Dow Jones futures: Inflation report expected after S&P 500 climbs above 200-day on Fed boss Powell

Dow Jones futures fell slightly Thursday morning, along with S&P 500 futures and Nasdaq futures. Salesforce.com reported overnight earnings, but investors’ focus will be on Thursday’s PCE inflation report after Fed chief Jerome Powell sparked a tech rally in the stock market on Wednesday.

x

The pace of interest rate hikes could begin to slow at the December meeting, Fed chief Powell said on Wednesday, providing stronger support for a smaller hike at the upcoming meeting. But Powell stood his ground that the fed funds rate is likely to reach 5% or more. The current fed funds interest rate range is 3.75%-4%. Powell also noted that many factors supporting inflation are declining. The Fed chief, who suggested a recession may be necessary, said a “soft landing” was still possible.

Nasdaq led the way, with An apple (AAPL), Microsoft (MSFT), Nvidia (NVDA), Tesla (TSLA) and Google Parent Alphabet (GOOGLE) all outperform the composite. Notably, the S&P 500 shot up to clear the 200-day moving average, a key resistance area.

On Thursday, investors will get the October PCE price index, with the November jobs report due out on Friday morning.

So while Wednesday’s action was encouraging, investors should wait for the market’s reaction to the Fed-critical data.

Key wins

Salesforce.com (CRM), Snowflake (SNOW) and Box (A BOX) led a number of software revenue reports. Clean storage (PSTG) and Victoria’s Secret (VSCO) is also reported.

CRM shares fell solidly in premarket trade as Salesforce’s earnings beat but the guidance was light. Co-CEO Brett Taylor will step down, leaving Marc Benioff as sole CEO. SNOW stocks were also down steadily early Thursday after initially falling to a weak level Snowflake Income Guide. Box availability was a bit mixed as EPS just peaked and sales were slightly off.

Shares of PSTG rose modestly early Thursday after that Pure Storage led the outlook in the third quarter and increased guidance. Shares fell about 1% on Wednesday after falling intraday on weak results and guidance from NetApp (NTAP). Shares of VSCO fell slightly as earnings beat Victoria’s Secret but sales fell slightly.

early thursday Dollar General (DG) missed earnings and guided low earnings per share for Q4. Shares of DG fell, signaling a move below the 50-day line and perhaps the 200-day.

Chinese electric car manufacturers Nio (NIO), Li Auto (LI) and Xpeng (XPEV) reported November sales early Thursday. Nio and Li Auto, with newer models, reported record monthly deliveries. Xpeng shipments were down from a year earlier, but up slightly from October and with hopes for a big jump in December. All three stocks fell in premarket trade after a sharp jump on Wednesday, along with other Chinese names, on hopes of a Covid reopening.

Inflation Report

The Commerce Department will release the PCE price index, the Fed’s favorite gauge of inflation, at 8:30 a.m. ET as part of the earnings report.

The PCE price index for October should show a 0.4% increase from September. On the year, PCE inflation should cool to 6% from 6.2% in September. Core PCE, which excludes food and energy, is expected to rise 0.3%. The core PCE inflation rate eased to 5% from 5.1% in September.

The PCE inflation report, along with the November jobs report on Friday, will help shape expectations for a Fed rate hike. November’s consumer price index will be released on December 13, one day before the Fed’s December meeting is announced.

Earlier on Wednesday, ADP reported a sharp slowdown in private sector hiring in November. The JOLTs survey also showed that job vacancies fell more than expected in October. Third-quarter GDP growth was revised higher than expected, along with a measure of inflation in the report.

Dow Jones futures today

Dow Jones futures fell 01% to fair value as CRM shares resisted the blue chips. S&P 500 futures lost 0.1 percent and Nasdaq 100 futures were down 0.1 percent.

The yield on the 10-year Treasury note fell 10 basis points to 3.6%.

Crude oil futures rose 1%.

Remember this night action in Dow futures and elsewhere does not necessarily become an actual trade in the next regular Stock Exchange session.

Join IBD’s experts as they analyze active stocks on IBD Live’s stock market rally

Stock market rallies

The stock market rally was mixed for most of Wednesday’s session, then rallied after Fed chief Powell’s comments, closing at session highs.

The Dow Jones Industrial Average jumped 2.2% on Wednesday Exchange Trading. The S&P 500 jumped 3.1%. The Nasdaq Composite jumped 4.4%. The small-cap Russell 2000 rose 2.7%.

Apple shares rose 4.9% and Google shares rose 6.1%, both back above their 50-day highs. Shares of Microsoft and Nvidia, already above their 50-day lines, jumped 6.2% and 8.2%, respectively. Tesla shares rose 7.7%, snapping a 21-day high.

U.S. crude oil prices jumped 3 percent to $80.55 a barrel, but fell 6.9 percent for the month. Hopes of China’s Covid reopening also lifted copper futures.

Treasury yields and Fed rate hike odds

The 10-year Treasury yield turned lower, falling 5 basis points to 3.7%. The two-year Treasury yield, more closely linked to Fed policy, sank to 4.33%, although Powell expected a peak fed funds rate of at least 5%.

The odds of a 50 basis point Fed rate hike are now around 79% versus 66% after Tuesday. Markets still see another half-point move as a slight favorite in February, but odds of a quarter-point move exceed 45%.

Tesla Vs. BYD: Which EV giant is the better buy?

ETFs

Avg the best ETFsInnovator IBD 50 ETF (FFTY) rose 1.8%, while the Innovator IBD Breakout Opportunities ETF (BOOTH) rose 2%. iShares Expanded Tech-Software Sector ETF (IGV) jumped 4.4%, with Microsoft and CRM shares both major components. VanEck Vectors Semiconductor ETF (SMH) jumped 5.7%, with Nvidia shares the top performers.

SPDR S&P Metals & Mining ETF (XME) advanced 3.75%, and the Global X US Infrastructure Development ETF (PAVING) grew by 2.4%. Energy Select SPDR ETF (XLE) rose 0.5%, and the Financial Select SPDR ETF (45) grew by 1.7%. Select Healthcare Sector SPDR Fund (XLV) added 2.4%.

Reflecting the more speculative stocks of history, the ARK Innovation ETF (ARKK) jumped 7.7%, and the ARK Genomics ETF (ARKG) 6.5%. Tesla stock remains a major holding in Ark Invest’s ETF.

The five best Chinese stocks to watch now

Market Rally Analysis

The stock market rally made a big move higher on heavy volume on Wednesday after comments from Fed chief Powell.

The S&P 500 rebounded from near its 21-day line to reach the 4,000 level and move above its 200-day line for the first time in seven months.

The Nasdaq Composite, the laggard in the market’s rally, led the way higher on Wednesday. It retook its 21-day line and the 11,000 level to settle at a two-month high at the close. Shares of Apple, Microsoft, Google, Nvidia and Tesla had strong gains on Wednesday, but it’s not clear that any of them will lead the current uptrend.

The Russell 2000, which had broken its 21-day line intraday, recovered to regain its 200-day mark. The Dow Jones, which led the market’s current rally, returned to a new seven-month high.

Advancers beat losers by wide margins. Many leading stocks that had been under pressure rose on Wednesday.

Although there was plenty of positive action on Wednesday, the S&P 500 remained below its 200-day moving average. Thursday’s October PCE inflation report and Friday’s November jobs report could add to Wednesday’s bullish rebound or trigger a bearish retreat.

Note that the current market rally had multiple big one-day gains, but then struggled to make headway over the next few days or weeks.

Time the Market with IBD’s ETF Market Strategy

What should we do now

The stock market rally had a strong session, with major indices and leading stocks making encouraging moves.

Investors may have been tempted to increase exposure on Wednesday, and that may work.

But there remain good reasons not to increase exposure just yet. The S&P 500 is above its 200-day line, but not decisively. This would probably mean breaking a long trend line with falling tops on a weekly chart. Breaking decisively above this zone can be a strong signal that the current uptrend is more than a bear market rally.

But that will require a positive reaction to the upcoming PCE inflation data and jobs report.

Investors should work furiously on their watch lists, looking at promising stocks from various sectors. But definitely stay engaged. The market rally may be at a turning point, but where will it turn?

Read it The big picture every day to stay in sync with market direction and leading stocks and sectors.

Please follow Ed Carson on Twitter at @IBD_ECarson for stock market updates and more.

YOU MIGHT ALSO LIKE:

Why this IBD tool simplifies SearCh For Top Stocks

Catch the next big winning stock with MarketSmith

Do you want to get quick profits and avoid big losses? Try SwingTrader

The best growth stocks to buy and watch

IBD Digital: Unlock IBD’s premium lists, tools and analysis today