Dow Jones Futures: Market Rise to Fed Rate Hike; AMD, Snap are important factors of late
Dow Jones futures fell modestly after hours, along with S&P 500 futures and Nasdaq futures, with attention to the Federal Reserve meeting on Wednesday. Advanced Micro Devices ( AMD ) and SNAP shares grabbed the headlines overnight.
The stock market rally picked up again on Tuesday, retrieving much of Monday’s retreat. The Nasdaq Composite is now in a power trend.
Ahead of the Fed meeting announcement on Wednesday afternoon, several key economic reports and an OPEC+ meeting will arrive tomorrow morning.
AMD and Snapchat parent Snap (SNAP) reported after the close.
AMD’s earnings and revenue slightly beat views. The chip maker sees first-quarter revenue falling by 10%, worse than consensus, but better than feared. AMD shares rose slightly after hours. The stock rose 3.7% to 75.15 on Tuesday. AMD stock is working on a bottom with a buy point at 79.33. It is well below the 200-day mark, but a real breakout would involve clearing that key level.
AMD rival Nvidia (NVDA) was down in late trading. NVDA shares rose nearly 2% to 195.37 on Tuesday, in buy territory from a short cup base.
Snap revenue topped views, but revenue just missed the mark. The social network sees revenue tracking in the first quarter with a decline of 2-10%. SNAP stock plunged 15% overnight. Shares climbed 4.2% to 11.56 on Tuesday.
Snap earnings and guidance Meta platforms (META) and Pinterest (PINS). Facebook parent Meta platforms (META) reports on Wednesday evening, with Pinterest (PINS) will be delivered next Monday. META stock fell a bit late, after closing just below the 200-day mark. The PINS share fell modestly. Pinterest has a three-week tight entry that is modestly above the major moving averages.
The video embedded in this article discussed Tuesday’s market rally and the upcoming Fed rate hike decision, and analyzed Nvidia stock, Arista Networks (ANET) and Etsy (ETSY).
China EV sales
Early Wednesday, Tesla competes in China Nine (NIO), Li Auto (LI) and Xpeng (XPEV) will report January deliveries. The Lunar New Year holiday, as well as heavy Covid infections, hit sales last month. So it’s hard to draw conclusions about February and beyond, especially in the wake of Tesla (TSLA) price cuts that rivals are still reacting to.
The Nio share and Xpeng are at the bottom, but well below their 200-day lines. Li Auto is fighting the 200th day. EV and battery giant BID (BYDDF) is showing an aggressive entry from its 200-day line, with January selling later this week. Tesla shares rose nearly 41% in January, jumping above the 50-day line, but do not have a clear buy point.
Outlook for Fed rate hike
The Federal Reserve is set to cut interest rate hikes for a second meeting in a row, raising the Fed Funds rate by a quarter point at 2pm ET Wednesday, to a range of 4.5%-4.75%. It follows an increase of half a point in December after four straight increases of 75 basis points in November.
Markets overwhelmingly expect a Fed rate hike of 4.75%-5% at the end of March. But then the investors prefer that there are no longer any increases.
So the central bank’s hints about the outlook for the rate hike, inflation and the economy will be key. Will the Fed policy statement continue to expect “ongoing increases?”
Fed Chairman Jerome Powell, who will speak at 2:30 PM ET, will certainly emphasize the Fed’s commitment to keeping interest rates high to bring down inflation. But with rate hikes slowing and nearing a pause, Fed chief Powell may be more subtle, keeping the central bank’s options open.
Before the announcement of the Fed meeting, investors will get a new batch of economic data. The ADP employment report for January will be out at 8:15 a.m. ET, with December job vacancies and the January ISM manufacturing index at 10 a.m. ET.
On Friday, the January jobs report comes out. Before the March meeting, the Fed will get the jobs report from February, as well as the CPI inflation reports for January and February.
Early on Tuesday, the employment cost index came in slightly lower than expected. The ECI, a broad measure of workers’ compensation, rose 1% in the 4th quarter, the third straight quarter of slowing growth.
Dow Jones Futures today
Dow Jones futures fell 0.2% relative to fair value. S&P 500 futures fell 0.3 percent. Nasdaq 100 futures fell 0.45 percent.
The 10-year government yield fell 2 basis points to 3.51%.
Caixin China’s manufacturing index rose 0.2 points in January to 49.2. A day earlier, the official Chinese manufacturing index jumped 3.1 points to 50.1, just above the break-even 50 level.
Keep in mind that overnight action in Dow futures and elsewhere does not necessarily translate into actual trading in the next regular session.
Join IBD experts as they analyze actionable stocks in the stock market rally on IBD Live
Stock market rally
The stock rally had a strong session, rebounding from Monday’s retreat.
The Dow Jones Industrial Average rose 1.1% in Tuesday’s trading. The S&P 500 index rose 1.5 percent. The Nasdaq index rose 1.7 percent. The small-cap Russell 2000 jumped 2.4%.
US crude oil prices rose 1.25% to $78.87 a barrel. OPEC+, which includes the oil cartel and key allies such as Russia, will meet on Wednesday morning. Markets expect no change in OPEC+ production quotas.
The 10-year Treasury yield fell 2 basis points to 3.53%, helped by the relatively tame ECI report.
Among growth ETFs, the Innovator IBD 50 ETF ( FFTY ) climbed just over 2%. The iShares Expanded Tech-Software Sector ETF ( IGV ) rose 1.4%. The VanEck Vectors Semiconductor ETF ( SMH ) rose 1.5%, with AMD and NVDA shares.
The SPDR S&P Metals & Mining ETF (XME) rose 1.15% and the Global X US Infrastructure Development ETF (PAVE) rose 2.3%. The US Global Jets ETF (JETS) rose just over 1%. The SPDR S&P Homebuilders ETF (XHB) rose 4.8% on strong earnings. The Energy Select SPDR ETF (XLE) rose 0.9% and the Financial Select SPDR ETF (XLF) rose 1.4%. Health Care Select Sector SPDR Fund (XLV) rose 1.3%
ARK Innovation ETF ( ARKK ) reflects more speculative story stocks, up 3.7% and ARK Genomics ETF ( ARKG ) 3.1%. Tesla stock is a large holding across Ark Invest ETFs. Cathie Wood’s Ark also owns a small stake in Tesla competitor BYD’s stock.
Top five Chinese stocks to watch now
Market rally analysis
The stock market rallied again on Tuesday, making Monday’s retreat look like a normal pause around key levels amid a robust advance.
The Nasdaq Composite regained the 200-day line, right around the December highs. The S&P 500 and Dow Jones rose solidly, with blue chips finding support near the 50-day lines.
The Russell 2000 recouped all of Monday’s losses and then some, now well above its late 2022 highs.
The major indices decisively clearing their late 2022 highs would be a very bullish sign.
The Nasdaq Composite and the Russell 2000 are now in a power trend that meets all four conditions. The S&P 500 and Dow Jones are not there. A power trend is a positive signal, but last year the market stopped several times soon after the power trends took effect.
The Fed meeting is approaching big on Wednesday. The market recovery expects an end to interest rate increases in March or possibly May. Wednesday’s economic data and Friday’s jobs report will help markets interpret Fed Chair Powell’s remarks.
Don’t forget the income. AMD reported late Tuesday. Meta Platforms is coming Wednesday night and apple (AAPL), Amazon.com (AMZN) and Google parent Alphabet (GOOGL) is on tap Thursday night, along with hundreds of others.
These earnings reports can disrupt the major indexes as well as sectors and, of course, individual names.
Just as AMD earnings will affect Nvidia stock and Snap moves Meta, Meta’s spending plans will affect the likes of Arista Networks and Clean storage (PSTG). Amazon revenue is likely to be a catalyst for Etsy stock. The Apple earnings will swing the iPhone ecosystem while the Google earnings will hit a number of companies.
ANET shares 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 share rise is working well, with a strong uptrend and only small setbacks. Leading stocks flash buy signals that generally work. It has been a good time to add exposure.
The Fed meeting announcement and Fed chief Powell could be a catalyst for big market moves. But so could income and financial data. Investors should not be too aggressive in taking on new positions in the next couple of days, even if the technical picture for the market and specific stocks looks promising.
Remember, if you’re going to be aggressive in getting into stocks, you need to be ready to get out just as quickly.
Work on your watchlists. Dozens of stocks are setting up or flashing buy signals. You want to keep your eyes on them, analyzing potential targets before pulling the trigger.
Read The Big Picture every day to stay in sync with market direction and leading stocks and sectors.
Follow Ed Carson on Twitter at @IBD_ECarson for stock exchange updates and more.
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