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

Dow Jones futures tilted higher early Wednesday, while S&P 500 futures and Nasdaq futures rose slightly with Fed chief Jerome Powell and key economic data on tap.




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The stock market rally closed mixed Tuesday with Apple (AAPL) once again a drag on the major indexes, along with Amazon.com (Amzn) and Tesla (TSLA). Meanwhile, Apple’s fellow Dow giants Boeing (BA), Chevron (CWC) and Goldman Sachs (GS) are close to buying points.

Hewlett Packard Enterprise (HPE) and NetApp ( NTAP ) headlines earnings reports late Tuesday, with CrowdStrike (CRWD) and Work day (WDAY) Kicking off big software reports this week.

HPE stock rose modestly in premarket trade after HPE earnings topped views. HP Enterprise stock, above its 200-day line, is working on a long cup base. NTAP stock plunged into extended action on weak NetApp revenue and guidance. WDAY stock jumped overnight on a Q3 hit and a $500 million buyback. CRWD stock dived despite beating Q3 looks as subscriptions came into light and the cybersecurity company implied a Q4 revenue miss.

separately, Horizon Therapeutics (HZNP) soared 30% overnight after confirming three potential bids.

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

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

Investors should be cautious about opening new positions until there is more clarity on the economy and Fed rate hike outlook. If anything they may want to lighten positions in the very short term.

CVX stock is on IBD leaderboard. BA stock is on SwingTrader.

Fed Chief Powell speech

Fed Chief Jerome Powell will speak at the Brookings Institution at 1:30 PM ET on Wednesday. He is expected to reinforce expectations that the central bank will shift to a 50 basis point rate hike on December 14. Markets see a 67.5% chance of a half-point move, but still a decent chance of a fifth straight Fed rate hike from 75 basis points. But he is also likely to indicate that rate hikes will continue into 2023.

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Whatever Powell says will quickly be overtaken by economic data. If inflation starts to show significant cooling and labor markets ease, even the most hawkish Fed policymakers will face slowing the pace of rate hikes and ending earlier than markets might expect. Hot price and employment data will strengthen the determination of many Fed doves. Of course, the economic data in the coming days may show mixed results, or marginal improvement.

Dow Jones futures today

Dow Jones futures rose about 0.1% against fair value. S&P 500 futures advanced 0.2%. Nasdaq 100 futures climbed 0.4%.

The 10-year Treasury yield fell 3 basis points to 3.72%.

Crude oil futures rose 2%, while natural gas futures were lower. Copper prices climbed 1%.

China’s official manufacturing index fell 1.2 points to 48 in November, further falling below the neutral 50 level and views for 49. The services index sank to 46.7 against forecasts for 48. China’s covid lockdowns have taken a serious toll on the economy.

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

Remember 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 meeting

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

The Dow Jones Industrial Average closed just above break-even in Tuesday’s stock market trading. The S&P 500 index fell about 0.2%. The Nasdaq composite declined 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 about the tech giant. On Tuesday, shares fell 2.6%, below their 50-day moving average. Above the 50-day line is 200-day resistance for AAPL stock. Apple has seen unrest at a massive Foxconn iPhone assembly plant in Zhengzhou amid an ongoing Covid lockdown. China lifted the Zhengzhou lockdown overnight.

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

Crude oil prices climbed 2.4% to $79.62 per barrel. Intraday Monday, crude oil futures hit their lowest levels of the year.

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

etc

Among the top ETFs, the Innovator IBD 50 ETF ( FFTY ) dipped 0.2%, while the Innovator 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%.

SPDR S&P Metals & Mining ETF (XME) gained 2.3% and the Global X US Infrastructure Development ETF (PAVE) 0.1%. US Global Jets ETF (JETS) advanced 1.8%. The Financial Select SPDR ETF ( XLF ) climbed 0.6%. The Health Care Select Sector SPDR Fund ( XLV ) fell 0.25%.

ARK Innovation ETF (ARKK), reflecting more speculative stock stocks, was down 0.5% and ARK Genomics ETF (ARKG) was down 0.4%. Tesla stock is a major holding across Ark Invest’s ETF.


Five best Chinese stocks to watch now


Dow stocks near buy points

Boeing stock rose 2% to 175.32 on Tuesday, back above a 173.95 cup-base buy point, according to MarketSmith analysis. Shares have been trading tightly in light band near the buy point after a big run-up on optimism for the aerospace giant. Analysts expect Boeing to return to profitability in 2023 after four years of losses. The recent break in BA stock has the 21-day line catching up.

Chevron stock climbed 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 this official buy point all month. An early entry near 167 on October 19 is probably the safer bet initially. But with Chevron stock straight into the 21-day and no longer extended from the 50-day, it looks more interesting.

GS stock was up 0.35% on Tuesday to 383.71. The investment bank has a 389.68 buy point from a 35%-deep cup-and-shovel base going back to November 2021. Investors also could see the latest pause as a shelf just above the buy range of a bottom base that Goldman Stock cleared early November. The 21-day moving average is close to catching up, while the 50-day line is starting to gain ground. The relative strength line is at a multi-year high reflecting the outperformance of GS stock against the S&P 500.

Market rally analysis

The stock market rally is pulling back with key technical tests and economic data on tap, along with uncertainty over China’s Covid policies.

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

The laggard Nasdaq fell below the 21-day line and is closing at its 50-day line.

Apple stock, Tesla and other megacaps have weighed 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 do not exaggerate the impact of Apple. Many leading stocks are testing either falling below buy points or round-tripping decent gains.

The silver lining is that the stock market is not rallying in Fed speeches and important economic data. This could mean that markets could bounce if there are any negative surprises, with the possibility of bigger gains if upcoming headlines are positive.

But the market rally will do what it will do.


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What to do now

With the markets pulling back, there aren’t a lot of stocks flashing buy signals. Investors probably should wait for Powell’s speech and the economic data to roll in before making significant new purchases. Investors may want to take at least some partial profits in winners, especially if the winning stocks are back to buy points.

If the market rally reverses higher soon, a large number of stocks will look actionable. But a lot of interesting stocks today will start looking damaged if the main indexes fall significantly from here.

So investors need to stay engaged and flexible. Keep your watchlists up to date but have exit strategies for your holdings as well.

Read the big picture every day to be 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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