Dow Jones futures rose slightly early Wednesday, along with S&P 500 futures and Nasdaq futures, with Fed chief Jerome Powell and key economic data being touched on.
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The stock market rally closed mixed Tuesday with Apple (AAPL) is again a drag on major indexes, along with Amazon.com (AMZN) and Tesla (TSLA). Meanwhile, fellow Dow giant Apple Boeing (BA), Chevron (CVX) and Goldman Sachs (GS) is near the buy point.
Hewlett Packard Enterprise (HPE) and NetApp (NTAP) headline earnings report late Tuesday, with CrowdStrike (CRWD) and Working day (WDAY) kicks off this week’s big software report.
HPE shares rose modestly in premarket trading after HPE’s earnings beat views. HP Enterprise stock, above its 200-day line, is working on a long cup base. NTAP shares plunged in extended action on NetApp’s weak results and guidance. WDAY stock surged overnight on Q3 pace and $500 million buyback. Shares of CRWD slumped despite beating Q3 views as subscriptions began to emerge and the cybersecurity firm hinted at missing Q4 revenue.
Separately, Horizon Therapeutics (HZNP) surged more than 30% overnight after confirming three potential takeover offers.
On Wednesday morning, the Labor Department will release job vacancies in the October JOLTS report. Job openings are closely watched by Fed chief Jerome Powell, who will speak Wednesday evening.
All that foreshadows the Fed’s favorite gauge of inflation, the PCE price index, on Thursday morning, along with the November jobs report on Friday, as well as several other notable economic releases.
Investors should be cautious about opening new positions until there is more clarity on the economy and the prospect of a Fed rate hike. If anything they may want to be a light position in the short term.
CVX stock is on the IBD Leaderboard. BA stock is on SwingTrader.
Fed Chairman Powell’s speech
Fed Chairman Jerome Powell will speak at the Brookings Institution at 1:30 pm ET on Wednesday. He is expected to reinforce expectations that the central bank will move to a 50 basis point rate hike on Dec. 14. The market sees a 67.5% chance for a half-point move, but still a good chance for a fifth consecutive Fed rate hike of 75 basis points. But he is also likely to indicate that rate hikes will continue through 2023.
Anything Powell says will be quickly overridden by the economic data. If inflation begins to show significant cooling and the labor market eases, even the most hawkish Fed policymakers will choose to slow the pace of rate hikes and end earlier than market expectations. Hot price and jobs data will strengthen the resolve of many Fed doves. Of course, economic data in the next few days may show mixed results, or a small improvement.
Dow Jones Futures Today
Dow Jones futures rose 0.15% against fair value. S&P 500 futures rose 0.3%. Nasdaq 100 futures rose 0.55%.
Futures added to gains as ADP said private payrolls rose just 127,000 in November versus estimates for 200,000.
The 10-year Treasury yield fell 3 basis points to 3.72%.
Crude oil futures rose 3%, moving back above $80 a barrel. Copper prices rose almost 3%.
China’s official manufacturing index fell 1.2 points to 48 in November, falling further below the neutral level of 50 and the outlook for 49. The services index slipped to 46.7 compared to forecasts for 48. China’s Covid shutdown has taken a serious toll on the economy.
Still, Hong Kong’s Hang Seng index rose 2.2% after surging 5.2% on Tuesday on hopes for easier Covid restrictions ahead.
Remember that overnight action in Dow futures and elsewhere does not necessarily translate into actual trading in the next regular stock market session.
Join IBD experts as they analyze actionable stocks in the stock market rally on IBD Live
Stock Market Rally
After Monday’s sharp selloff, the stock market rally closed mixed Tuesday.
The Dow Jones Industrial Average closed just above the break-even point in stock market trading Tuesday. The S&P 500 index fell about 0.2%. The Nasdaq Composite declined 0.6%. The small-cap Russell 2000 rose 0.3%.
Apple shares fell 2.1%, the third significant decline in a row, as China’s Covid cases, shutdowns and protests weighed on the tech giant. On Tuesday, shares fell 2.6%, below their 50-day moving average. Above the 50-day line is 200-day resistance for AAPL stock. Apple has seen chaos at Foxconn’s massive iPhone assembly plant in Zhengzhou amid ongoing Covid shutdowns. China lifted Zhengzhou’s overnight curfew.
Amazon shares slipped 1.6% and Tesla shares fell 1.1%, both retreating from near their 21-day lines. Both are relatively close to bear market lows.
US crude oil prices rose 2.4% to $79.62 a barrel. Intraday Monday, crude oil futures hit the lowest level of the year.
The 10-year Treasury yield rose 5 basis points to 3.75%.
ETFs
Among the top ETFs, the Innovator IBD 50 ETF (FFTY) declined 0.2%, while the Innovator IBD Breakout Opportunities ETF (BOUT) rose 0.5%. The iShares Expanded Technology Software Sector ETF (IGV) declined 0.8%. VanEck Vectors Semiconductor ETF (SMH) fell 0.3%.
The SPDR S&P Metals & Mining ETF (XME) gained 2.3% and the Global X US Infrastructure Development ETF (PAVE) 0.1%. The US Global Jets ETF (JETS) rose 1.8%. Financial Select SPDR ETF (XLF) rose 0.6%. The Healthcare Select Sector SPDR Fund ( XLV ) fell 0.25%.
Reflecting the more speculative story stocks, the ARK Innovation ETF (ARKK) fell 0.5% and the ARK Genomics ETF (ARKG) shed 0.4%. Tesla stock is the top holding in the entire Ark Invest ETF.
The Five Best Chinese Stocks To Watch Right Now
Dow Stocks Near Buy Points
Boeing shares rose 2% to 175.32 on Tuesday, back above a key buy point of the 173.95 cup, according to MarketSmith analysis. Shares were trading tight in light volume near buy points after a big boost on optimism for the aerospace giant. Analysts expect Boeing to return to profitability in 2023 after four years of losses. The recent pause in BA stock has a 21-day line behind it.
Chevron shares rose 1.45% to 180.94, slightly below a 182.50 buy point and just above the 21-day line. CVX shares have been trading around that official buy point all month. An early entry near 167 on October 19 may have been a safer bet initially. But with Chevron stock right at 21 days and no longer extended from 50 days, it looks even more attractive.
GS shares edged up 0.35% on Tuesday to 383.71. The investment bank has a 389.68 buy point from the base of the cup with a handle as deep as 35% since November 2021. Investors can also view the recent pause as a shelf just above the buy range from the base low that Goldman shares cleared in early November. The 21-day moving average is close to catching up, while the 50-day line is starting to gain ground. The relative strength line is at multi-year highs reflecting the outperformance of GS stock relative to the S&P 500.
Market Assembly Analysis
The stock market rally is retreating on key technical tests and economic data, along with uncertainty over China’s Covid policy.
The S&P 500 index extended the pullback from just below its 200-day moving average, but still above its 21-day line. The Russell 2000, which dipped back below the 200-day and 21-day lines on Monday, is back above the 21-day.
The lagging Nasdaq fell below its 21-day line and is nearing its 50-day line.
Shares of Apple, Tesla and other megacaps have weighed on the Nasdaq and S&P 500 indexes.
The Invesco S&P 500 Equal Weight ETF (RSP) is still above its 200-day moving average.
But don’t exaggerate Apple’s impact. Many top stocks are testing or falling below buy points or profitable gains.
The bottom line is that the stock market did not rally into the Fed speech and key economic data. This can mean that the market can bounce in the absence of a negative shock, with the possibility of greater gains if the upcoming headlines are positive.
But the market rally will do what it will do.
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What to do now
With the market retreating, not many stocks are flashing buy signals. Investors may have to wait for Powell’s speech and economic data to roll out before making significant new purchases. Investors may want to take at least a portion of the profits in winners, especially if the winning stock retreats to buy points.
If the market rally turns higher soon, a large number of stocks will look actionable. But many of today’s attractive stocks will start to look broken if the major indexes fall significantly from here.
So investors need to stay engaged and flexible. Keep your watchlist up to date but have an exit strategy for your holdings as well.
Read The Big Picture daily to stay abreast of market direction and leading stocks and sectors.
Please follow Ed Carson on Twitter at @IBD_ECarson for stock market updates and more.
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