Dow Jones futures edged higher overnight, along with S&P 500 futures and Nasdaq futures, while crude oil prices fell solidly overnight after a report reported that President Joe Biden is considering a major release of strategic reserves over several months, to fight inflation. Important inflation data are available on Thursday.
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Major indices slipped slightly on Wednesday amid a strong stock market rally since March 14. Crude oil futures and other commodity prices rallied while government bond yields fell.
Banks were big losers as government bond yields fell and the yield curve was almost inverted. Chips and software also fell, albeit often after several days of gains. apple stock, Tesla (TSLA), Microsoft (MSFT) and Google parent alphabet (GOOGL) barely touched. Apple (AAPL) is trading in a buy range although a market pause would help. Microsoft and Google stock are above early entries, while Tesla stock is nearing buy points.
Meanwhile, energy, fertilizer and other commodity stocks rallied on Wednesday after retreating on Tuesday. Many are extended. But oil major sleeve (SHEL) is just below a buy point while effectively lagging Philip 66 (PSX) hovers around a potential entry point.
Release of strategic reserves
President Biden’s team is considering a plan to release about a million barrels a day from strategic reserves over several months to combat high gasoline prices and supply problems amid the Russian invasion of Ukraine. This emerges from several reports on Wednesday evening. An announcement could come on Thursday.
Biden’s approval rating has fallen to 40-year highs with inflation. Polls suggest Republicans will regain control of Congress in November.
US crude prices fell more than 4%.
inflation data
On Thursday at 8:30 am ET, the Commerce Department will release new inflation data as part of the February Income and Expenditure Report. The consumer spending index, the Fed’s favorite indicator of inflation, is expected to rise 6.4% year-on-year. PCE core inflation should reach 5%. On Friday, the Department of Labor will publish the jobs report for March.
The next Federal Reserve monetary policy meeting isn’t until May 3-4, so there will be some inflation readings before then. Still, the inflation and employment report will signal whether policymakers will hike rates by 50 basis points in early May and in future sessions, versus moves of a quarter point.
Tesla and Microsoft stocks are on the IBD leaderboard. Microsoft and Google stocks are IBD long-term leaders. Tesla shares, Google and Microsoft are on the IBD 50.
Dow Jones futures today
Dow Jones futures were up 0.2% from fair value. S&P 500 futures were up 0.3%. Nasdaq 100 futures were up 0.5%.
Thursday’s inflation report is likely to move Dow futures and Treasury yields.
Keep in mind that overnight action in Dow futures and elsewhere doesn’t necessarily translate to actual trading in the next regular trading session.
Join IBD experts as they analyze actionable stocks in the stock market rally on IBD Live
stock market rally
The stock market rally had a down phase led by techs and small caps.
The Dow Jones Industrial Average fell 0.2% in trading on Wednesday. The S&P 500 Index was down 0.6%, with PSX stock among the top performers. The Nasdaq Composite fell 1.2%. Small cap Russell 2000 fell 1.9%.
Crude oil prices rose 3.4% to $107.82 a barrel, despite being below morning highs. Gold and base metals also gained.
The 10-year government bond yield fell 4 basis points to 2.36%. The 2-year yield fell 4 basis points to 2.31%, with a spread of just 5 basis points. The yield curve is approaching inversion and indeed did so briefly on Tuesday. An inverted yield curve is bad news for traditional lenders, with regional banks being big losers on Wednesday.
It’s also a possible recession signal, although the general uptrend in interest rates suggests otherwise. Also, an inverted yield curve does not typically signal a recession or stock market correction for several months.
ETFs
Among the best ETFs, Innovator IBD 50 ETF (FFTY) fell 1.4%, while Innovator IBD Breakout Opportunities ETF (BOUT) fell 0.4%. The iShares Expanded Tech-Software Sector ETF (IGV) is down 1.9%, with MSFT stock a key IGV component. The VanEck Vectors Semiconductor ETF (SMH) lost 2.9%.
The SPDR S&P Metals & Mining ETF (XME) was up 1.1% and the Global X US Infrastructure Development ETF (PAVE) was down 0.9%. The US Global Jets ETF (JETS) fell 0.3%. The SPDR S&P Homebuilders ETF (XHB) plunged 3.6% RH (RH) led some home retailers sharply lower. The Energy Select SPDR ETF (XLE) was up 1.2% and the Financial Select SPDR ETF (XLF) was down 0.7%, despite regional banks being much more impacted. The Health Care Select Sector SPDR Fund (XLV) edged up 0.2%.
ARK Innovation ETF (ARKK) slumped 3.8% and ARK Genomics ETF (ARKG) 3.6%, reflecting more speculative story stocks. Both remained above their 50-day moving average. Tesla stock remains Ark Invest’s #1 ETF.
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Shell stock
Shell shares rose 4% to 55.61, rebounding from its 50-day moving average. Investors could buy SHEL shares now or wait for a break above the official buy point of 56.23 flat-base. The flat base is part of a base-on-base formation.
The relative strength line for SHEL stock is holding near highs after a sharp rise in late 2021.
Phillips 66 bearings
PSX shares rose 4.8% to 87.44, hitting its 50-day moving average, as refiners and other energy players rallied along with crude oil prices. Phillips 66 has an official buy point of 94.44 in a consolidation that dates back to last June. Investors could use 93.64, just above February short-term high, as an early entry. But aggressive traders could have used Wednesday’s move as a starting point to place a position, both off the 50-day moving average and breaking a short-term trendline.
Apple stock
Apple shares fell 0.7% to 177.77, ending an 11-day winning streak.
On Tuesday, shares were up 1.9% to 178.96, breaking a double bottom buy point of 176.75.
Investors could still buy AAPL stock or wait for a pause or a grip. The RS line is again at record highs, reflecting the performance of Apple stock versus the S&P 500 index. The RS line is the blue line in the provided charts.
Google Stock
Google shares fell 0.4% to 2,838.77 and continued to trade tightly over the past few sessions. GOOGL shares can be used from the 200-day line as an early entry or as a long-term leader. A grip around current levels would also be positive. The official buy point is currently at 3,0313.03. The RS line is just below highs but has been moving sideways since early September.
Microsoft stock
Microsoft shares fell 0.5% to 313.86 after recovering from its 200-day moving average in the previous two sessions. Investors could buy MSFT shares here as early entry or long-term leaders, or after they surpass Wednesday’s intraday high. The official buy point is 349.77.
Tesla stock
Tesla shares fell 0.5% to 1,093.99 after rising in 10 of the previous 11 sessions. The EV giant is racing towards a 1208.10 cup base buy point and an early entry around 1150. Ideally, Tesla stock would form a grip and create a cheaper, lower-risk buy point. And this grip should be felt. A barely perceptible grip on a daily chart is unlikely to dislodge many weak holders from a rapidly charging TSLA stock.
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Analysis of the market rally
To paraphrase the Rolling Stones, you don’t always get what you want, but sometimes you get what you need. The stock market rally may not rise every day as key indices decline on Wednesday. But that’s in the context of a rapid rise in recent weeks. It is natural for the Nasdaq to meet resistance near its 200-day moving average.
Slight losses in Apple, Microsoft, Google and Tesla stocks helped mask declines in major indices, along with gains in commodities plays.
But even so, the indices and guide values do not look damaged. The market rally could arguably take several days to halt or pull back. That would help Apple and Tesla, among others, handle the stock form. But the market will do what it will.
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What now
The stock market rally cannot go up every day. Investors should therefore remain optimistic but level-headed. Is this a long-awaited market break and will it last longer than a day or two? Don’t try to make predictions, just be ready to react to the actions of the market.
Movements between commodity and growth stocks over the past two sessions demonstrate the benefits of a portfolio of diversified leading companies. It’s also a reason why investors should gradually increase their exposure to avoid making big new bets on short-term highs.
Keep working on a broad watchlist and closely follow a select group of stocks in or near buy zones.
Read The Big Picture every day to keep up 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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