Dow Jones futures rose early Wednesday, along with S&P 500 futures and Nasdaq futures. Domestic flights in the US were suspended, while WWE, Wells Fargo, Axcelis Technologies and Impinj were also in focus ahead of the open.
The stock market rally was indecisive for most of Tuesday, but the major indexes gained momentum, with the S&P 500 moving past its 50-day moving average. Investors await the December consumer price index report on Thursday morning.
Medpace (MERP) rose steadily on Tuesday, giving another buy signal after a similar move failed in late 2022. Sunny first (FSLR) bounced off its 50-day line, also providing an early entry. But ELF Beauty (ELF) and Super micro computer (SMCI) fell after Monday’s reversals.
Investors should remain cautious, especially with the upcoming CPI inflation report.
The FAA suspended all domestic flights until 9 a.m. ET due to a significant systems outage. Flights were suspended from early Wednesday morning. The FAA expects to “reboot” the system soon, but airlines will have to scramble to get back on schedule. Including airline stocks Delta Air Lines (DAL) and United Airlines (UAL) had slightly decreased.
Vince McMahon is once again chairman of the World Wrestling Entertainment (WWE), after his daughter Stephanie stepped down as chairman and co-CEO on Tuesday night. Mr. McMahon, a major shareholder, resigned last year over payments related to sexual misconduct claims. WWE shares rose steadily in premarket trading after surging in recent days on reports of his expected return to lead the sale of the company.
Meanwhile, Wells Fargo (WFC) will largely exit the mortgage business amid regulatory pressure, CNBC reported late Tuesday. It will offer home loans only to existing and wealth management customers and borrowers in minority communities. Shares of WFC were little changed in extended trading.
Axcelis Technologies (ACLS), which has made a strong move in the past few sessions, said revenue for the late December fourth quarter topped $250 million, versus the chip equipment maker’s previous guidance of $232 million to $240 million. Shares of ACLS rose after hours.
imp (PI) says fourth-quarter sales topped $76 million, versus the RFID chipmaker’s previous guidance of $71.5 million to $73.5 million. PI shares, already just above the 50-day line, rose steadily overnight. This could suggest an early entry or close to a flat buying base for Impinj stock. PI shares are also on the chart.
Earnings season also starts to pick up at the end of the week. Taiwan Semiconductor (TSM) reported Thursday morning. In Friday, JPMorgan Chase (JPM), Bank of America (BAC), Citigroup (° С) and Wells Fargo reported ahead of the open, along with Delta Air and UnitedHealth.
Dow Jones futures today
Dow Jones futures were up 0.15% at fair value. S&P 500 futures rose 0.2% and Nasdaq 100 futures advanced 0.1%.
The yield on the 10-year Treasury note fell 4 basis points to 3.58%.
Crude oil futures rose despite the American Petroleum Institute predicting a huge weekly jump in US inventories. The Energy Information Administration will release data on U.S. crude oil and petroleum products at 10:30 a.m. ET.
Stock market rallies
After Monday’s disappointing fade, the stock market rally picked up steam Tuesday afternoon, closing near session highs.
The Dow Jones Industrial Average rose 0.6% on Tuesday Exchange Trading. The S&P 500 rose 0.7%. The Nasdaq composite rose 1%. The small-cap Russell 2000 jumped 1.5%
Tesla shares fell 0.8% on Tuesday after jumping 5.9% on Monday. Shares rose on Friday after hitting a bear market low of 101.06 after the electric car giant announced big price cuts in China and other key Asian markets. TSLA’s stock needs a lot of repairs.
Shares rose 2% before the open on Wednesday. Tesla has filed an application with Texas for a major expansion of its Austin assembly plant, the Austin Business Journal reported late Tuesday. Tesla Austin is still reaching its existing capacity.
UNH shares fell 0.8%, hitting their worst levels since last June. The Dow Jones health insurer has tumbled 8.3% so far in 2023 after ending 2022 in relatively good shape. UnitedHealth’s earnings and guidance on Friday will be important for the suddenly struggling sector.
U.S. crude oil prices rose 0.7% to $75.12 a barrel. Natural gas prices fell by 6.9%.
The yield on the 10-year Treasury note jumped 10 basis points to 3.62 percent, after falling 20 basis points in the previous two sessions.
Among growth ETFs, the Innovator IBD 50 ETF (FFTY) rose 1.1%, while the Innovator IBD Breakout Opportunities ETF (BOOTH) rose 0.15%. iShares Expanded Tech-Software Sector ETF (IGV) realized a profit of 0.1%. VanEck Vectors Semiconductor ETF (SMH) advanced 1.3%, just above the 200-day line after clearing the 50-day on Friday. TSM stock is a large holding of SMH.
Reflecting the more speculative stocks of history, the ARK Innovation ETF (ARKK) jumped 2.5%, and the ARK Genomics ETF (ARKG) 3.6%. Tesla shares are still a major holding at Ark Invest, with Cathie Wood increasing her position in recent weeks.
SPDR S&P Metals & Mining ETF (XME) rose 2.5%, and the Global X US Infrastructure Development ETF (PAVING) rose 1.6%. US Global Jets ETF (STREAMS) rose 2.4%, with DAL shares among the notable holdings. SPDR S&P Homebuilders ETF (XHB) grew by 1%. Energy Select SPDR ETF (XLE) advanced 0.7% and the Financial Select SPDR ETF (45) gained 0.6%. Select Healthcare Sector SPDR Fund (XLV) closed up 0.8%, with UNH shares hitting an XLV high.
Market Rally Analysis
The stock market rally spent much of the morning hovering around equilibrium, but ended Tuesday with a relatively strong performance.
The S&P 500 rose above the 50-day line. The 200-day average is just above that.
The Dow Jones rebounded from a test of its 50-day line after moving above that key level on Friday. The Nasdaq broke above its 21-day line with the 50-day line not far behind.
The Russell 2000 is back above its 50-day line, just below its 200-day.
The S&P MidCap 400 rose on Tuesday after finding support at the 50-day. That’s after it jumped above its 21-day, 50-day and 200-day lines on Friday. Invesco S&P 500 Equal Weight ETF (RSP) looks quite similar.
RSP and MidCap 400 highlight how large caps such as An apple (AAPL), Tesla and UNH shares weighed on the market.
The sustained rally in the stock market may not last until there is clarity on when the Federal Reserve will stop raising interest rates. Markets strongly expect an increase of just a quarter of a point at the policy meeting on February 1 and again at the end of March.
Thursday’s CPI inflation report could cap expectations for a quarter-point increase. Inflation should continue to ease in the coming months, if only because year-on-year comparisons are so steep.
Leading stocks mixed
A number of leading stocks have issued buy signals in recent days and weeks. But most quickly went wrong. In some cases, like the MEDP stock, they recover a few days later.
Medpace jumped 5.9% to 223.29 on heavy volume, bouncing off the 50-day line and clearing its high since Dec. 29, when MEDP tried to exit.
First Solar jumped 7.4% to 171.01, continuing a streak of mini gains. The break above the 50-day line offered an early entry into a new base, but it now looks a bit extended. But the official buy point of 173.78 is not far away.
Other names continue to circulate.
ELF shares had a promising breakout on Friday, but gave up most of those gains on Monday and tumbled 8.3% on Tuesday to 51.15, falling below the 50-day line and hitting the bottom of its flat base.
Shares of SMCI jumped on Monday morning, offering an early entry, but closed only marginally higher. On Tuesday, shares fell 7.55%, below the 50-day line, following a report of short sellers.
Many other stocks are moving right around potential buy points.
What should we do now
The stock market rally is still in effect, but major indexes, sectors and especially leading stocks are prone to reversals. Thursday’s CPI inflation report could spark big gains, with the major indexes moving decisively higher above some key levels. But it can also go in the opposite direction.
Investors should be cautious about their exposure and watch out for new purchases, especially ahead of the CPI report.
If you are making new purchases, familiarize yourself with your exit strategy before entering. Consider taking partial profits quickly to lock in some profits.
It’s still a showcase market. But there are plenty of intriguing stocks to watch across sectors. Prepare these watch lists.
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.
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