Dow Jones futures rose early Wednesday along with S&P 500 futures and Nasdaq futures. US domestic flights were suspended while WWE, Wells Fargo, Axcelis Technologies and Impinj were also in focus ahead of the opening.
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The stock market rally was undecided for much of Tuesday, but major indices gained momentum, with the S&P 500 moving its 50-day moving average. Investors await the December CPI inflation report on Thursday morning.
Medpace (MEDP) rose solidly on Tuesday, signaling a fresh buy signal after a similar move in late 2022 fizzled. first sun (FSLR) bounced off its 50-day moving average and also offered an early entry. but ELF beauty (Eleven) and super microcomputer (SMCI) plunged after Monday’s reversals.
MEDP Stocks and ELF Beauty are on the IBD Leaderboard. SMCI stock is on the IBD 50. Medpace was Tuesday’s IBD stock of the day.
Tesla (TSLA) and UnitedHealth (UNH) declined as many big caps continue to struggle.
Investors should remain cautious, especially with the forthcoming CPI inflation report.
business news
The FAA halted all domestic flights until 9 a.m. ET due to a significant system failure. Air traffic had been suspended since early Wednesday morning. The FAA expects to “repopulate” the system soon, but airlines are struggling to get back on schedule. Airline shares incl Delta Airlines (DAL) and United Airlines (UAL) declined slightly.
Vince McMahon is again chairman at World Wrestling Entertainment (WWE) after his daughter Stephanie stepped down as chairman and co-CEO Tuesday night. Mr McMahon, a major shareholder, resigned last year over payments related to sexual misconduct lawsuits. WWE stock was up solidly in premarket trading after surging in recent days on reports of his expected return to lead a sale of the company.
In the meantime, Wells Fargo (WFC) will largely exit the mortgage business amid regulatory pressure, CNBC reported late Tuesday. It will offer home loans only to existing banking and wealth management clients and borrowers in minority communities. WFC stock was little changed in extended trading.
Axcelis Technologies (ACLS), which has taken a strong step over the past several meetings, said revenue for the fourth quarter ended December exceeded $250 million, up from the chip equipment maker’s earlier guidance of $232 million to $240 million. ACLS stock rose after the close of business.
impinj (PI) says fourth-quarter revenue exceeded $76 million, compared to the RFID chip maker’s previous guidance of $71.5 million to $73.5 million. PI stock, which was already slightly above the 50-day moving average, rose solidly overnight. That could offer early entry or get close to Impinj stock’s flat base buy point. PI stocks are also on the leaderboard.
Earnings season also starts at the end of the week. Taiwan semiconductor (TSM) reported Thursday morning. On Friday, JPMorgan Chase (JPM), Bank of America (BAK), Citigroup (C) and Wells Fargo all report ahead of the opening, along with Delta Air and UnitedHealth.
Dow Jones futures today
Dow Jones futures are up 0.15% from fair value. S&P 500 futures were up 0.2% and Nasdaq 100 futures were up 0.1%.
The 10-year government bond yield fell 4 basis points to 3.58%.
Crude oil futures edged higher despite the American Petroleum Institute’s estimate of a huge weekly rise in US inventories. The Energy Information Administration will release data on US crude oil and petroleum products at 10:30 am ET.
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 disappointing decline, the stock market rally strengthened Tuesday afternoon, closing near session highs.
The Dow Jones Industrial Average rose 0.6% in trading on Tuesday. The S&P 500 index rose 0.7%. The Nasdaq Composite rose 1%. Small-cap Russell 2000 rose 1.5%
Tesla shares fell 0.8% on Tuesday after rising 5.9% on Monday. Shares reversed higher on Friday after hitting a bear market low of 101.06 after the EV giant announced big price cuts in China and other major Asian markets. TSLA stocks need a lot of repairs.
Shares rose 2% ahead of Wednesday’s open. Tesla has applied for a major expansion of its Austin assembly plant in Texas, the Austin Business Journal reported late Tuesday. Tesla Austin is still expanding its existing capacity.
UNH shares fell 0.8%, hitting their lowest level since last June. Health insurer Dow Jones is already down 8.3% in 2023 after ending 2022 in reasonably good shape. UnitedHealth’s earnings and guidance on Friday will be important for the suddenly competitive sector.
US crude prices rose 0.7% to $75.12 a barrel. Natural gas prices fell by 6.9%.
The 10-year Treasury yield rose 10 basis points to 3.62% after slipping 20 basis points in the previous two sessions.
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ETFs
Among growth ETFs, Innovator IBD 50 ETF (FFTY) is up 1.1%, while Innovator IBD Breakout Opportunities ETF (BOUT) is up 0.15%. The iShares Expanded Tech-Software Sector ETF (IGV) returned 0.1%. The VanEck Vectors Semiconductor ETF (SMH) gained 1.3%, narrowly beating the 200-day moving average after surmounting the 50-day moving average on Friday. TSM stock is a large SMH holding.
Reflecting more speculative story stocks, ARK Innovation ETF (ARKK) is up 2.5% and ARK Genomics ETF (ARKG) is up 3.6%. Tesla shares remain a key position at Ark Invest, with Cathie Wood strengthening her position in recent weeks.
The SPDR S&P Metals & Mining ETF (XME) was up 2.5% and the Global X US Infrastructure Development ETF (PAVE) was up 1.6%. The US Global Jets ETF (JETS) is up 2.4%, with DAL stock among notable holdings. The SPDR S&P Homebuilders ETF (XHB) is up 1%. The Energy Select SPDR ETF (XLE) was up 0.7% and the Financial Select SPDR ETF (XLF) was up 0.6%. Health Care Select Sector SPDR Fund (XLV) ended up 0.8%, with UNH stock a top XLV holding.
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Analysis of the market rally
The stock market rally spent much of the morning hovering around breakeven but ended on Tuesday with relatively strong performance.
The S&P 500 rose above the 50-day moving average. The 200-day moving average is slightly above.
The Dow Jones recovered from a test of its 50-day moving average after moving above this key level on Friday. The Nasdaq rose off its 21-day moving average with the 50-day moving average not far away.
The Russell 2000 is back above its 50-day moving average, just below its 200-day moving average.
The S&P MidCap 400 rose Tuesday after finding support at the 50-day price. That’s after it jumped above its 21-day, 50-day, and 200-day moving averages on Friday. The Invesco S&P 500 Equal Weight ETF (RSP) looks very similar.
RSP and the MidCap 400 highlight how big caps such as Apple (AAPL), Tesla and UNH shares weighed on the market.
A sustained stock market rally may not begin until there is clarity about when the US Federal Reserve will stop raising interest rates. Markets are keen on a hike of just a quarter point at the February 1st monetary policy meeting and again at the end of March.
Thursday’s CPI inflation report could set expectations for a quarter-point hike. Inflation should trend downwards further in the coming months, if only because year-on-year comparisons are so steep.
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Mixed leading stocks
A number of leading stocks have flashed buy signals over the past few days and weeks. But most quickly faltered. In some cases, such as B. the MEDP stock, they recover a few days later.
Medpace rose 5.9% to 223.29 in strong volume, bouncing off the 50-day moving average and surmounting its Dec. 29 high as MEDP tried to exit.
First Solar rose 7.4% to 171.01, continuing a mini-win streak. The move off the 50-day moving average offered an early entry into a new base, but now looks a bit prolonged. But the official buy point of 173.78 is not far away.
Other names keep falling.
ELF stock had a promising breakout on Friday, but gave back most of those gains on Monday, falling 8.3% to 51.15 on Tuesday, breaking the 50-day moving average and the low of its flat base undercut.
SMCI shares rose Monday morning, offering an early entry but closing only marginally higher. On Tuesday, shares fell 7.55% below the 50-day moving average after a short seller report.
Many other stocks are hovering right around potential buy points.
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What now
The stock market rally is still in force, but the major indices, sectors and especially leading stocks are vulnerable to trend reversals. Thursday’s CPI inflation report could trigger big gains as major indexes decisively breach some key levels. But it could also go the other way around.
Investors should be cautious about their exposure and cautious about new purchases, especially ahead of the CPI report.
When making new purchases, you should know your exit strategy before you enter. Consider taking quick partial wins to lock in some wins.
This is still a window market. But there are many intriguing stocks to watch across a variety of sectors. Prepare these watch lists.
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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