Dow Jones futures fell slightly after hours, along with S&P 500 and Nasdaq futures, as attention turned to Wednesday’s Federal Reserve meeting announcement.
Advanced micro-systems (AMD) and SNAP shares headlined earnings overnight.
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The stock market rally rebounded on Tuesday, recouping much of Monday’s pullback.
Ahead of the Fed meeting announcement on Wednesday afternoon, several key economic reports and an OPEC+ meeting will arrive in the morning.
AMD Parent and Snapchat Break (SNAP) reported after the close.
AMD’s revenue and earnings slightly exceeded views. The chipmaker sees first-quarter revenue down 10%, worse than consensus but better than feared.
AMD stock rose slightly after hours. Shares rose 3.7% to 75.15 on Tuesday.
AMD stock is working on a minimum basis with a buy point of 79.33. It’s well below the 200-day line, but a true breakout would involve breaching this key level.
AMD Rival Nvidia (NVDA) fell slightly late in the session. NVDA stock rose nearly 2% to 195.37 on Tuesday, in a buy range from a short-cut base.
Instant earnings topped views, but earnings narrowly missed. The social network sees Q1 revenue tracking for a 2% to 10% drop. SNAP stock plunged overnight. The shares climbed 4.2% to 11.56 on Tuesday.
Instant wins and orientation omen Metaplatforms (META) and pinterest (PINS). Parent Facebook Metaplatforms (META) reports Wednesday night, with pinterest (PINS) due next Monday.
META stock fell a bit late, after closing just below the 200-day line. The stock of PINS has decreased slightly. Pinterest has a tight three-week entry slightly above key moving averages.
The video embedded in this article discusses Tuesday’s market rally and the Fed’s upcoming rate hike decision, and analyzes Nvidia stock, Arista Networks (ANET) and Etsy (ETSY).
Sales of electric vehicles in China
Early Wednesday, Tesla China rivals Nio (NIO), Li-Auto (LI) and Xpeng (XPEV) will report January deliveries. The Lunar New Year holiday, along with heavy Covid infections, hit sales last month.
It is therefore difficult to draw conclusions about February and beyond, especially following the You’re here (TSLA) price cuts to which competitors are still reacting.
Nio and Xpeng shares are in low bases, but well below their 200-day lines. Li Auto runs into 200 days. EV and battery giant BYD (BYDDF) is launching an aggressive entry from its 200-day line, with January selling expected later this week.
Tesla stock soared nearly 41% in January, topping its 50-day line, but has no clear buy point.
Fed rate hike outlook
The Federal Reserve is expected to slow rate hikes for a second consecutive meeting, raising the federal funds rate by a quarter point at 2 p.m. ET Wednesday, to a range of 4.5% to 4.75%.
This follows a half-point rise in December after four consecutive increases of 75 basis points in November.
Markets are massively expecting another quarter-point rate hike from the Fed at the end of March, to 4.75%-5%. But then investors lean towards more upside.
So central bank cues on the outlook for rate hikes, inflation and the economy will be key. Will the Fed’s policy statement keep language pending “continued increases?”
Fed Chief Jerome Powell, speaking at 2:30 p.m. ET, will certainly underscore the Fed’s commitment to keeping rates high to bring inflation down.
But with rate hikes slowing and close to a pause, Fed chief Powell could be more subtle, keeping central bank options open.
Ahead of the Fed meeting announcement, investors will receive another batch of economic data. The January ADP jobs report will be released at 8:15 a.m. ET, along with December job openings and the January ISM manufacturing index at 10 a.m. ET.
On Friday, the January jobs report is due. Prior to the March meeting, the Fed will receive the February jobs report, as well as the January and February CPI inflation reports.
Early Tuesday, the employment cost index came out slightly lighter than expected. The ECI, a broad measure of workers’ compensation, rose 1% in the fourth quarter, the third consecutive quarter of slower growth.
Dow Jones Futures Today
Dow Jones futures fell 0.2% from fair value. S&P 500 futures fell 0.25%. Nasdaq 100 futures were down 0.35%.
The 10-year Treasury yield fell 2 basis points to 3.51%.
Remember that overnight action on futures contracts on Dow and elsewhere does not necessarily translate into actual trading in the next regular trading session.
Join the experts at IBD as they analyze actionable stocks in the stock market rally on IBD Live
Stock market rally
The stock market rally had a strong session, rebounding from Monday’s retreat.
The Dow Jones Industrial Average rose 1.1% in trading on Tuesday. The S&P 500 index jumped 1.5%. The Nasdaq composite jumped 1.7%. The small-cap Russell 2000 jumped 2.4%.
U.S. crude oil prices rose 1.25% to $78.87 a barrel. OPEC+, which includes the oil cartel and key allies such as Russia, meets 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 subdued ECI report.
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Among growth ETFs, the Innovator IBD 50 (FFTY) ETF rose just over 2%. The iShares Expanded Tech-Software Sector ETF (IGV) gained 1.4%. The VanEck Vectors Semiconductor (SMH) ETF rose 1.5%, with large holdings in AMD and NVDA stocks.
The SPDR S&P Metals & Mining ETF (XME) gained 1.15% and the Global X US Infrastructure Development ETF (PAVE) gained 2.3%. The US Global Jets ETF (JETS) rose just over 1%.
The SPDR S&P Homebuilders ETF (XHB) jumped 4.8% amid strong earnings. ETF Energy Select SPDR (XLE) rose 0.9% and ETF Financial Select SPDR (XLF) 1.4%. The SPDR healthcare sector fund (XLV) climbed 1.3%
Reflecting more speculative stocks, ARK Innovation ETF (ARKK) jumped 3.7% and ARK Genomics ETF (ARKG) jumped 3.1%.
Tesla stock is a major holding in Ark Invest ETFs. Cathie Wood’s Ark also owns a small stake in shares of rival Tesla BYD.
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Market rally analysis
The stock market rally rebounded on Tuesday, making Monday’s retreat a normal break around key levels amid a robust advance.
The Nasdaq composite recovered the 200-day line, just around its December highs. The S&P 500 and the Dow Jones rose solidly, with the blue chips finding support near their 50-day lines.
The Russell 2000 Index recouped all of Monday’s losses, then some, now clearly above its late-2022 highs.
Major indices decisively clearing their late 2022 highs would be a very bullish sign.
But the Fed meeting weighs heavily on Wednesday. The market rally expects the end of rate hikes in March or possibly May.
Wednesday’s economic data and Friday’s jobs report will help markets interpret Fed Chief Powell’s statements.
Don’t forget the earnings. AMD reported Tuesday evening. Meta Platforms is due out Wednesday night and Apple (AAPL), Amazon.co.uk (AMZN) and parent company of Google Alphabet (GOOGL) tuned Thursday night, along with hundreds of others.
These earnings reports could shake up major indexes as well as sectors and, of course, individual names.
Just as AMD’s revenue will influence Nvidia’s actions and Snap will displace Meta, Meta’s spending plans will influence the likes of Arista Networks and Pure storage (PSTG).
Amazon’s earnings will likely be a catalyst for Etsy shares. Apple’s revenue will rock the iPhone ecosystem while Google’s revenue will hit a wide variety of businesses.
ANET stock 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 stock market rally is working well, with a strong uptrend and only minor pullbacks. Major stocks are flashing buy signals that usually work. It was a good time to add exposure.
The Fed meeting announcement and Fed chief Powell could be a catalyst for big market moves.
But earnings and economic data could be the same. Investors should not be too aggressive in taking new positions over the next few days, although the technical chart for the market and specific stocks looks promising.
Remember, if you are going to be aggressive entering stocks, you need to be ready to exit just as quickly.
Work on your watchlists. Dozens of stocks are setting up or issuing buy signals. You want to have your eyes on them, analyzing potential targets before you pull the trigger.
Read The Big Picture every day to stay in tune with market direction and top stocks and sectors.
Please follow Ed Carson on Twitter at @IBD_ECarson for stock market updates and more.
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