Dow Jones futures fell slightly after hours as attention turned to the announcement of the Federal Reserve’s meeting on Wednesday, along with S&P 500 futures and Nasdaq futures. The tiny device of the future (AMD) and SNAP stocks headline overnight earnings.
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The stock market rally rebounded on Tuesday, recouping much of Monday’s retreat.
Ahead of the Fed meeting announcement on Wednesday afternoon, several key economic reports and an OPEC+ meeting will arrive in the morning.
AMD and Snapchat parent Snap (SNAP) reports after closing.
AMD earnings and revenue slightly beat the view. The chipmaker sees Q1 revenue down 10%, worse than consensus but better than feared. AMD stock rose modestly after hours. Shares rose 3.7% to 75.15 on Tuesday. AMD stock is operating in a bottoming base with a 79.33 buy point. It’s below the 200-day line, but a real breakout involves clearing that key level.
AMD is a competitor Nvidia (NVDA) edged lower in late trading. NVDA stock rose nearly 2% to 195.37 on Tuesday, in buy range from a short cup base.
Snap topped earnings views, but missed revenue. The social network sees Q1 revenue tracking for a 2%-10% decline. SNAP stock plunged overnight. Shares rose 4.2% to 11.56 on Tuesday.
Snap earnings and presage guidance Meta platform (META) and Pinterest (pin). Facebook Parent Meta platform (Meta) report on Wednesday night, with Pinterest (pin) will be next monday. META stock fell slightly of late after closing just below the 200-day line. Pin stock has decreased slightly. Pinterest has a three-week tight entry above key moving averages.
The video embedded in this article discusses Tuesday’s market rally and the upcoming Fed rate hike decision, and analyzes Nvidia stock, Arista Networks (ANET) and Etsy (ETSY).
China EV Sales
Earlier on Wednesday, Tesla rival China take (NIO), Lee Auto (LI) and expeng (XPEV) will report January deliveries. Lunar New Year holidays, as well as heavy Covid infections hit sales last month. So it is difficult to make a decision especially in view of February and beyond Tesla ( TSLA ) price cuts that rivals are still reacting to.
Nio stock and Xpeng are bottoming, but below their 200-day lines. Lee Otto is butting against the 200 day. The EV and battery giant BYD (BYDDF) is flashing an aggressive entry above its 200-day line, with January selling due later this week. Tesla stock is up nearly 41% in January, vaulting above its 50-day line, but without a clear buy point.
Fed Rate Hike Outlook
The Federal Reserve is set to slow rate hikes for a second straight meeting, raising the fed funds rate by a quarter point at 2 pm ET Wednesday, to a 4.5%-4.75% range. This followed four consecutive 75-basis-point increases in November followed by a half-point increase in December.
Markets overwhelmingly expect another quarter-point Fed rate hike in late March, to 4.75%-5%. But then investors aren’t looking for any more hikes.
So the central bank’s indication of rate hikes will be important for the outlook, inflation and the economy. Will the Fed policy statement keep the language of “sustained growth” expectations?
Fed chief Jerome Powell, speaking at 2:30 pm ET, will certainly emphasize the Fed’s commitment to keeping rates high to reduce inflation. But with rate hikes slowing and nearing a break, Fed chief Powell may be more nuanced, keeping the central bank’s options open.
Ahead of the Fed meeting announcement, investors will get another batch of economic data. The ADP employment report for January will be released at 8:15 a.m. ET, December job openings and the January ISM manufacturing index will be released at 10 a.m. ET.
The January jobs report is due on Friday. Before the March meeting, the Fed will receive the February jobs report, as well as the January and February CPI inflation reports.
Earlier on Tuesday, the employment cost index came in slightly lighter than expected. The ECI, a broad measure of workers’ compensation, rose 1% in the fourth quarter, slowing growth in the third quarter.
Dow Jones futures today
Dow Jones futures fell 0.2% vs. fair value. S&P 500 futures fell 0.2%. Nasdaq 100 futures fell 0.4%.
Note that overnight action in Dow futures and elsewhere does not necessarily translate into actual trading in the next regular stock market session.
Join IBD experts as they analyze actionable stocks on the stock market rally on IBD Live
Stock market rally
The stock market rally had a strong session, rebounding from Monday’s pullback.
The Dow Jones Industrial Average rose 1.1% in Tuesday’s stock market trading. The S&P 500 index popped 1.5%. The Nasdaq Composite jumped 1.7%. The small-cap Russell 2000 jumped 2.4%.
U.S. crude oil prices rose 1.25% to $78.87 a barrel. OPEC+, which includes the oil cartel and key allies like Russia, is meeting Wednesday morning. Markets expect no change in OPEC+ production quotas.
The 10-year Treasury yield fell 2 basis points to 3.53%, helped by a relatively subdued ECI report.
ETF
Among growth ETFs, the Innovator IBD 50 ETF ( FFTY ) rose just over 2%. The iShares Expanded Tech-Software Sector ETF ( IGV ) advanced 1.4%. The Vanek Vector Semiconductor ETF ( SMH ) rose 1.5%, with AMD and NVDA stocks the main holdings.
The SPDR S&P Metals & Mining ETF (XME) gained 1.15% and the Global X US Infrastructure Development ETF (PAVE) was up 2.3%. The US Global Jets ETF ( JTS ) rose just over 1%. The SPDR S&P Homebuilders ETF (XHB) rose 4.8% amid strong earnings. The Energy Select SPDR ETF (XLE) rose 0.9% and the Financial Select SPDR ETF (XLF) rose 1.4%. The Healthcare Select Sector SPDR Fund ( XLV ) rose 1.3%
Reflecting more speculative story stocks, the ARK Innovation ETF ( ARKK ) popped 3.7% and the ARK Genomics ETF ( ARKG ) popped 3.1%. Tesla stock is a major holding across the Arc Invest ETF. Kathy Woods also owns a small stake in Tesla rival BYD’s stock
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Market rally analysis
The stock market rallied on Tuesday, making Monday’s pullback look like a natural break around key levels between strong advances.
The Nasdaq Composite retook the 200-day line, right near its December peak. The S&P 500 and Dow Jones rose strongly, with the blue chips finding support near their 50-day lines.
The Russell 2000 index recovered all of Monday’s losses and then some, now above late 2022 highs.
Major indices decisively clearing their late 2022 highs would be a very bullish sign.
But the Fed’s meeting on Wednesday loomed large. The market rally is anticipating an end to rate hikes in March or possibly May. Wednesday’s economic data and Friday’s jobs report will help markets interpret Fed chief Powell’s statement.
Don’t forget about earnings. AMD said late Tuesday. Meta platform Wednesday night and because apple (AAPL), Amazon.com (AMZN) and Google parent the alphabet (GOOGL) tapped Thursday night, along with hundreds of others.
These earnings reports can impact major indices as well as sectors and, of course, individual names.
Just as AMD earnings will affect Nvidia stock and affect Snap Meta, Meta’s spending plans will affect the likes of Arista Networks and Pure storage (PSTG). Amazon earnings will likely be a catalyst for Etsy stock. Apple’s earnings will swing the iPhone ecosystem while Google’s earnings will hit various companies.
ANET stock and Pure Storage are near early entries, while Etsy, a swingtrader holding, is just below a buy point.
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what to do now
The stock market rally is doing well with a strong uptrend and only a slight pullback. Leading stocks flashing buy signals that are usually working. It has been a good time to add exposure.
Fed meeting announcements and Fed chief Powell could be a catalyst for big market moves. But so can earnings and economic data. While the technical picture of the market and certain stocks looks promising, investors should not be too aggressive about taking new positions for the next few days.
Remember, if you’re going to be aggressive in entering a stock, you need to be prepared to exit quickly.
Work on your watchlist. Dozens of stocks are setting up or flashing buy signals. You want to analyze potential targets and keep your eyes on them before pulling the trigger.
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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