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Dow Jones Futures: Stock Market Rally on CPI Inflation Report; What to look for


Dow Jones futures were little changed early Thursday, along with S&P 500 futures and Nasdaq futures ahead of Thursday’s CPI inflation report.




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Wednesday’s stock market rally extended recent gains. Investors are betting on the modest inflation data, raising the stakes for the Fed-critical report.

Amazon.com (AMZN) and Tesla shares led megacap rallies on Wednesday, with An apple (AAPL), Microsoft (MSFT) and Google Parent Alphabet (GOOGLE) with solid sessions. Tesla (TSLA) and AMZN stock also reflected strong performances in automotive/EV and e-commerce names, respectively.

Celsius Holdings (CELH) turned hot on Wednesday, offering a buy signal.

CELH shares were added SwingTrader on Wednesday and IBD ranking watch list. Celsius was also on Wednesday IBD Stock of the Day.

Key wins

KB Home (KBH) reported earnings after the closing, which kicks off housing reports. Shares of KBH were modestly lower as KB Home income was well below outlook for the fiscal quarter, missing revenue as well. KB Home shares rose 3.2% on Wednesday to their best level since March 2022, up nearly 13% so far this year.

Shares of construction companies and housing-related names in general have rallied in recent weeks.

Taiwan Semiconductor (TSM) earnings topped early Thursday viewings, but revenue fell. Taiwan Semi, which makes chips for Apple, Nvidia (NVDA) and many others, said first-quarter sales could be down from a year earlier. TSMC also cut capital spending plans for 2023. Shares were still up modestly early Thursday, signaling a test of the 200-day moving average. Shares of TSM rose 0.6% on Wednesday.

American Airlines (AAL) gave bullish Q4 preliminary data early Thursday, a day before Delta Air Lines (DAL) profits. AAL shares were up modestly, with Delta also up, with airlines rising in recent days.

Disney Taps Nike Veteran

Walt Disney (DIS) named Nike (ON) Chairman Mike Parker as the new chairman, replacing Susan Arnold. Parker has been on Disney’s board for seven years.

Disney also recommended that shareholders vote out its board and not support activist investor Nelson Peltz, who wants to join the board of entertainment giant Dow Jones.

DIS shares rose modestly. Nike, another Dow company like Disney, Apple and Microsoft, was little changed after hours.

CPI Inflation Report

The Consumer Price Index for December will be released at 8:30 a.m. ET.

Economists expect consumer prices unchanged after a 0.1% rise in November. The core consumer price index rose 0.3% after a 0.2% rise in November. The headline CPI inflation rate should continue to cool to 6.6% from 7.1% in November. Core inflation is expected to slow to 5.7% from 6% in November.

The CPI inflation rate peaked at 9.1% last June, while the core CPI inflation rate hit 6.6% in September, both 40-year highs.

Other data this week, including New York Fed inflation expectations and small businesses with job openings and hiring plans, pointed to cooling inflation and labor markets.

The moderate inflation report should conclude a quarter-point increase in the Fed’s interest rate at the Feb. 1 policy meeting, slowing from 50 basis points and 75 basis points in the previous two meetings. More importantly, cooling inflation could raise expectations that the Fed will hold off on raising interest rates, perhaps after the March meeting.

Dow Jones futures today

Dow Jones futures were up 0.1% at fair value. S&P 500 futures rose and Nasdaq 100 futures lost a bit.

The yield on 10-year government bonds fell 2 basis points to 3.53%.

Crude oil futures rose 1%.

The CPI inflation report is sure to change Dow Jones futures and Treasury yields.

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 added to recent gains, with major indexes closing near session highs for the second session in a row. The Nasdaq led the advance thanks to Amazon and large-cap names.

The Dow Jones Industrial Average rose 0.8% on Wednesday Exchange Trading. The S&P 500 rose 1.3%. The Nasdaq composite jumped 1.8%. The small-cap Russell 2000 gained 1.2%.

U.S. crude oil prices rose 3.1 percent to $77.41 a barrel as China optimism outweighed a huge jump in U.S. crude inventories.

The yield on the 10-year Treasury note fell 6 basis points to 3.55%.

ETFs

Among growth ETFs, the Innovator IBD 50 ETF (FFTY) rose 1.3%. iShares Expanded Tech-Software Sector ETF (IGV) advanced 1.6%, retrieving its 50-day line, with MSFT shares a major IGV holding. VanEck Vectors Semiconductor ETF (SMH) rose 1.2%, moving above its 200-day line. TSM stock is the best SMH component.

Reflecting the more speculative stocks of history, the ARK Innovation ETF (ARKK) jumped 3.4%, and the ARK Genomics ETF (ARKG) 3.7%. Tesla stock remains the top performer in Ark Invest’s ETF. Cathie Wood’s coffin has been loaded with TSLA stock in recent days and weeks.

SPDR S&P Metals & Mining ETF (XME) rose 0.5%, and the Global X US Infrastructure Development ETF (PAVING) grew by 1.3%. US Global Jets ETF (STREAMS) rose 0.4%, with American Airlines and DAL shares key components. SPDR S&P Homebuilders ETF (XHB) jumped 2.6%. Energy Select SPDR ETF (XLE) pushed 0.3% higher and the Financial Select SPDR ETF (45) rose 0.9%. Select Healthcare Sector SPDR Fund (XLV) added 0.6%.


The five best Chinese stocks to watch now


Megacap Shares

Shares of Tesla rose 3.7% to 123.22, extending a rebound from Friday morning’s bear market of 101.81. The stock is still below its long-standing 21-day downtrend. Tesla is planning a major expansion of its Austin plant and is reportedly close to a preliminary deal for a new factory in Indonesia. The latter could compound Tesla Shanghai’s demand issues.

China’s government on Thursday delayed another expansion of Tesla Shanghai, which will increase annual production capacity to two million from a recently increased 1.2 million. Officials reportedly concerned about Elon Musk’s Starlink.

Shares of TSLA fell slightly before the open.

Amazon shares jumped 5.8% to 95.09, closing above its 50-day moving average for the first time in four months. AMZN stock also hit a bear market low last Friday.

Apple shares jumped 2.1%, again above their 21-day mark. This came despite Barclays cutting its price target for AAPL, citing weakening demand for Apple in many product categories.

Google shares rose 3.5%, also breaking a 21-day line. Microsoft shares rose 3%, just below their 21-day line after last week’s decline.

Merchandise in Celsius

CELH shares jumped 5.3% to 106.57 on Wednesday on heavy volume, after reversing higher on Tuesday. The stock rallied from the 50-day line, broke the trend line and closed above the 21-day moving average. Anything that offered a buy signal. CELH shares did hit intraday highs of 108.80, but had a strong close.

Market Rally Analysis

The stock market rally showed more strength on Wednesday, heading into the CPI inflation report.

The S&P 500 index moved further from its 50-day line and surpassed its intraday high on Tuesday. Although still below the 200-day line, the benchmark index managed to break above its 10-week and 40-week lines. The Russell 2000 cleared its 200-day line after surpassing its 50-day Wednesday.

The Nasdaq, which had been lagging in recent months, cleared its 50-day line for the first time in nearly a month.

Meanwhile, leading stocks showed positive action overall. CELH shares have given a buy signal. Stocks that recently broke out generally held or continued to rise.

Apple, Tesla, Amazon and other megacaps are far from viable, but at least they don’t weigh the major indexes.

Just looking at the major indexes and leading stocks, the stock market rally is showing solid action, albeit with more resistance levels ahead.

But gathering Fed-critical economic data or events has been precarious at best over the past few months. Yes, the modest CPI inflation report could push the market rally. But a hotter-than-expected reading could trigger a big selloff. And the market sets prices in “good news”.

Of course, it is not the news that is important, but the reaction to the news. The November CPI Inflation Report was cooler than expected on December 13, pushing the major indexes to their best intraday levels in months. But that was the peak for the October-December market rally. Indices closed well above highs that day and have been down for most of the year.


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What should we do now

Investors may have added some exposure in recent days with indexes moving higher and many stocks flashing buy signals.

Those recent purchases may look great on Thursday, but they could also all blow up, depending on December’s CPI inflation report.

So investors should not be too exposed to inflation accounting.

But be ready to act if the major indexes show strong action after the opening bell. Many quality stocks are flashing buy signals or adjusting.

Don’t forget about earnings season. JPMorgan Chase (JPM) and several other banking giants reported Friday morning, along with Delta Air and UnitedHealth (UNH).

Shares of Microsoft and Tesla are due in two weeks, with Apple, Amazon and Google soon to follow.

Earnings results and guidance will be critical amid uncertain economic times.

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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