by Dow Jones futures edged higher overnight, along with S&P 500 futures and Nasdaq futures, with Fed Chair Jerome Powell and the start of major economic data.
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The stock market rally ended on a mixed note on Tuesday Apple (AAPL) once again a burden on the major indices, along with Amazon.com (AMZN) and Tesla (TSLA). Meanwhile, Apple’s fellow Dow giants Boeing (BA), rafters (CVX) and Goldman Sachs (GS) are near buy points.
Hewlett Packard Enterprise (HP) and NetApp (NTAP) overwrote earnings reports late Tuesday CrowdStrike (CRWD) and working day (WDAY) launches major software reports this week.
HPE shares edged up in overnight trading after HPE earnings beat expectations. HP Enterprise stock, trading above its 200-day moving average, is working on a long cup base. NTAP stock plummeted in extended action on weak NetApp sales and guidance. WDAY shares surged overnight after a Q3 beat and a $500 million buyback. CRWD shares tumbled despite beating Q3 prospects as subscriptions came to light and the cybersecurity company implied a fourth-quarter revenue shortfall.
On Wednesday morning, ADP will release its November Personal Payroll Employment Estimate. Department of Labor to publish job vacancies in October JOLTS report. Job vacancies will be closely watched by Fed Chair Jerome Powell, who will speak on Wednesday afternoon.
All of this points to the Fed’s favorite indicator of inflation, the PCE price index, on Thursday morning, along with Friday’s November jobs report, as well as several other notable economic releases.
Investors should exercise caution when opening new positions until there is more clarity on the economy and the prospects for a rate hike by the Fed. If anything, they may want to lighten positions for the very short term.
CVX stocks are on the IBD leaderboard. BA shares are on SwingTrader.
Speech by Fed Chair Powell
Fed Chair Jerome Powell will speak at the Brookings Institution at 1:30 p.m. ET on Wednesday. He is expected to reinforce expectations that the central bank will move on to a 50 basis point rate hike on December 14th. Markets see a 67.5% chance of a half-point rate hike, but still a decent chance of a fifth straight Fed hike of 75 basis points. But he’s also likely to hint that rate hikes will continue into 2023.
What Powell says is quickly being overtaken by economic data. If inflation cools significantly and labor markets relax, even the Fed’s most hawkish policymakers will prefer a slower pace of rate hikes and an earlier end than markets expect. Hot price and employment data will bolster resolve for many Fed doves. Of course, economic data may show mixed results or a slight improvement in the coming days.
Dow Jones futures today
Dow Jones futures edged higher versus fair value, along with S&P 500 futures. Nasdaq 100 futures rose a fraction.
The 10-year government bond yield fell 1 basis point to 3.74%. Crude oil futures edged higher.
China’s official manufacturing index fell 1.2 points to 48 in November, falling further below neutral 50 levels and 49 outlook. Services index fell to 46.7 from 48 forecasts. China’s Covid lockdowns have taken a heavy toll on the economy.
Keep in mind that overnight action in Dow futures and elsewhere doesn’t necessarily translate to actual trading in the next regular trading session.
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stock market rally
After Monday’s sharp selling, Tuesday’s stock market rally ended on a mixed note.
The Dow Jones Industrial Average closed just above breakeven in trading on Tuesday. The S&P 500 Index fell about 0.2%. The Nasdaq Composite declined 0.6%. Small-cap Russell 2000 was up 0.3%.
Apple stock fell 2.1%, its third straight decline as China Covid cases, lockdowns and protests weigh on the tech giant. Shares fell 2.6% on Tuesday, below their 50-day moving average. Above the 50-day moving average there is a 200-day resistance for AAPL stock. Apple has seen riots at a giant Foxconn iPhone manufacturing plant in China.
Amazon shares fell 1.6% and Tesla shares fell 1.1%, both retreating from near their 21-day moving average. Both are relatively close to bear market bottoms.
US crude prices rose 2.4% to $79.62 a barrel. During the course of the day on Monday, crude oil futures hit their low for the year.
The 10-year government bond yield rose 5 basis points to 3.75%.
ETFs
Among the best ETFs, Innovator IBD 50 ETF (FFTY) fell 0.2%, while Innovator IBD Breakout Opportunities ETF (BOUT) rose 0.5%. The iShares Expanded Tech-Software Sector ETF (IGV) was down 0.8%. The VanEck Vectors Semiconductor ETF (SMH) lost 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%. The US Global Jets ETF (JETS) rose 1.8%. The Financial Select SPDR ETF (XLF) is up 0.6%. The Health Care Select Sector SPDR Fund (XLV) fell 0.25%.
Reflecting more speculative story stocks, ARK Innovation ETF (ARKK) lost 0.5% and ARK Genomics ETF (ARKG) 0.4%. Tesla stock is a key position in Ark Invest’s ETFs.
The five best Chinese stocks to watch right now
Dow stocks near buy points
According to MarketSmith analysis, Boeing shares rose 2% on Tuesday to 175.32, back above a 173.95 cup basis buy point. Shares traded tight near the buy point on low volume after a large surge in optimism for the aerospace giant. Analysts expect Boeing to return to profitability in 2023 after four years of losses. The recent pause in BA shares has the 21-day moving average catching up.
Chevron shares rose 1.45% to 180.94, just below the 182.50 buy point and just above the 21-day moving average. CVX stock has traded around this official buy point all month. An early entry near 167 on Oct. 19 was probably the safer bet at first. But with Chevron stock right at 21-day and no longer extended from 50-day, things are looking more interesting.
GS shares rose 0.35% on Tuesday to 383.71. The investment bank has a buy point of 389.68 from a 35% deep cup and handle basis dating back to November 2021. Investors could also view the recent break as a shelf just above the buy range from a bottoming base that Goldman stock hit in early November. The 21-day moving average is about to catch up, while the 50-day moving average is gaining ground. The line of relative strength is at a multi-year high, reflecting GS stock’s outperformance versus the S&P 500.
Analysis of the market rally
Stock market rally pulls back as key technical tests and economic data become available, along with uncertainty over China’s Covid policy.
The S&P 500 index continues a pullback from just below the 200-day moving average but still above its 21-day moving average. The Russell 2000, which fell back below the 200-day and 21-day moving average on Monday, rose back above the 21-day moving average.
The laggard Nasdaq fell below the 21-day moving average and is approaching its 50-day moving average.
Apple stocks, Tesla and other megacaps have weighed on the Nasdaq and the S&P 500 Index.
The Invesco S&P 500 Equal Weight ETF (RSP) is still above its 200-day moving average.
But don’t overstate Apple’s influence. Many leading stocks are testing or falling below buy points or making decent gains.
The silver lining is that the stock market is failing to recover on Fed speeches and major economic data. This could mean that the markets could rally barring any downside surprises, with the possibility of bigger gains if the upcoming headlines are positive.
But the market rally will do what it will.
Time the market with IBD’s ETF market strategy
What now
As markets pull back, there aren’t many stocks flashing buy signals. Investors should likely await Powell’s speech and economic data before making any meaningful new purchases. Investors may want to take at least some partial profits from winners, especially when winning stocks retire to buy points.
When the market rally turns higher soon, a large number of stocks will appear viable. But many interesting stocks will start looking damaged today as the major indices fall significantly from here.
Investors must therefore remain engaged and flexible. Keep your watch lists updated, but also have exit strategies for your holdings.
Read The Big Picture every day to keep up to date 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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