Dow Jones futures edged higher overnight, along with S&P 500 futures and Nasdaq futures, with Fed chief Jerome Powell and the start of key economic data on reach
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The stock market rally closed Tuesday mixed with Apple ( AAPL ) once again a drag on the major indexes, along with Amazon.com ( AMZN ) and Tesla ( TSLA ). Meanwhile, Dow giants Apple, Boeing ( BA ), Chevron ( CVX ) and Goldman Sachs ( GS ) are all near buy points.
Hewlett Packard Enterprise ( HPE ) and NetApp ( NTAP ) led earnings reports Tuesday afternoon, with CrowdStrike ( CRWD ) and Workday ( WDAY ) releasing big software reports this week.
HPE shares rose modestly in overnight trade after HP’s earnings beat views. HP Enterprise stock, above its 200-day line, is working on a long cup base. NTAP shares dipped in extended action on weak NetApp earnings and guidance. WDAY stock jumped overnight on a third-quarter pace and a $500 million buyback. CRWD shares fell despite beating third-quarter views as subscriptions came to light and the cybersecurity company implied a fourth-quarter revenue loss.
On Wednesday morning, ADP will release its November employment estimate from private payrolls. The Department of Labor will publish job openings in the October JOLTS report. The job offers are being closely watched by Fed chief Jerome Powell, who will speak on Wednesday afternoon.
All of this bodes well for the Fed’s favorite inflation gauge, the PCE price index, on Thursday morning, along with Friday’s November jobs report, 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 outlook for a Fed rate hike. If anything, they may want to lighten positions in the very short term.
CVX shares are in the IBD classification. BA shares are on SwingTrader.
Speech by Fed Chairman Powell
Fed Chairman Jerome Powell will speak at the Brookings Institution on Wednesday at 1:30 PM ET. It is expected to reinforce expectations that the central bank will move to a rate hike of 50 basis points on December 14. Markets see a 67.5% chance of a half point move, but there is still a good chance of a fifth straight Fed rate hike. of 75 basic points. But it will also likely signal that rate hikes will continue into 2023.
Anything Powell says will quickly be trumped by the economic data. If inflation begins to show a significant cooling and labor markets relax, even the most fervent Fed policymakers will favor slowing the pace of rate hikes and ending earlier than markets may expect. Hot employment and price data will tighten the resolve of many Fed doves. Of course, economic data in the coming days may show mixed results, or a marginal improvement.
Dow Jones futures today
Dow Jones futures edged higher versus fair value, along with S&P 500 futures. Nasdaq 100 futures rose 0.1%.
The 10-year Treasury yield fell 1 basis point to 3.74%.
Crude oil futures rose.
Remember that overnight action in Dow futures and elsewhere does not necessarily translate into actual trading in the next normal stock market session.
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Stock Exchange meeting
After Monday’s strong sell-off, the rally in the stock market closed mixed on Tuesday.
The Dow Jones Industrial Average closed just above breakeven on Tuesday. The S&P 500 index fell about 0.2%. The Nasdaq composite fell 0.6%. The small-cap Russell 2000 rose 0.3%.
Apple shares fell 2.1%, their third consecutive significant decline, as Covid cases in China, lockdowns and protests weigh on the tech giant. On Tuesday, the stock fell 2.6%, below its 50-day moving average. Above the 50-day line is 200-day resistance for AAPL stock. Apple has seen unrest at a massive Foxconn iPhone assembly factory in China.
Amazon shares fell 1.6% and Tesla shares fell 1.1%, both retreating near their 21-day lines. Both are relatively close to bearish market lows.
The price of US crude rose 2.4% to $79.62 a barrel. On Monday, crude oil futures hit their lowest levels of the year.
The 10-year Treasury yield rose 5 basis points to 3.75%.
ETFs
Among top ETFs, the Innovator IBD 50 ETF ( FFTY ) fell 0.2%, while the Innovator IBD Breakout Opportunities ETF ( BOUT ) rose 0.5%. The iShares Extended Technology Software Sector ETF ( IGV ) sank 0.8%. The 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) gained 0.1%. US Global Jets ETF (JETS) rose 1.8%. The Financial Select SPDR ETF ( XLF ) rose 0.6%. The Select Healthcare Sector SPDR Fund ( XLV ) fell 0.25%.
Reflecting more speculative stocks, the ARK Innovation ETF ( ARKK ) was down 0.5% and the ARK Genomics ETF ( ARKG ) was down 0.4%. Tesla stock is a major holding in Ark Invest’s ETFs.
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Dow stocks near buy points
Boeing shares rose 2% to 175.32 on Tuesday, above a buy point of 173.95 cups, according to MarketSmith analysis. Shares have traded strongly on light volume near a buy point after a big acceleration in optimism for the aerospace giant. Analysts expect Boeing to return to profitability in 2023 after four years of losses. The recent break in BA shares has the 21-day line catching up.
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 this official buy point all month. An early entry near 167 on October 19 was probably the safest bet initially. But with Chevron shares right at 21 days and no longer extending past 50 days, it looks more interesting.
Shares of GS rose 0.35% on Tuesday to 383.71. The investment bank has a 389.68 buy point from a 35% deep cup-handled base dating back to November 2021. Investors could also view the recent break as a fair shelf above the buy range of a fund base that Goldman shares cleared. beginning of 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 a multi-year high reflecting the outperformance of GS stock relative to the S&P 500.
Analysis of market concentration
The stock rally is pulling back with key technical tests and economic data on hand, along with uncertainty over China’s Covid policies.
The S&P 500 is extending a pullback from just below its 200-day moving average, but still above its 21-day line. The Russell 2000, which dipped below the 200-day and 21-day lines on Monday, returned above the 21-day.
The lagging Nasdaq fell below the 21-day line and is closing at its 50-day line.
Shares of Apple, Tesla and other megacaps have been weighing on the Nasdaq and S&P 500.
The Invesco S&P 500 Equal Weight ETF (RSP) is still above its 200-day moving average.
But don’t overstate Apple’s impact. Many major stocks are testing or falling below buy points or making decent gains back and forth.
The good thing is that the stock market is not focusing on Fed speeches and important economic data. This could mean markets could bounce back if there are no negative surprises, with the potential for bigger gains if upcoming headlines are positive.
But the market rally will do what it will do.
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what to do now
With the markets pulling back, there aren’t a lot of stocks flashing buy signals. Investors should probably wait for Powell’s speech and economic data to arrive before making any major new purchases. Investors may want to take at least some partial profit from the winners, especially if the winning stocks are pulled back to buy points.
If the market rally picks up soon, a large number of stocks will look actionable. But many interesting stocks today will start to look damaged if the major indexes fall significantly from here.
Therefore, investors must remain engaged and flexible. You keep your watchlists up to date, but you also have exit strategies for your holdings.
Read The Big Picture every day to stay in sync with 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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