Dow Jones futures edged lower after hours, while S&P 500 futures and especially Nasdaq futures rose with Facebook parent Meta platform (aim) is increasing in its earnings reports. It followed a big day for the stock market rally as investors welcomed comments from Fed chief Jerome Powell.
X
Parent of Apple, Amazon and Google the alphabet (Google) is on tap.
Major indices recovered on Wednesday after the much-anticipated Fed meeting and especially Fed Chief Powell. The Federal Reserve raised rates by a quarter point and said it still sees “continued growth.” Powell supported that, but said it was a “good thing” and “satisfying” that inflation was easing without the labor market weakening.
The market rally cleared more key levels on Wednesday, when a large number of stocks broke or flashed other buy signals, including the China search-and-AI giant. Baidu (BIDU), chip gear maker Lam research (LRCX), maker of network-monitoring software Dynatress (DT), Delta Airlines (Dal) and more.
Basic earnings
Meta platform revenue is down, but revenue, sales guidance and Facebook user views are up. It announced a $40 billion stock buyback. The Facebook and Instagram parent lowered its forecast for spending, including capital expenditures. META stock rose 20% after hours. Shares rose 2.8% to 153.12 in Wednesday’s session, retracing the 200-day line for the first time in more than a year and shrugging off weak revenue guidance from Snap (Snap)
Corvo (QRVO) of the top revenue earners Q3. But, like many other chip stocks, Corvo has guided sharply lower for the current quarter. QRVO stock fell 3^ in extended trading. Shares of the 5G and Apple iPhone-chip maker rose 4.5% to 113.53 on Wednesday.
fairy beauty (fairy) crushed earnings view and comfortable revenue beat. EPS doubled, growth accelerated for third consecutive quarter. Sales increased 49%, accelerating for the fourth consecutive quarter. The cosmetic manufacturer also gave instructions. ELF stock rose 16% to record highs in overnight action. Shares rose 1.8% to 58.58 on Wednesday, just below a Jan. 6 record high.
The drug giant early Thursday morning Eli Lilly (LLY), Mark (MRK) and Bristol Myers Squibb (BMI) report. But big pharma, which fared well in the bear market of 2022, has so far lagged behind the growth-led market rally in 2023. LLY stock, Merck and Bristol Myers are all below their 50-day moving averages.
By late Thursday, Manjana (AAPL), Amazon.com (AMZN) and Google reports. All are rebounding in 2023, but below their 200-day line. GOOGL stock and Amazon rose nearly 4% overnight in sympathy with the meta.
Fed rate hike ‘on track’
As expected, the Fed raised rates by a quarter point on Wednesday, lifting the fed funds rate to 4.5%-4.75%. That followed a half-point Fed rate hike in December and four straight 75-basis-point hikes before that.
Fed policy statements still state that Policymakers expect “sustained growth”. In the Fed funds rate, a clear signal that Fed rate hikes are not over.
Fed Chief Powell’s ‘Good Stuff’
Fed chief Jerome Powell backed that up, saying that “more work needs to be done,” later noting that “we’re talking about a few more rate hikes.” He added that the labor market remains “extremely tight”.
However, Powell also said that “the process of disinflation has begun.” I note that inflation is falling without significantly easing employment conditions, which is a “good thing” and “satisfying”. He also said that policymakers have “no incentive, no desire to over-tighten.”
That statement appeared to trigger an afternoon rally.
On Wednesday morning, the Labor Department reported that job openings reached 11.01 million, above the view. On Friday, the January jobs report was tapped. But Powell’s comments suggest that markets shouldn’t be as fixated on labor data as they have been.
Markets overwhelmingly expect another quarter-point Fed rate hike in late March, with odds rising slightly to 86% on Wednesday.
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But despite Powell’s support for a “couple more” hikes, investors are still eyeing the climax of a March Fed rate hike. That would leave the fed funds rate range at 4.75%-5%, below the Fed’s forecast of 5%-5.25%.
Meanwhile, both the European Central Bank and the Bank of England are expected to raise rates by 50 basis points on Thursday morning.
Dow Jones futures today
Dow Jones futures yield low versus fair value. S&P 500 futures rose 0.4%. Nasdaq 100 futures popped 1%, with META stock leading Google and AMZN stock
Remember that overnight action Dow futures and otherwise does not necessarily translate into subsequent regular actual trading in the stock market session.
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Stock market rally
Stock market rallies were subdued ahead of the Fed news, but picked up after Fed chief Powell’s speech.
The Dow Jones Industrial Average rose a fraction on Wednesday Stock market trading, but after falling more than 1% intraday before the Fed announcement. The S&P 500 index jumped just over 1%. The Nasdaq Composite jumped 2%. The small-cap Russell 2000 gained 1.5%.
U.S. crude fell 3.1% to $76.41 a barrel as domestic crude inventories rose for a sixth week. Natural gas prices fell 8%, continuing an epic decline. Copper futures fell 2.8%, with prices settling ahead of the Fed’s rate hike announcement.
The 10-year Treasury yield fell 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 fed funds rate range.
ETF
Among growth ETFs, Inventor IBD 50 ETF (ffty) increased by 1.5%. iShares Expanded Tech-Software Sector ETF (IGV) jumped 2.85%. Vanek Vector Semiconductor ETF (HMS) increased by 4.7%. Lam Research and AMAT stock are major SMH holdings, with QRVO stock also a component.
Reflecting a more speculative stock story, the ARK Innovation ETF (ARKK) sprinted 4.4% and the ARK Genomics ETF (RKG) gained 2.4%.
SPDR S&P Metals & Mining ETF (XME) 1.8% and the Global x US Infrastructure Development ETF (seasoned) 1.5%. US Global Jet ETF (JetDAL stock rose 1% with a top component. SPDR S&P Homebuilders ETF (XHB) popped 2%. Energy Select SPDR ETF (XLE) sank 2% and the Financial Select SPDR ETF (XLF) was flat. Healthcare Select Sector SPDR Fund (XLV) increased by 0.5%.
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Market rally analysis
Major indexes continued to build momentum, with big gains after Fed chief Powell began speaking.
The Nasdaq appears decisively above its 200-day moving average and late 2022 highs. Russell 2000 clearly cleared that level.
The S&P 500 also appears to be pushing past its 200-day line. The benchmark index also moved to its December high.
The Dow Jones, now the lagging index, tested its 200-day line before bouncing back for a slim gain.
Note that markets often react two days into Fed meetings.
Meanwhile, the rest of the week is jammed with news. Big earnings are due on Thursday night from Apple, Amazon, Google. Qualcomm (QCOM), Ford engine (f) and more, including the January jobs report on Friday.
The S&P 500’s biggest daily winners and losers over the past few weeks have been dominated by income movers.
DT Stock, Oi Glass (i heard), Striker (SYK) and stop (ATKR) blanked off the base based on Wednesday’s earnings.
But there was much better action without earnings on Wednesday, especially after comments from Fed chief Powell.
LRCX is a stock and allied equipment giant Applied materials (AMATDAL stock and JB Hunt Transport Services (JBHT) and Performance food group (PFGC) cleared the traditional point of purchase. BIDU’s stock also collapsed.
Arista Networks (a fake), Pure storage (PSTG) and Global Foundries (GFS) All Wednesdays clear early entries. However, Meta Platform’s low capex plans could hurt Arista and Pure Storage. ANET stock declined modestly after a few hours.
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what to do now
The stock market rally continues at higher strength with the Nasdaq, Russell 2000 and leading stocks. The Fed meeting is incomplete while there is increasing clarity on the central bank’s end game.
There is growing evidence that the current market rally will be a lasting uptrend.
So investors could have added new positions on Wednesday, taking advantage of the new crop buying opportunity. It’s still wise to do it slowly, not buying in bulk or getting too concentrated. If this market rally has legs, steadily increasing exposure can quickly get you fully invested or beyond. If this market rally stumbles, even briefly, you won’t get caught out. With Apple and Google growing revenue in 2023 and the Nasdaq moving so fast, a pullback wouldn’t be a surprise.
Before you buy stocks, you need to find them and study them. Prepare your watchlist and prepare your game plan.
read on big picture Daily to stay in tune with market direction and leading stocks and sectors.
Please follow Ed Carson on Twitter @IBD_ECarson For stock market updates and more.
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