Dow Jones futures were little changed early Wednesday, along with S&P 500 futures and Nasdaq futures.
The stock market rally was indecisive for much of Tuesday, but the major indexes gained steam, 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 Tuesday, flashing a new buy signal after a similar move fizzled at the end of 2022. First Solar (FSLR) rebounded from its 50-day line, also providing an early entry. But ELF Beauty (ELF) and Super Micro Computer (SMCI) tumbled after Monday’s reversals.
Investors should remain cautious, especially with the CPI inflation report looming.
Meanwhile, Wells Fargo (WFC) will largely exit the mortgage business amid regulatory pressure, CNBC reported late Tuesday. It’ll only offer home loans to existing bank and wealth management customers and borrowers in minority communities. WFC stock was little changed in extended trade.
Axcelis Technologies (ACLS), which made a strong move over the last several sessions, said revenue for the December-ending fourth quarter topped $250 million vs. the chip-equipment maker’s prior guidance of $232 million to $240 million. ACLS stock edged higher after hours.
Impinj (PI) says Q4 sales exceeded $76 million vs. the RFID-chip maker’s prior guidance of $71.5 million-$73.5 million. PI stock, already slightly above the 50-day line, rose solidly overnight. That could offer an early entry or come close to Impinj stock’s flat base buy point. PI stock also is on Leaderboard.
Earnings season also begins to pick up late in the week. Taiwan Semiconductor (TSM) reports on Thursday morning. On Friday, JPMorgan Chase (JPM), Bank of America (BAC), Citigroup (C) and Wells Fargo all report before the open, along with Delta Air Lines (DAL) and UnitedHealth.
Dow Jones Futures Today
Dow Jones futures rose 0.1% vs. fair value. S&P 500 futures edged higher and Nasdaq 100 futures were flat.
The 10-year Treasury yield fell 3 basis points to 3.59%.
Crude oil futures declined 1%.
Stock Market Rally
After Monday’s disappointing fade, the stock market rally strengthened Tuesday afternoon, closing near session highs.
The Dow Jones Industrial Average rose 0.6% in Tuesday’s stock market trading. The S&P 500 index climbed 0.7%. The Nasdaq composite climbed 1%. The small-cap Russell 2000 popped 1.5%
Tesla stock edged down 0.8% after bouncing 5.9% on Monday. Shares reversed higher Friday after setting a bear market low of 101.06 after the EV giant announced big price cuts in China and other key Asian markets. TSLA stock needs a lot of repair.
Tesla has applied to Texas for a big expansion of its Austin assembly plant, the Austin Business Journal reported late Tuesday. Tesla Austin is still ramping up to its existing capacity.
UNH stock dipped 0.8%, hitting its worst levels since last June. The Dow Jones health insurer has tumbled 8.3% already in 2023, after ending 2022 in reasonably good shape. UnitedHealth earnings and guidance Friday will be important for the suddenly embattled sector.
U.S. crude oil prices rose 0.7% to $75.12 a barrel. Natural gas prices tumbled 6.9%.
The 10-year Treasury yield jumped 10 basis points to 3.62% after skidding 20 basis points in the prior two sessions.
Among growth ETFs, the Innovator IBD 50 ETF (FFTY) rose 1.1%, while the Innovator IBD Breakout Opportunities ETF (BOUT) edged up 0.15%. The iShares Expanded Tech-Software Sector ETF (IGV) eked out a 0.1% gain. The VanEck Vectors Semiconductor ETF (SMH) advanced 1.3%, just topping the 200-day line after clearing the 50-day on Friday. TSM stock is a big SMH holding.
Reflecting more-speculative story stocks, ARK Innovation ETF (ARKK) jumped 2.5% and ARK Genomics ETF (ARKG) 3.6%. Tesla stock is still a major holding at Ark Invest, with Cathie Wood bolstering her position in recent weeks.
SPDR S&P Metals & Mining ETF (XME) ran up 2.5% and the Global X U.S. Infrastructure Development ETF (PAVE) climbed 1.6%. U.S. Global Jets ETF (JETS) ascended 2.4%, with DAL stock among the notable holdings. SPDR S&P Homebuilders ETF (XHB) rose 1%. The Energy Select SPDR ETF (XLE) advanced 0.7% and the Financial Select SPDR ETF (XLF) gained 0.6%. The Health Care Select Sector SPDR Fund (XLV) closed up 0.8%, with UNH stock a top XLV holding.
Market Rally Analysis
The stock market rally spent much of the morning around break-even, but finished Tuesday with a relatively strong performance.
The S&P 500 rose above the 50-day line. The 200-day average is modestly above that.
The Dow Jones rebounded from a test of its 50-day line after moving above that key level on Friday. The Nasdaq rose from its 21-day line with the 50-day line not far away.
The Russell 2000 is back above its 50-day line, just below its 200-day.
The S&P MidCap 400 rose on Tuesday after finding support at the 50-day. That’s after jumping above its 21-day, 50-day and 200-day lines on Friday. Invesco S&P 500 Equal Weight ETF (RSP) looks quite similar.
RSP and the MidCap 400 highlight how big caps such as Apple (AAPL), Tesla and UNH stock have weighed on the market.
A sustained stock market rally may not take hold until there is clarity on when the Federal Reserve will stop hiking rates. Markets strongly expect just a quarter-point hike at the Feb. 1 policy meeting and again in late March.
Thursday’s CPI inflation report could lock in expectations for a quarter-point hike. Inflation should continue to trend lower in the coming months, if only because the year-over-year comparisons are so steep.
Leading Stocks Mixed
A number of leading stocks have flashed buy signals in recent days and weeks. But most have quickly faltered. In some cases, such as MEDP stock, they bounce back a few days later.
Medpace jumped 5.9% to 223.29 in heavy volume, rebounding from the 50-day line and clearing its Dec. 29 high, when MEDP tried to move out.
First Solar soared 7.4% to 171.01, continuing a mini-win streak. The move from the 50-day line offered an early entry within a new base, but is now looking a little extended. But the 173.78 official buy point isn’t far away.
Other names keep tumbling.
ELF stock had a promising breakout Friday, but gave up most of those gains Monday and plunged 8.3% on Tuesday to 51.15, knifing below the 50-day line and undercutting the low of its flat base.
SMCI stock soared Monday morning, offering an early entry, but closed only fractionally higher. On Tuesday, shares gapped down 7.55%, below the 50-day line, after a short-seller report.
Many other stocks are hovering right around potential buy points.
What To Do Now
The stock market rally is still in force, but the major indexes, sectors and especially leading stocks are prone to reversals. Thursday’s CPI inflation report could trigger big gains, with the major indexes pushing decisively above some key levels. But it could also go the other way.
Investors should be cautious about their exposure and be wary of new buys, especially before the CPI report.
If you do make new buys, know your exit strategy before going in. Consider taking partial profits quickly to lock in some gains.
This is still a window-shopping market. But there are a lot of intriguing stocks to watch from a variety of sectors. Get those watchlists ready.
Read The Big Picture every day to stay in sync with the 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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