S&P 500 Surges Above Key Level On Fed Chief Powell, But Inflation, Jobs Report Loom

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Dow Jones futures changed little overnight along with S&P 500 futures and Nasdaq futures. Salesforce.com took profits overnight, but investors’ focus will be on Thursday’s PCE inflation report after Fed Chief Jerome Powell kicked off a tech-led stock market rally on Wednesday.




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The pace of rate hikes could slow at the December meeting, Fed chief Powell said Wednesday, giving more explicit support for a smaller hike at the upcoming meeting. But Powell stood by his view that Fed Funds rates are likely to reach 5% or more. The current Fed Funds rate range is 3.75%-4%. Powell also noted that many factors driving up inflation are diminishing. The Fed chief, who has suggested a recession may be necessary, said a “soft landing” is still possible.

The Nasdaq led the way, with Apple (AAPL), Microsoft (MSFT), Nvidia (NVDA), Tesla (TSLA) and Google parent Alphabet (GOOGL) all faster than the composite. Notably, the S&P 500 index soared to clear the 200-day moving average, a key area of ​​resistance.

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

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

Main income

Salesforce. com (CRM), Snowflake (To snow Box (BOX) led a number of software earnings reports. Pure storage (PSTG) and Victoria’s Secret (VSCO) also reported.

CRM shares fell sharply in overnight trading as Salesforce’s earnings top, but the outlook was bright. Co-CEO Bret Taylor will step down, leaving Marc Benioff as sole CEO. SNOW shares initially slumped on extended action due to Snowflake’s weak revenue outlook, but significantly offset the losses. Box stock was little changed as EPS had just surpassed and sales were slightly behind.

PSTG shares rose slightly overnight after Pure Storage topped the third quarter and raised the outlook. Shares closed about 1% after taking an intraday plunge on weak results and guidance from NetApp (NTAP). VSCO shares fell slightly as Victoria’s Secret revenue surpassed, but sales fell just short.

early thursday, Dollar General (DG) and Kroger (KR) are on tap. Chinese EV makers Nio (NIO), li car (LI) and Xpeng (XPEV) reports November sales, with those stocks and other Chinese names soaring Wednesday as Covid reopened hope.

Inflation report

The Department of Commerce will release the PCE price index, the Fed’s preferred inflation gauge, at 8:30 a.m. ET as part of its income and expenditure report.

October’s PCE price index should show an increase of 0.4% compared to September. Year on year, PCE inflation should cool down from 6.2% in September to 6%. Core PCE, excluding food and energy, is expected to rise 0.3%. Core PCE inflation is down from 5.1% in September to 5%.

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

Earlier Wednesday, ADP reported a sharp slowdown in private sector hiring in November. Also, the JOLTs survey showed that the number of job openings fell more than expected in October. GDP growth in the third quarter was revised upwards more than expected, along with the report’s inflation gauge.

Dow Jones Futures Today

Dow Jones futures were flat relative to fair value, with CRM stocks hampering blue chips. S&P 500 futures rose 0.1% and Nasdaq 100 futures rose 0.1%.

Remember that overnight action in Dow futures and elsewhere does not necessarily translate into actual trading in the next regular trading session.


Join IBD experts as they analyze actionable stocks in the stock market rally on IBD Live


Stock market rally

The stock market rally was mixed for much of Wednesday’s session, but then kicked off following Fed Chief Powell’s comments and closed on session highs.

The Dow Jones Industrial Average soared 2.2% during Wednesday’s stock trading. The S&P 500 index rose 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 mark. Microsoft stock and Nvidia, which were already above their 50-day limit, rose 6.2% and 8.2% respectively. Tesla shares rose 7.7% higher and retook their 21-day line.

US crude oil prices rose 3% to $80.55 a barrel, but fell 6.9% this month. Hopes of China Covid reopening also drove up copper futures.

Treasury revenues and chances of a rate hike by the Fed

The yield on 10-year Treasury bills fell 5 basis points to 3.7%. Two-year Treasury yields, which are more closely related to Fed policy, fell to 4.33%, despite Powell expecting maximum Fed Funds rates of at least 5%.

The probability of a 50 basis point Fed rate hike is now about 79% versus 66% after Tuesday. Markets still view a half-point move as a slight favorite in February, but the probability of a quarter-point move has risen to 45%.


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ETFs

Among the top ETFs, the Innovator IBD 50 ETF (FFTY) was up 1.8%, while the Innovator IBD Breakout Opportunities ETF (BOUT) was up 2%. The iShares Expanded Tech-Software Sector ETF (IGV) was up 4.4%, with Microsoft and CRM both key components. The VanEck Vectors Semiconductor ETF (SMH) was up 5.7%, with Nvidia stocks leading the pack.

SPDR S&P Metals & Mining ETF (XME) was up 3.75% and the Global X US Infrastructure Development ETF (PAVE) was up 2.4%. The Energy Select SPDR ETF (XLE) was up 0.5% and the Financial Select SPDR ETF (XLF) was up 1.7%. The Health Care Select Sector SPDR Fund (XLV) added 2.4%.

Reflecting more speculative story stocks, ARK Innovation ETF (ARKK) was up 7.7% and ARK Genomics ETF (ARKG) was up 6.5%. Tesla stock remains an important position in Ark Invest’s ETFs.


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Analysis of the market rally

The stock market rally made a big, bullish move in heavy volume on Wednesday on Fed Chief Powell’s comments.

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

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

The Russell 2000, which had undermined its 21-day line during the day, recovered and recaptured its 200-day line. The Dow Jones, which has led the current market rally, is at a new seven-month high.

Progress beat losers with broad gains. Many leading stocks that had come under pressure rallied on Wednesday.

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

Keep in mind that the current market rally has produced numerous large one-day gains, but has then struggled to make headway in the days or weeks to come.


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What to do now

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

Investors were likely tempted to increase their exposure on Wednesday, and they may succeed.

But there are still good reasons not to increase exposure completely just yet. The S&P 500 is above the 200-day mark, but not decisive. This would probably mean reaching a long trendline with bearish tops on a weekly chart. A decisive move above this area could be a strong signal that the current uptrend is more than a bear market rally.

But that requires a positive response to the upcoming PCE inflation data and jobs report.

Investors should be furiously working on their watchlists, looking at promising stocks from a variety of sectors. But definitely stay involved. The market rally could be at a turning point, but which way will it go.

Read The Big Picture every day to stay in sync with market direction and leading stocks and sectors.

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

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The Valley Voice
The Valley Voicehttp://thevalleyvoice.org
Christopher Brito is a social media producer and trending writer for The Valley Voice, with a focus on sports and stories related to race and culture.

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