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Dow Jones Futures: Stock Market Rally Into CPI Inflation Report; Amazon leads Megacaps




Dow Jones futures were little changed after hours, along with S&P 500 futures and Nasdaq futures.




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The stock rally on Wednesday extended the recent gains ahead of Thursday’s CPI inflation report. Investors are betting on tame inflation data, raising their stakes for the Fed-critical report.

Amazon.com (AMZN) and Tesla stock led a megacap rally Wednesday, with apple (AAPL), Microsoft (MSFT) and Google parent Alphabet (GOOGL) is having solid sessions. Tesla ( TSLA ) and AMZN shares also reflected strong performance in auto/EV names and e-commerce, respectively.

Celsius Holdings (CELH) warmed up on Wednesday, giving a buy signal.

CELH stock was added to SwingTrader on Wednesday and the IBD Leaderboard watch list. Celsius was also Wednesday’s IBD Stock Of The Day.

Key income

KB Home (KBH) reported earnings after closing, and kicked off housing reports. KBH stock fell modestly as KB Home revenue fell well short of fiscal Q1 views, with revenue also missing. KB Home shares had risen 3.2% on Wednesday to their best level since March 2022, up nearly 13% so far this year.

Housebuilder shares, and housing-related names in general, have increased in recent weeks. How will they react to KB Home’s results?

Taiwan Semiconductor (TSM) earnings are in the red early Thursday, the first big chip result for the last quarter. TSM stock rose 0.6% on Wednesday, just below its 200-day moving average.

Disney Taps Nike Veteran

Walt Disney (DIS) named Nike (NKE) Chairman Mike Parker as its new chairman, replacing Susan Arnold. Parker has been on Disney’s board for seven years.

Meanwhile, Disney recommended that shareholders vote for the board’s list and not support activist investor Nelson Peltz, who is seeking to join the Dow Jones entertainment giant’s board.

The DIS share rose modestly. Nike, another Dow stock like Disney, Apple and Microsoft, was little changed after hours.

CPI Inflation Report

The Consumer Price Index for December will be released at 8:30 a.m. ET.

Economists expect flat consumer prices after November’s rise of 0.1 per cent. The core CPI is set at 0.3% after November’s increase of 0.2%. Headline CPI inflation should continue to cool, to 6.6% from November’s 7.1%. Core inflation is expected to ease to 5.7% from November’s 6%.

The CPI inflation rate peaked at 9.1% last June, while core CPI inflation reached 6.6% in September, both 40-year highs.

Other data this week, including New York Fed inflation expectations and small business job vacancies and plans to hire, point to cooling inflation and labor markets.

A tame inflation report should lock in a quarter-point Fed rate hike at the Feb. 1 policy meeting, easing from 50 basis points and 75 basis points in the previous two meetings. More importantly, cooling inflation could raise expectations that the Fed will hold off on rate hikes, perhaps after the March meeting.

Dow Jones Futures today

Dow Jones futures tipped lower relative to fair value. S&P 500 futures were down and Nasdaq 100 futures were flat.

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 share price rally contributed to the recent gains, with the major indexes closing near session highs for a second session in a row. The Nasdaq led the advance thanks to Amazon and big growth names.

The Dow Jones Industrial Average rose 0.8% in Wednesday’s trading. The S&P 500 index rose 1.3 percent. The Nasdaq composite rose 1.8 percent. The small-cap Russell 2000 rose 1.2%.

US crude oil prices rose 3.1% to $77.41 a barrel.

The 10-year government yield fell 6 basis points to 3.55%.

ETFs

Among growth ETFs, the Innovator IBD 50 ETF ( FFTY ) climbed 1.3%. The iShares Expanded Tech-Software Sector ETF ( IGV ) rose 1.6%, retracing its 50-day line, with MSFT stock as a major IGV entry. VanEck Vectors Semiconductor ETF (SMH) rose 1.2%, moving above its 200-day line. The TSM stock is a top SMH component.

Reflecting more speculative storied stocks, the ARK Innovation ETF ( ARKK ) fell 3.4% and the ARK Genomics ETF ( ARKG ) 3.7%. Tesla stock remains a top holding across Ark Invest’s ETFs. Cathie Wood’s Ark has loaded up on TSLA stock in recent days and weeks.

The SPDR S&P Metals & Mining ETF ( XME ) rose 0.5% and the Global X US Infrastructure Development ETF ( PAVE ) gained 1.3%. The US Global Jets ETF (JETS) rose 0.4%. The SPDR S&P Homebuilders ETF (XHB) rose 2.6 percent. The Energy Select SPDR ETF (XLE) rose 0.3% and the Financial Select SPDR ETF (XLF) gained 0.9%. The Health Care Select Sector SPDR Fund ( XLV ) rose 0.6%.


Top five Chinese stocks to watch now


Megacap stocks

Tesla shares rose 3.7% to 123.22, extending a bounce from Friday morning’s bear market low of 101.81. Shares remain below their long declining 21-day line. Tesla is planning a major expansion of its Austin facility and is reportedly close to a tentative deal for a new factory in Indonesia. The latter could complicate demand issues from Tesla Shanghai.

Amazon stock jumped 5.8% to 95.09, closing above its 50-day moving average for the first time in four months. AMZN stock also set a bear market low last Friday.

Apple shares rose 2.1%, back above the 21-day mark. That came despite Barclays cutting its AAPL price target, citing weakened Apple demand across many product categories.

Google shares rose 3.5%, also retracing their 21-day line. Microsoft shares rose 3%, just below the 21-day line after plunging last week.

Celsius stock

CELH shares jumped 5.3% to 106.57 on Wednesday on heavy volume, following Tuesday’s upside. Shares rose from the 50-day line, broke a trend line and closed above the 21-day moving average. Anything that gave a buy signal. CELH stock closed at intraday highs of 108.80, but had a strong finish.

Market rally analysis

The stock rally showed more strength on Wednesday heading into the CPI inflation report.

The S&P 500 Index moved further from its 50-day line and topped Tuesday’s intraday high. While still below the 200-day line, the benchmark topped its 10-week and 40-week lines. The Russell 2000 cleared its 200-day line after topping its 50-day Wednesday.

The Nasdaq, which has been a laggard in recent months, cleared its 50-day line for the first time in nearly a month.

Meanwhile, leading stocks showed positive action overall. The CELH share gave a buy signal. Stocks that recently broke out generally held ground or continued to climb.

Apple, Tesla, Amazon and other megacaps are a long way from being actionable, but at least they don’t weigh on the major indexes.

Just looking at the major indexes and leading stocks, the stock market rally is showing healthy action, albeit with several resistance levels ahead.

But collecting Fed-critical economic data or events has been difficult at best in recent months. Yes, a tame CPI inflation report can send the market rally flying. But a hotter-than-expected reading could trigger a big selloff. And the market prices in “good news”.

Of course, it is not the news that matters, but the reaction to the news. The CPI inflation report for November was cooler than expected on December 13, pushing the major indexes to their best intraday levels in months. But that was the peak for the October-December market rally. The indices closed well off peaks that day and declined until almost the turn of the year.


Time the market with IBD’s ETF market strategy


What to do now

Investors may have added some exposure in recent days with indices moving higher and many stocks flashing buy signals.

The latest purchases may look good on Thursday, but they could also explode, depending on the December CPI inflation report.

So investors should not have been too exposed heading into the inflation report.

But be ready to trade if the major indexes show strong action beyond the opening bell. Many quality stocks are flashing buy signals or rallying.

Don’t forget earnings season. JPMorgan Chase (JPM) and several other banking giants report Friday morning, along with Delta Air Lines (DAL) and UnitedHealth (UNH).

Microsoft and Tesla shares follow in two weeks, with Apple, Amazon and Google soon following.

Earnings results and guidance will be crucial in uncertain economic times.

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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