Dow Jones futures fell slightly overnight, while S&P 500 futures and especially Nasdaq futures rose with Facebook’s parent company. metaplatforms (GOAL) shooting up on his earnings report. That followed a big day for the stock market rally as investors praised comments from Fed chief Jerome Powell.
Parents of Apple, Amazon and Google Alphabet (Google) They’re available.
The major indices rallied on Wednesday, rising after the long-awaited meeting by the Fed and especially by Fed chief Powell. The Federal Reserve raised rates by a quarter point and said it still sees “continued increases” ahead. Powell backed that, but said it’s a “good thing” and “rewarding” that inflation is coming down even without labor markets weakening.
The market rally broke above more key levels on Wednesday as a slew of stocks broke out or showed other buy signals, including China’s search and artificial intelligence giant. Baidu (BIDU), manufacturer of chip gears Lam Research (LRCX), maker of network monitoring software dynatrace (DT), delta airlines (DALL) and more.
Meta Platforms’ earnings fell short, but revenue, sales guidance and Facebook users all outpaced views. He also announced a $40 billion share buyback. The parent of Facebook and Instagram cut its spending forecast, including capital spending. META shares soared 20% after hours. The shares rose 2.8% to 153.12 in trading on Wednesday, retaking the 200-day line for the first time in more than a year and ignoring the weak earnings forecast from Snap (SNAP).
Qorvo (QRVO) topped earnings for the fiscal third quarter. But, like many other chip stocks, Qorvo was skewed sharply lower during the current quarter. QRVO shares fell 3^ in extended trading. Shares of Apple’s iPhone and 5G chipmaker rose 4.5% to 113.53 on Wednesday.
elf beauty (ELF) crushed earnings views and comfortably outperformed revenue. EPS doubled and growth accelerated for the third consecutive quarter. Sales increased 49%, picking up pace for the fourth consecutive quarter. The cosmetics maker also rose. ELF shares rose 16% to an all-time high overnight. The shares rose 1.8% to 58.58 on Wednesday, just below January 1. 6 record.
Early Thursday, the drug giants Eli Lilly (LLY), Merck (MRK) Y bristol myers squibb (BMY) report. But Big Pharma, which did well in the 2022 bear market, is lagging so far in a growth-driven 2023 market rebound. LLY, Merck and Bristol Myers shares are all below their 50-day moving averages.
Thursday afternoon, Apple (AAPL), amazon.com (AMZN) and the Google report. All are rallying in 2023, but below their 200-day line. Shares of GOOGL and Amazon rose nearly 4% overnight in sympathy with Meta.
Fed rate hikes are “continuous”
As expected, the Fed raised rates by a quarter point on Wednesday, raising the fed funds rate to 4.5%-4.75%. That 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 that policymakers anticipate “continued increases” in the federal funds rate, a clear sign that the Fed’s rate hikes are not over.
Fed chief Powell’s ‘good thing’
Fed chief Jerome Powell backed that up, saying “there’s more work to be done,” later specifying that “we’re talking about a couple more rate hikes.” He added that labor markets remain “extremely tight.”
However, Powell also said that the “disinflation process has begun.” He noted that inflation is coming down even without labor conditions improving substantially, calling that a “good thing” and “rewarding.” He also said that politicians “have no incentive, the desire to adjust too much.”
That statement seemed to trigger an afternoon rally.
On Wednesday morning, the Labor Department reported job postings at 11.01 million, well above views. On Friday, the January jobs report is available. But Powell’s comments suggest that markets need not be as fixated on labor data as they have been.
The market overwhelmingly expects another quarter-point Fed rate hike at the end of March, with the odds rising slightly on Wednesday to 86%.
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But despite Powell backing a “couple more” hikes, investors are still leaning towards the Fed’s March rate hike being the climax. That would leave the federal funds rate range at 4.75%-5%, below the Fed’s forecast of 5%-5.25%.
Meanwhile, 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 fell 0.3% against fair value. S&P 500 futures rose 0.1%. Nasdaq 100 futures rose 0.75%, with shares of META leading the way, along with shares of Google and AMZN.
Remember that overnight action in dow futures and elsewhere does not necessarily translate into actual trading in the next regular stock Exchange session.
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The stock market rally slowed modestly before the Fed news, but intensified when Fed chief Powell spoke.
The Dow Jones Industrial Average rose a fraction on Wednesday stock trading, but after falling more than 1% intraday before the Fed’s announcement. The S&P 500 index jumped just over 1%. The Nasdaq Composite jumped 2%. The small-cap Russell 2000 gained 1.5%.
US crude prices fell 3.1% to $76.41 a barrel as domestic crude inventories rose for the sixth straight week. Natural gas prices fell 8%, following an epic crash. Copper futures fell 2.8% and prices settled 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 tied to Fed policy, fell 10 basis points to 4.11%. That is well below the current range of federal funds rates.
The US dollar fell to an eight-month low.
Among growth ETFs, the Innovator IBD 50 ETF (ffty) rose 1.5%. The iShares Expanded Technology Software Sector ETF (IGV) jumped 2.85%. The VanEck Vector Semiconductor ETF (HMS) shot up 4.7%. Lam Research and AMAT shares are large holdings of SMH, and QRVO shares are also a component.
Mirroring more speculative historical stocks, the ARK Innovation ETF (ARKK) ran 4.4% and ARK Genomics ETF (ARKG) gained 2.4%.
SPDR S&P Metals and Mining ETF (XME) 1.8% and the Global X US Infrastructure Development ETF (TO PAVE) 1.5%. US Global Jets ETF (JETS) rose 1%, with DAL shares the top component. SPDR S&P Home Builders ETF (XHB) burst 2%. The Energy Select SPDR ETFXLE) plunged 2% and the Financial Select SPDR ETF (XLF) was flat. The SPDR Select Healthcare Sector Fund (XLV) rose 0.5%.
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Market recovery analysis
Major indices continued to gain momentum, with big improvements after Fed chief Powell started speaking.
The Nasdaq appears to be decisively above its 200-day moving average and its late-2022 highs. The Russell 2000 has clearly broken above that level.
The S&P 500 also appears to be leaving its 200-day line behind. The benchmark index also moved off its December highs.
The Dow Jones, now the lagging index, tested its 200-day line before bouncing for a slight gain.
Note that the market often has a second day reaction to Fed meetings.
Meanwhile, the rest of the week continues to be packed with news. Huge gains on Thursday night are expected from Apple, Amazon, Google, Qualcomm (QCOM), ford engine (F) and more, with the January jobs report coming Friday.
The biggest daily winners and losers in the S&P 500 in recent weeks are dominated by earnings engines.
dt Action, RO glass (I HEARD), stryker (SYK) Y Atkore (ATKR) ran out of bases on Wednesday’s earnings.
But there were plenty of good non-gain moves on Wednesday, especially after Fed chief Powell’s remarks.
Stock giant LRCX and other equipment applied materials (AMAT) broke bases bottoming out, while the shares of DAL and J.B. Hunt Transport Services (JBHT) Y Performance Food Group (PFGC) liquidated the traditional points of purchase. BIDU shares also exploded.
Arista Networks (A NETWORK), pure storage (PSTG) Y global foundries (GFS) all advance tickets cleared on Wednesday. However, Meta Platforms’ reduced capex plans could affect Arista and Pure Storage. ANET shares fell modestly after hours.
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What to do now
The stock market rally continues to rise, with the Nasdaq, Russell 2000 and major stocks leading the way. The Fed meeting is out of the way, while there is increasing clarity about the central bank’s end game.
There is increasing evidence that the current market rally will be a long-lasting uptrend.
Therefore, investors may have added new positions on Wednesday, taking advantage of a new crop of buying opportunities. It is still advisable to do it gradually, without buying a lot or concentrating too much. If this market rally has legs, the steady increase in exposure may cause you to reverse completely or more quickly. If this market rally stumbles, even for a short time, you won’t be caught out. With Apple and Google earnings in the offing and the Nasdaq rising so fast in 2023, a pullback would not be a surprise.
Before you buy stocks, you need to find and study them. Have your watch lists ready and your game plan ready.
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