Dow Jones futures fell slightly after hours, while S&P 500 futures and especially Nasdaq futures rose with Facebook’s parent company Metaplatforms (META) booming on its earnings report. It followed a big day for the stock market rally as investors welcomed comments from Fed chief Jerome Powell.
Parent Apple, Amazon and Google Alphabet (GOOGL) are available.
Major indexes rebounded on Wednesday, rising after the much-anticipated Fed meeting and in particular Fed chief Powell. The Federal Reserve raised rates by a quarter point and said it still expects “continued increases”.
Powell supported that, but said it was a “good thing” and “rewarding” that inflation was falling even without weaker labor markets.
The market rally broke through more key levels on Wednesday as a slew of stocks broke out or issued other buy signals, including the Chinese search and AI giant Baidu (BIDU), chip gear manufacturer Research (LRCX), network monitoring software publisher Dynatrace (DT), Delta Airlines (DAL) and more Chief Jerome.
Revenue from meta platforms fell short while Facebook’s revenue and user count exceeded views. He also announced a $40 billion share buyback. Notably, parent company Facebook and Instagram cut its spending forecast, including capital spending.
META stock rose after hours. Shares rose 2.8% to 153.12 in Wednesday’s session, Chief Jerome retracing the 200-day line for the first time in more than a year and shrugging off weak earnings forecasts from Break (BREAK).
Qorvo (QRVO) topped fiscal third quarter results. But, like many other chip stocks, Qorvo has fallen sharply for the current quarter. QRVO stock fell sharply in extended trading. Shares of the iPhone 5G chipmaker and Apple jumped 4.5% to 113.53 on Wednesday.
elf beauty (ELF) crushed earnings views and comfortably beat earnings. EPS doubled as growth accelerated for a third straight quarter. Sales jumped 49%, accelerating the pace for the fourth consecutive quarter. The cosmetics maker also guided up. ELF stock hit an all-time high in the action overnight. Shares rose 1.8% to 58.58 on Wednesday, just below the January 6 high.
Early Thursday drug giants Eli Lily (THERE IS), Merck (MRK) and Bristol Myers Squibb (BMY). But big pharma, which has weathered the 2022 bear market well, is lagging in a growth-led market rally in 2023 so far. LLY, Merck and Bristol Myers shares are all below their 50-day moving averages.
Late Thursday, Apple (AAPL), Amazon.co.uk (AMZN) and Google report. All rebound in 2023, but below their 200-day threshold. Chief Jerome Shares of GOOGL and Amazon rose solidly overnight in sympathy with Meta.
Fed rate hike ‘in progress’
As expected, the Fed raised rates by a quarter point on Wednesday, taking the federal funds rate to 4.5%-4.75%. This follows a half-point Fed rate hike in December and four consecutive 75 basis point moves before that.
The Fed’s policy statement still said policymakers were anticipating “continued increases” in the federal funds rate, a clear signal that the Fed’s rate hikes are not over.
Fed Chief Powell’s ‘right thing’
Fed Chief Jerome Powell backed that up, saying there was “more work to do,” later clarifying that “we’re talking about a few more rate hikes.” Chief Jerome He added that labor markets remain “extremely tight”.
However, Powell also said “the process of disinflation has begun.” Chief Jerome He noted that inflation is falling even without employment conditions improving significantly, saying it is a “good thing” and “rewarding”. He also said policymakers “have no incentive, no desire to overtighten.”
This statement seemed to trigger a rally in the afternoon.
On Wednesday morning, the Labor Department reported job postings hit 11.01 million, well above views. On Friday, the January employment report is available. But Powell’s comments suggest markets need not be as fixated on labor data as they have been.
The market is overwhelmingly expecting another quarter-point rate hike from the Fed at the end of March, with odds rising slightly to 86% on Wednesday.
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But despite Powell’s support for “a few more” hikes, investors are still leaning towards the Fed’s March rate hike as the high point. That would leave the federal funds rate range at 4.75%-5%, below the Fed’s forecast for 5%-5.25%.
Meanwhile, the European Central Bank and the Bank of England are both expected to raise rates by 50 basis points on Thursday morning.
Dow Jones Futures Today
Dow Jones futures lost 0.1% relative to fair value. S&P 500 futures rose 0.3%. Nasdaq 100 futures jumped 1%, with META shares leading the way, along with Google and AMZN shares.
Remember that overnight action on futures contracts on Dow and elsewhere does not necessarily translate into actual trading in the next regular trading session.
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Stock market rally
The stock market rally was down slightly ahead of the Fed news, but accelerated when Fed chief Powell spoke.
The Dow Jones Industrial Average rose a fraction in Wednesday’s stock trading, but after falling more than 1% intraday ahead of the Fed’s announcement. The S&P 500 index jumped just over 1%. The Nasdaq composite jumped 2%. Small cap Russell 2000 gained 1.5%.
U.S. crude oil prices slipped 3.1% to $76.41 a barrel as domestic crude inventories rose for a sixth consecutive week. Natural gas prices plunged 8%, continuing an epic slump. Copper futures fell 2.8% as prices stabilized ahead of the Fed’s rate hike announcement.
The 10-year Treasury yield slipped 13 basis points to 3.4%. The two-year Treasury yield, more closely tied to Fed policy, fell 10 basis points to 4.11%. This is well below the current range for federal funds rates.
Among growth ETFs, the Innovator IBD 50 ETF (FFTY) gained 1.5%. The iShares Expanded Tech-Software Sector ETF (IGV) jumped 2.85%. ETF VanEck Vectors Semiconductor (SMH) climbed 4.7%. Lam Research and AMAT shares are large SMH holdings, with QRVO shares also a component.
Reflecting more speculative history stocks, ARK Innovation ETF (ARKK) sprinted 4.4% and ARK Genomics ETF (ARKG) gained 2.4%.
SPDR S&P Metals & Mining ETF (XME) 1.8% and Global X US Infrastructure Development ETF (PAVE) 1.5%. The US Global Jets ETF (JETS) climbed 1%, with DAL stock a major contributor. The SPDR S&P Homebuilders ETF (XHB) jumped 2%.
The Energy Select SPDR (XLE) ETF fell 2% and the Financial Select SPDR (XLF) ETF was flat. The SPDR health care sector fund (XLV) edged up 0.5%.
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Market rally analysis
Major indexes continued to gain momentum, with big improvements after Fed chief Powell started talking.
The Nasdaq appears to be significantly above its 200-day moving average and its late 2022 highs. The Russell 2000 has clearly breached this level.
The S&P 500 also appears to be dropping its 200-day line. The benchmark also moved its highs from December.
The Dow Jones, now the lagging index, tested its 200-day line before bouncing back for a slight gain.
Keep in mind that the market often reacts on the second day to Fed meetings.
Meanwhile, the rest of the week remains packed with news. Huge revenue on Thursday night is due to Apple, Amazon, Google, Qualcomm (QCOM), Ford engine (F) and more, with the January jobs report on Friday.
The S&P 500’s biggest daily gainers and losers over the past two weeks are dominated by earnings drivers.
DT Share, RO glass (HI), stryker (SYK) and Atkore (ATKR) broke above the basics on earnings on Wednesday.
But there were plenty of good moves with no results on Wednesday, especially after statements from Fed Chief Powell.
LRCX stock and other equipment giant Applied materials (AMAT) broke bottom bases, while DAL stock and JB Hunt Transportation Services (JBHT) and Performance Food Group (PFGC) compensated for traditional buying points. BIDU action also broke out.
Arista Networks (A NET), Pure storage (PSTG) and Global foundries (GFS) all allowed early entries on Wednesday. However, Meta Platforms reduced capex plans could hit Arista and Pure Storage. ANET stock fell slightly after hours.
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What to do now
The stock market rally continues to gain momentum, with the Nasdaq, Russell 2000 and major stocks leading the way. The Fed meeting is on the sidelines as the central bank’s endgame becomes increasingly clear.
There is growing evidence that the current market rally will be a sustainable uptrend.
Investors could therefore have added new positions on Wednesday, taking advantage of a new crop of buying opportunities. It’s always wise to do this gradually, without buying too long or too concentrated.
If this market rally has legs, steadily increasing exposure can quickly allow you to invest fully or beyond. If this market rally stumbles, even if it’s only for a short time, you won’t be caught off guard. With Apple and Google’s revenues looming and the Nasdaq rising so rapidly in 2023, a pullback wouldn’t be a surprise.
Before you buy stocks, you need to find and study them. Prepare your watchlists and prepare your game plan.
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