Dow Jones futures rose slightly overnight, along with S&P 500 futures and Nasdaq futures, with attention turning to Wednesday’s Federal Reserve meeting and whether policymakers will confirm or slash Fed pivot hopes.
The stock market rally reversed lower from early gains Tuesday as stronger-than-expected economic data is not what the Fed wants to see. Megacap technicals continue to weigh on the indexes, especially the Nasdaq. Amazon.com (AMZN) and Google parent Alphabet (GOOGL) tumbled to fresh bear-market lows while Apple (AAPL) and Microsoft (MSFT).
Advanced micro devices (AMD), lithium producer Livent (LTHM), drug distributor McKesson (MCK), Paycom Software (PAYC), and shale oil and gas producers Devon Energy (DVN) headlines key earnings overnight.
AMD stock rose despite weak results. Livent fell because the growth of the hot revenue was not quite hot enough. Devon Energy stock retreated on a dividend however. PAYC stock was higher on strong earnings while MCK stock was not trading after mixed results.
DVN stock is on the IBD 50.
Meanwhile Tesla (TSLA) competitor BYD (BYDDF) will soon report October sales, following lackluster-at-best deliveries from Nay (NIO), Lee Auto (Lee) and Xpeng (XPEV). BYD stock rose 2.6% Tuesday, while Tesla stock closed up 0.1%, both off intraday highs.
The Federal Reserve is expected to raise rates by 75 basis points for a fourth straight meeting. But the market is split on whether policymakers will raise rates by 50 or 75 basis points in December.
Some relatively tame inflation data and various central bank moves around the world – including some hints from Fed officials – have boosted hopes of a Fed pivot to smaller rate hikes.
The Fed policy statement is due at 2 pm ET Wednesday, with Fed Chief Jerome Powell’s news conference at 2:30 pm Investors will be looking for any Fed pivot hints. Powell may not want to give clear signals to maintain maximum flexibility.
The Fed chief will likely include caveats about reacting to key data. The October jobs report is due on Friday, following a stronger-than-expected September JOLTS survey.
Dow Jones futures today
Dow Jones futures climbed 0.15% against fair value. S&P 500 futures advanced 0.2% and Nasdaq 100 futures rose 0.3%.
The 10-year Treasury yield fell 2 basis points to 4.03%.
Crude oil futures rose 10%.
Remember 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 in the stock market rally on IBD Live
Stock market meeting
The stock market rally retreated on Tuesday. The major indexes opened solidly higher, fueled by lower Treasury yields and unconfirmed chatter that China may move to ease its strict zero-covid policy.
But at 10 a.m. ET, job openings unexpectedly popped in September, while the ISM manufacturing index remained above the break-even 50 level in October. Treasury yields rebounded and stocks quickly turned lower.
The Dow Jones Industrial Average dipped 0.2% in Tuesday’s stock market trading. The S&P 500 index fell 0.4%. The Nasdaq composite retreated 0.9%. The small-cap Russell 2000 climbed 0.25%, its eighth straight advance.
Amazon stock skidded 5.5%, undercutting Friday’s low to its worst level since April 2020. That’s after plunging 13% last week on earnings. AMZN stock has fallen for five straight sessions in heavy volume.
Google stock slumped 4.3% to its worst since January 2021, after skidding 4.8% last week.
Apple stock fell 1.75%, reversing from near its 200-day line to close just below its 50-day. AAPL stock was up 5.75% last week.
Microsoft stock rose 1.7%, not far from bear-market lows. MSFT stock fell 2.6% last week.
The 10-year Treasury yield fell 3 basis points to 4.05%, but finished near session highs. The 10-year yield tumbled to 3.955% shortly after the open, but once again found support at its 21-day moving average. The US it. Dollar hit early losses.
Crude oil prices rose 2.1% to $88.37 per barrel. Crude futures rose on hopes that China will adjust its Covid policies, as well as a report that the Saudis are on high alert for an Iranian attack. Natural gas futures plunged 10% after spiking nearly 12% Monday.
Why this IBD tool simplifies the search for top stocks
Among the top ETFs, the Innovator IBD 50 ETF (FFTY) climbed 0.6%. The iShares Expanded Tech-Software Sector ETF ( IGV ) sank 1.3%, with MSFT stock a core holding. The VanEck Vectors Semiconductor ETF (SMH) rose 0.7%, with AMD stock a major component.
SPDR S&P Metals & Mining ETF (XME) gained 1.5% and the Global X US Infrastructure Development ETF (PAVE) gained 0.6%. The Energy Select SPDR ETF (XLE) is up 1%, with DVN stock a top 10 holding. The Health Care Select Sector SPDR fund ( XLV ) was up 0.1%.
Reflecting more speculative stock stocks, ARK Innovation ETF ( ARKK ) rose 1 cent while ARK Genomics ETF ( ARKG ) climbed 1.3%
Tesla stock is a major holding across Ark Invest’s ETF. Tesla Cybertruck mass production will begin at the end of 2023, Reuters reported early Tuesday.
Cathie Wood’s Ark owns a small stake in BYD stock. BYD’s EV and plug-in hybrid sales outpace Tesla’s total, though the U.S.
Five best Chinese stocks to watch now
AMD earnings and sales slightly missed lowered views, after the chip giant reported preliminary revenue that was far below consensus. AMD also signaled that Q4 revenue will fall slightly short of consensus, but would be up approximately 14% versus a year earlier.
AMD stock popped 4% in overnight trade. Shares dipped 0.7% to 59.66 on Tuesday. AMD stock has bounced a bit from the October 13 bear market low of 54.57, but not much.
Nvidia (NVDA), which competes with AMD in graphics chips, was slightly higher in after-hours trading.
Livent earnings skyrocketed, topping views but revenue fell just short despite more than doubling against a year earlier. LTHM stock fell 6% in extended action. Shares lost 0.8% to 31.33 on Tuesday, reversing lower to around its 50-day line. Livent stock has a 36.48 cup-base buy point, according to MarketSmith analysis.
ALB stock, with a similar chart, edged lower in limited after-hours trading. Lithium giant Albemarle (ALB) reports late Wednesday.
Devon Energy’s earnings beat estimates, but the oil producer is cutting its dividend by 13%. DVN stock fell 2.7% overnight. Shares were down 5 cents on Tuesday to 77.30, with a range of 75.37 cup-with-scoop buy points. DVN stock remains slightly extended from a rising 50-day line.
Paycom earnings topped views, with revenue guidance also strong. PAYC stock was little changed in extended trade. Shares retreated nearly 1% on Tuesday to 342.72, just above the 50-day line and below a trendline. A strong post-earnings move could offer an early entry. PAYC stock has a 402.88 consolidation buy point.
McKesson earnings just missed while revenue dipped slightly. MCK stock is not yet trading in overnight action. Shares fell 1.85% to 382.16 on Tuesday, but held within range of a 375.33 flat-base buy point. That flat base is part of a base-on-base pattern.
Cardinal health ( CAH ), which reports Friday, was also not trading after-hours. CAH stock is slightly extended from a buy point.
Market rally analysis
The major indexes opened strong, but backed off on stronger-than-expected economic data.
The Dow Jones fell back below its 200-day line, while the Russell 2000 moved to the level. The S&P 500 is still holding the 50-day line, while the Nasdaq is hitting resistance near that area.
Much of Tuesday’s weakness reflected weakness in AMZN stock, Google and other megacaps.
The Invesco S&P 500 Equal Weight ETF ( RSP ) rose 0.2%, trading between the 200-day and 50-day lines.
Advancing stocks led decliners on the NYSE and Nasdaq.
Investors should not overthink Tuesday’s market rally action, coming ahead of the Fed meeting announcement and Fed chief Powell’s comments.
But the major indexes and leading stocks have rallied largely in anticipation of a Fed pivot. If Powell gives a hawkish surprise, the stock market rally could see a big sell-off.
Tuesday’s stock market and Treasury yield moves may pale next to the post-Fed reaction.
The post-Fed reaction could continue, perhaps reversing, on Thursday. Friday’s jobs report will also likely calm markets.
Leading stocks showed mixed action, with heavy gains still driving individual names higher or lower.
Time the market with IBD’s ETF Market Strategy
What to do now
The stock market rally appears to be in good shape on a technical basis, despite Tuesday’s downside reversal.
Investors should probably hold off on adding exposure until after the Fed rate hike and Powell’s comments. They may choose to avoid exposure slightly heading into Wednesday’s afternoon announcement depending on their risk tolerance.
While the Fed meeting is like an earnings report for the market rally, don’t forget actual earnings.
Earnings aren’t as market moving as last week’s megacap releases, but still have a huge impact on individual stocks.
The coming days will be key for the market rally. So have your watchlists ready. Stay engaged and ready to add or reduce exposure.
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.
You may also like:
Want to get quick profits and avoid big losses? Try SwingTrader
Best growth stocks to buy and watch
IBD Digital: Unlock IBD’s premium stock lists, tools and analysis today
Tesla vs. BYD: Which EV Giant is a better buy?
Fed’s Powell Will Try To Stop S&P 500 Rally, But Can He?