Dow Jones futures rose slightly overnight, along with S&P 500 futures and Nasdaq futures. Advanced micro devices (AMD) and lithium games Livent (LTHM) led to another busy night of finishing work. But investor focus is on the Federal Reserve meeting decision on Wednesday.
It is day two of a stock market rally attempt, but investors are not making major efforts with Fed rate hikes in print.
AMD warehouse, Livent and shipping company Matson (MATX) was among the notable results reports after the close. AMD is close to the lowest in 2022, but their revenues and guidance are important for the semiconductor region. The LTHM stock starts earning for EV battery material companies, with the lithium giant Albemarle (ALB) due Wednesday and mining for rare earths MP materials (MP) Thursday. MATX shares are among freight shares that are trying to return in favor.
Early Wednesday, LNG leader Cheniere energy (LNG) and Regeneron Pharmaceuticals (RAIN) is in print. LNG warehouse is established in a new base. The REGN share has achieved a solid gain from a traditional buying point and early entry, even though it has not broken down.
There were some positive earnings movements on Tuesday. LPX stock and Atkore (ATKR) gave buy signals on their strong results.
LNG stock is on IBD Leaderboard. The RAIN stock is at IBD 50. Louisiana-Pacific (LPX) was Tuesday’s IBD Stock Of The Day.
The video embedded in this article discussed Tuesday’s market action and the upcoming announcement of the Fed meeting. It also analyzed Louisiana-Pacific, ATKR stocks and ZIM integrated shipping (ZIM).
Dow Jones Futures today
Dow Jones futures rose 0.3% vs. fair value. S&P 500 futures rose 0.3 percent. Nasdaq 100 futures rose 0.4 percent.
Keep in mind that overnight trading in Dow futures and elsewhere does not necessarily translate into actual trading in the next regular trading session.
Fed meeting resolution
The two-day Federal Reserve meeting ends on Wednesday, with the Fed’s policy announcement at 2:00 PM ET and Fed chief Jerome Powell’s press conference at 2:30 PM ET. The Fed will almost certainly raise interest rates by 50 basis points, to a range of 0.75% -1%. Politicians are also expected to approve a reduction in the balance sheet, increasing over three months to around $ 95 billion per month.
The real question is whether the Fed statement and Fed chief Powell will pave the way for 75 basis point gains at the June and July meeting. The markets are already pricing in a strong chance of raising the Fed’s interest rate in oversize, as politicians are delaying in taking aggressive measures against inflation.
Inflation may be at its peak in terms of gains from year to year, but it may remain high for a long time, as workers become accustomed to larger wage increases and companies are able to pass on their higher costs.
The Fed must also worry about the risk of recession from aggressive monetary policy, while China’s Covid shutdowns and Russia’s Ukraine’s war cool global economic activity as supply chains crash.
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Stock market rally
The rise in equities did not have much direction before the Fed meeting announcement, and ended in the end with small gains.
The Dow Jones Industrial Average rose 0.2% in Tuesday’s trading session. The S&P 500 index rose 0.5 percent. The Nasdaq composite rose 0.15 percent. Small-cap Russell 2000 rose 0.9%.
The US crude oil price fell 2.6% to $ 102.41 a barrel.
The 10-year government interest rate fell 4 basis points to 2.96% after reaching the three-year high of 3% on Monday.
Among the best ETFs, Innovator IBD 50 ETF (FFTY) rose 1.4%, while Innovator IBD Breakout Opportunities ETF (BOUT) rose 2.3%. iShares Expanded Tech-Software Sector ETF (IGV) retreated 0.8%. VanEck Vectors Semiconductor ETF (SMH) climbed 0.8%, with the AMD stock a remarkable stake.
The SPDR S&P Metals & Mining ETF (XME) jumped 2.3% and the Global X US Infrastructure Development ETF (PAVE) rose 0.8%. The US Global Jets ETF (JETS) rose 0.7%, shrugging off sales in hotel and online booking stocks. SPDR S&P Homebuilders ETF (XHB) rose 1.15%. Energy Select SPDR ETF (XLE) increased by 2.8% and Financial Select SPDR ETF (XLF) 1.3%. Health Care Select Sector SPDR Fund (XLV) rose 0.3%
As a result of more speculative history stocks, the ARK Innovation ETF (ARKK) fell 0.9% and the ARK Genomics ETF (ARKG) fell 0.3%.
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AMD revenues topped the forecasts with revenues up 71%. The chip giant also guided sales in the second quarter. AMD shares jumped 7% in action overnight. Shares rose 1.4% to 91.13 on Tuesday, but are well below the main moving averages. AMD shares recently reached their worst levels since June last year.
The income of life easily beat the view, while the lithium miner also provided bullish guidance. LTHM shares rose 17% overnight, signaling a large pull back over the 50-day and 200-day lines. Shares rose 2.6% on Tuesday to 21.92. At the end of April, the Livent share fell below its 50-day and 200-day lines, but did not fall below the lowest levels in early March. The ALB share, which reports on Wednesday night, rose 3% in extended action after climbing 3% in Tuesday’s session.
Matson’s earnings barely hit, while revenues only missed after the container shipping company gave positive preliminary figures last month. The MATX stock climbed modestly in prolonged action. The stock jumped 3.4% on Tuesday to 91.36, back from its 200-day line.
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Market Rally Analysis
Tuesday’s modest rise was probably ideal on the way to a major Fed meeting decision.
The market reaction to the Fed rate hikes and guidance will be key, but do not be surprised by large fluctuations on Wednesday afternoon and beyond.
Tuesday marked day two of a stock exchange rally attempt. In a few days, investors may begin to look for a follow-up day on one or more of the major indices to confirm the new market upturn.
But we are not there yet.
Sectors to look at
Energy reserves are in the process of reshaping, especially those with refinery or natural gas exposure, such as Exxon Mobile (XOM) or Cheniere Energy.
Fertilizer games recovered from 50-day lines the following Tuesday Mosaic (MOS) and Nutrients (NTR) revenue, but after some sharp falls to that key level.
Wood companies and some construction products look good. Louisiana-Pacific and Atkore made bullish moves Tuesday on earnings, while Weyerhaeuser (WY), Boise Cascade (BCC) and Beacon Roofing Supply (BECN) sets up.
Offshore shipping companies had a strong session. Dry bulk conductors Star Bulk Carriers (SBLK) and Golden Ocean Group (GOGL) had done well while container-focused Matson jumped off his key support and the ZIM stock took back its 50-day line.
These are hopeful signs. And maybe they will work if the stock market rally picks up speed. But other groups have looked promising in recent weeks, such as REITs, medical products and travel plays, and they have faltered or broken.
Meanwhile, growth stocks still look terrible. apple (AAPL) and Tesla (TSLA) is fighting around their 200-day moving average. Other megacaps look worse. Meanwhile, the modest declines in IGV and ARKK signal that even coup hunters are not jumping on aggressive growth yet.
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What to do now
While a market rally attempt is underway, it is not the time to have much exposure, if any.
If the stock market rises on Fed rate hikes, investors may consider nibbling on a stock or two, or perhaps a broad sector ETF. But you have to be ready to get out quickly again.
There is nothing wrong with waiting for a follow-up day. Even when the market is back in a confirmed uptrend, you will not be in a hurry to increase your exposure. Gradually expand your holdings as the market builds strength and be quick to quit if the rally whizzes by.
For now, build these watch lists – with pencil, not ink. REITs, miners and medical product companies on your watch lists a week or two ago should probably be replaced with new names. But it is not a waste of effort. If you have an up-to-date watch list when market trends become favorable, you will be in a good position to jump into the new leaders early.
Read The Big Picture every day to stay in sync with the market direction and leading stocks and sectors.
Follow Ed Carson on Twitter at @IBD_ECarson for stock market updates and more.
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