Dow Jones Futures: Stock Market Rally Awaits Fed Chief Powell, Key Economic Data

Dow Jones futures edged higher early Wednesday, while S&P 500 futures and Nasdaq futures edged higher with Fed Chairman Jerome Powell and the start of key economic data on tap.




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The stock market rally ended mixed on Tuesday Appl ( AAPL ) once again a drag on the major indexes, with Amazon.com (AMZN) and Tesla (TSLA). At the same time, Apple’s partner Dow giants Boeing (BA) Chevron (CVX) and Goldman Sachs (GS) are near the points of purchase.

Hewlett Packard Enterprise (HPE) and NetApp ( NTAP ) headlined an earnings report late Tuesday CrowdStrike (CRWD) and working day (WDAY) Launching major software reports this week.

HPE stock rose moderately in premarket trading after beating HPE’s earnings outlook. HP Enterprise stock, above its 200-day line, is operating in a long cup base. NTAP stock has been mired in widespread action on weak NetApp earnings and guidance. WDAY stock rebounded from Q3 beat overnight and $500 million in purchases. CRWD stock sank despite beating Q3 comments as subscriptions came under fire and the cybersecurity company’s Q4 earnings decline.

On Wednesday morning, ADP will release its November employment estimates for personal payrolls. The Department of Labor will publish job openings in the October JOLTS report. Job openings are being closely watched by Fed chief Jerome Powell, who will speak on Wednesday afternoon.

All that presents the Fed’s favorite inflation measure, the PCE price index, on Thursday morning, along with the November jobs report on Friday, as well as a number of other notable economic releases.

Investors should be cautious about opening new positions until there is more clarity on the economy and the Fed’s rate hike outlook. If anything they may want clear positions in a very short time.

CVX stock is on the IBD Leaderboard. BA stock is on SwingTrader.

Fed Chairman Paul’s speech

Fed Chairman Jerome Powell will speak at the Brookings Institution on Wednesday at 1:30 p.m. ET. That is expected to strengthen expectations that the central bank will move to raise rates by 50 basis points on December 14. Markets see a 67.5% chance of a half-point move, but still a good chance of a fifth straight Fed rate hike of 75 basis points. But he also pointed to the possibility that rate hikes will continue until 2023.

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Anything Paul says will be quickly swallowed up by the economic data. If inflation begins to cool significantly and labor markets ease, even the most hawkish Fed policymakers will slow the pace of rate hikes and end earlier than markets expect. Hot price and employment data will make many feed pigeon solutions difficult. Of course, economic data in the coming days may show mixed results, or little progress.

Dow Jones futures today

Dow Jones futures rose a fraction above fair value. S&P 500 futures advanced 0.15%. Nasdaq 100 futures rose 0.3%.

The 10-year Treasury yield fell 2 basis points to 3.73%.

Crude oil futures were up more than 2%, while natural gas futures were lower. Copper prices rose by 2 percent.

China’s official manufacturing index fell 1.2 points to 48 in November, further below the neutral 50 level and narrowing the outlook for 49. The services index fell to 46.7, compared to forecasts for 48. China’s covid lockdown has seriously damaged the economy.

Still, Hong Kong’s Hang Seng index rose 2.2% on Tuesday after jumping 5.2% on Tuesday on hopes of easing Covid restrictions.

Note that overnight action in Dow futures and elsewhere does not necessarily translate into actual trading in the next regular stock market session.


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Stock market rally

After Monday’s sharp selloff, the stock market rally closed mixed on Tuesday.

The Dow Jones Industrial Average closed even above the break in stock market trading on Tuesday. The S&P 500 index fell about 0.2%. The Nasdaq composite was down 0.6%. The small-cap Russell 2000 rose 0.3%.

Apple stock fell 2.1%, its third straight significant decline, as China’s Covid cases, lockdowns and protests weighed on the tech giant. On Tuesday, shares fell 2.6%, below their 50-day moving average. The 200-day resistance for AAPL stock is falling above the 50-day line. Apple has seen unrest at Foxconn’s largest iPhone assembly factory in China.

Amazon stock fell 1.6% and Tesla stock fell 1.1%, both retreating from near their 21-day lines. Both are relatively close to market lows.

US crude oil prices rose 2.4 percent to $79.62 a barrel. On Monday, the price of crude oil reached the lowest level of the year.

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The 10-year Treasury yield rose 5 basis points to 3.75%.

ETFs

Among the top ETFs, the Innovative IBD 50 ETF ( FFTY ) fell 0.2%, while the Innovative IBD Breakout Opportunities ETF ( BOUT ) rose 0.5%. The iShares Expanded Tech 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%. The US Global Jets ETF ( JETS ) rose 1.8%. The Financial Select SPDR ETF ( XLF ) rose 0.6%. The Healthcare Select Sector SPDR Fund ( XLV ) fell 0.25%.

Reflecting the more speculative stock stocks, the ARK Innovation ETF ( ARKK ) shed 0.5% and the ARK Genomics ETF ( ARKG ) shed 0.4%. Tesla stock is a major holding among Ark Invest’s ETFs.


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Dow stocks near buy points

Boeing stock rose 2% to 175.32 on Tuesday, above a 173.95 cup base buy point, according to MarketSmith analysis. Shares are trading strongly on light volume near a buy point after a big improvement in optimism for the airline giant. Analysts expect Boeing to return to profitability in 2023 after four years of losses. The latest breakout in BA stock is the 21-day line.

Chevron stock rose 1.45% to 180.94, slightly below the 182.50 buy point and just above the 21-day line. CVX stock has been trading around its official buy point all month. An entry near 167 on October 19 was probably the safest bet initially. But with Chevron stock at 21 days and no longer extending beyond 50 days, it looks pretty interesting.

GS stock rose 0.35% to 383.71 on Tuesday. The investment bank has a 389.68 buy point from the manual base with a 35% deep cap going back to November 2021. Investors can also view the recent break above the buy range as a shelf on which Goldman stock has cleared. In early November the 21-day moving average is close to holding, while the 50-day line is starting to gain ground. The Relative Strength Index is at a multi-year high, reflecting the outperformance of GS stock relative to the S&P 500.

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Market rally analysis

Stock market rally rebounds with key technical tests and economic data on tap amid uncertainty over China’s Covid policies.

The S&P 500 index is extending its return from below its 200-day moving average, but still above its 21-day line. The Russell 2000, which fell below the 200-day and 21-day lines on Monday, climbed back above the 21-day.

The trailing Nasdaq fell below the 21-day line and closed at 50.

Apple stock, Tesla and other megacaps weigh in 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 exaggerate Apple’s influence. Many leading stocks are testing or falling below buy points or rally-trapping gains.

The silver lining is that the stock market doesn’t come to Fed speeches and key economic data. This could mean that markets can improve if there are no negative surprises, with the potential for big gains if future headlines are positive.

But the market rally does what it does.


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what to do now

There aren’t many stocks flashing buy signals as the markets pull back. Investors will probably wait for Paul’s speech and economic data before making significant new purchases. Investors may take at least a portion of the profits in the winners, especially if the winning stock is returned to purchase points.

If the market rallied quickly, a large number of stocks would appear viable. But most of the attractive stocks today will start looking bad if the major indexes fall significantly from here.

So investors must remain engaged and flexible. Keep your watch list up to date but also have an exit strategy for your stocks.

Read the big picture daily to stay in tune with market direction and leading stocks and sectors.

Please follow Ed Carson on Twitter @IBD_ECarson For stock market updates and more.

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