, -3.03%. A break below those levels would be bearish, otherwise it’s just minor consolidation, he said.

Newton offered up one sector that he thinks “deserves a second look” — cannabis — following a rally back to multiweek highs after Sen. Majority Leader Chuck Schumer proposed a bill to legalize marijuana at a Federal level and make that a “priority.”

The analyst suggested ETFMG Alternative Harvest ETF MJ, +1.12% in December as an intermediate-term bullish idea, and said recent price action makes it more attractive now.

“Specifically, the act of having climbed over early February peaks is bullish technically, and MJ has broken minor three-month downtrends that have been in place since November 2021. Furthermore, weekly MACD (as a gauge of intermediate-term momentum) is crossing back to positive this week, exceeding the signal line,” said Newton.

While the sector will need further strength to get over the long-term downturn in place since its February 2021 peak, “it looks appealing to buy and own MJ technically given this progress as a 2022 rebound candidate, expecting some mean reversion higher after such a lengthy decline,” Newton said.

He’s looking at an initial target for the ETFMG Alternative Harvest ETF of $15.78, a November 2021 peak, adding that a drop back under $9 would postpone that rally. Other stocks of interest include Canopy Growth CGC, +4.42%, Tilray TLRY, +1.71% TLRY, +1.92%, Curaleaf Holdings CURLF, +2.55% and GrowGeneration GRWG, -2.84%, said Newton.

Read: Cannabis sales set to rise ahead of Super Bowl Sunday

The buzz

Twitter TWTR, -3.34% said it has entered into agreements with Morgan Stanley MS, -2.79% and Wells Fargo Bank WFC, -1.25%  for a $2 billion in accelerated share repurchase

Zillow Z, +13.55% is surging, after the online real estate group reported record revenue from selling underwater homes, with a better-than-expected forecast.

Also up is Expedia EXPE, -2.73%, after the travel group missed revenue forecasts, but delivered a rosy outlook. Yelp YELP, +4.11% reported a forecast beating $1 billion in annual sales for the second time, but guidance underwhelmed. The stock is down.

The University of Michigan February consumer sentiment index along with expectations for five-year inflation are due at 10 a.m. Eastern.

Sunday’s Super Bowl will be the “biggest sports betting event in the country’s history,” an executive from betting site FanDuel told MarketWatch. Indeed, $1 billion is expected to be wagered among fans this year. If you’re in it for the ads, there will be crypto, and check out Dr. Evil and the gang reunited to plug General Motors’ GM, -3.00% electric vehicles.

Plus: 5 fun Super Bowl prop bets, including ‘will there be an octopus?’ and ‘Gatorade shower color’

The chart

Check out our holy guacamole chart from ZeroHedge that shows avocado prices at their highest ever ahead of the Super Bowl amid soaring food costs. They point to Bloomberg data that reveal a 20-pound box of avocados will set you back more than $26, a record for this time of year stretching back to 1998:

The markets

Stocks DJIA, -1.43% SPX, -1.90% COMP, -2.78% are struggling for direction following Thursday’s selloff, with red ink across European SXXP, -0.59% and Asian markets 000300, -0.83%. The yield on the 10-year Treasury TMUBMUSD10Y, 1.943% is easing off, but hovering at 2%, while the two-year TMUBMUSD02Y, 1.516% has pushed further into record territory.

Gold GC00, +1.00%, silver SI00, +0.99% and industrial metals prices HG00, -1.48% PL00, +0.73% PA00, +5.31% are falling, while oil CL00, +0.86% turned higher after the International Energy Agency spoke of “chronic supply issues.”

The tickers

These were the top searched tickers on MarketWatch as of 6 a.m. Eastern.

Random reads

Man battles to keep his emotional support pet — Ellie, a potbellied pig.

Australia declares koalas are an endangered species.

The original Soup Nazi weighs in on Georgia Rep. Marjorie Taylor Greene’s gazpacho confusion.

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