Stock market rally awaits Fed chief Powell, key economic data; Apple expands the slide
Dow Jones futures edged lower overnight, along with S&P 500 futures and Nasdaq futures, on Fed Chairman Jerome Powell and the start of key economic data.
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The stock market closed mixed on Tuesday apple (AAPL) once again a drag on the major indexes, along with Amazon.com (AMZN) and Tesla (TSLA). Meanwhile, Apple’s other Dow giants Boeing (BA), Chevron (CVX) and Goldman Sachs (GS) is close to the buying point.
Hewlett Packard Enterprise (HPE) and NetApp (NTAP) headlines earnings reports late Tuesday, with CrowdStrike (CRWD) and Workday (WDAY) kicks off major software reports this week.
HPE stock rose modestly in overnight trading after HPE earnings topped views. HP Enterprise stock, above the 200-day line, is working on a long cup base. NTAP stock plunged in extended action on weak NetApp earnings and guidance. WDAY stock jumped overnight on a third quarter and a $500 million buyback. CRWD stock plunged despite beating Q3 views as subscriptions came to light and the cybersecurity firm hinted at a Q4 revenue break.
On Wednesday morning, ADP will release its November employee hiring estimate for private payrolls. The Ministry of Labor will release vacancies in the JOLTS report from October. Job openings are closely watched by Fed chief Jerome Powell, who will speak on Wednesday afternoon.
All that foreshadows the Fed’s favorite inflation gauge, 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 the outlook for a Fed rate hike. If anything, they might be light positions in the very short term.
The CVX stock is on the IBD Leaderboard. The BA share is on SwingTrader.
Fed chief Powell speech
Fed Chairman 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 move to a rate hike of 50 basis points on 14 December. Markets see a 67.5% chance of a half-point move, but still a decent chance of a fifth consecutive 75 basis point rate hike. But he is also likely to indicate that rate hikes will continue into 2023.
Whatever Powell says will be quickly overtaken by economic data. If inflation begins to show significant cooling and labor markets ease, even the most hawkish Fed policymakers will step in to slow the pace of rate hikes and end earlier than markets might expect. Hot price and employment data will stiffen the will 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 fell 0.1% relative to fair value, along with S&P 500 futures. Nasdaq 100 futures fell 0.2 percent.
Keep in mind that overnight action in Dow futures and elsewhere does not necessarily translate into actual trading in the next regular session.
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Stock market rally
After Monday’s strong sell-off, the stock market rally closed mixed on Tuesday.
The Dow Jones Industrial Average closed just above break-even in Tuesday’s trading. The S&P 500 index fell around 0.2 percent. The Nasdaq composite fell 0.6 percent. The small-cap Russell 2000 rose 0.3%.
Apple shares fell 2.1%, the third significant drop in a row, as China Covid cases, shutdowns and protests weigh on the tech giant. On Tuesday, shares fell 2.6%, below the 50-day moving average. Above the 50-day line looms 200-day resistance for AAPL shares. Apple has seen unrest at a massive Foxconn iPhone assembly plant in China.
Amazon shares fell 1.6% and Tesla shares fell 1.1%, both retreating from near their 21-day lines. Both are relatively close to the lowest level of the bear market.
The US crude oil price rose 2.4% to $79.62 a barrel. Intraday Monday, crude oil futures reached their lowest levels of the year.
The 10-year government yield rose 5 basis points to 3.75%.
ETFs
Among the top ETFs, the Innovator IBD 50 ETF ( FFTY ) fell 0.2%, while the Innovator IBD Breakout Opportunities ETF ( BOUT ) rose 0.5%. The iShares Expanded Tech-Software Sector ETF ( IGV ) fell 0.8%. VanEck Vectors Semiconductor ETF ( SMH ) fell 0.3%.
The SPDR S&P Metals & Mining ETF (XME) rose 2.3% and the Global X US Infrastructure Development ETF (PAVE) rose 0.1%. The US Global Jets ETF (JETS) rose 1.8%. The Financial Select SPDR ETF ( XLF ) climbed 0.6%. The Health Care Select Sector SPDR Fund ( XLV ) fell 0.25%.
Reflecting more speculative stock stocks, the ARK Innovation ETF ( ARKK ) fell 0.5% and the ARK Genomics ETF ( ARKG ) fell 0.4%. Tesla stock is a large holding across Ark Invest’s ETFs.
Top five Chinese stocks to watch now
Dow stocks near buy points
Boeing shares rose 2% to 175.32 on Tuesday, back above a buy point of 173.95 cups, according to MarketSmith analysis. The shares have been trading close in low volume near the buy point after a big rally 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 retook the 21-day line.
Chevron shares climbed 1.45% to 180.94, just below a buy point of 182.50 and just above the 21-day mark. CVX stock has been trading around the official buy point all month. An early entry near 167 on October 19 was probably the safer bet initially. But with Chevron stock right on the 21-day and no longer extended from the 50-day, it looks more interesting.
GS shares rose 0.35% on Tuesday to 383.71. The investment bank has a 389.68 buy point from a 35% deep cup-with-handles base back to November 2021. Investors may also see the recent break as a shelf just above the buy range from a bottom base that Goldman stock cleared in 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 GS stock’s outperformance compared to the S&P 500.
Market rally analysis
The stock rally retreats with key technical tests and economic data in print, along with uncertainty around China’s Covid policy.
The S&P 500 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, pushed back above the 21-day.
The lagging Nasdaq fell below its 21-day line and is approaching its 50-day line.
Apple shares, Tesla and other megacaps have weighed on the Nasdaq and the S&P 500 index.
The Invesco S&P 500 Equal Weight ETF (RSP) remains above its 200-day moving average.
But don’t overstate Apple’s impact. Many leading stocks are testing or falling below buy points or decent round-trip gains.
The advantage is that the stock market does not get caught up in Fed speeches and important economic data. That could mean the markets could bounce if there are no negative surprises, with the possibility of bigger gains if upcoming headlines are positive.
But the market rally is going to do what it’s going to do.
Time the market with IBD’s ETF market strategy
What to do now
When markets pull back, not many stocks are flashing buy signals. Investors should probably wait until Powell’s speech and economic data come in before making significant new purchases. Investors may want to take at least some partial profit in winners, especially if the winning stocks pull back to buy points.
If the market rally picks up soon, a large number of stocks will look actionable. But many interesting stocks today will start to look damaged if the major indexes fall significantly from here.
So investors need to be committed and flexible. Keep your watchlists up to date, but have exit strategies for your holdings as well.
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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