Dow Jones futures fell slightly overnight, along with S&P 500 futures and Nasdaq futures. A strong stock market rally on Tuesday morning faded and was briefly mixed after Russian missiles reportedly hit Poland.
Target (TGT) headlines Wednesday morning gains as chip giant Nvidia (NVDA) looms on Wednesday evening.
The stock market rallied Tuesday morning on another tame inflation report. walmart (WMT) earnings also helped. So did Warren Buffett’s Berkshire Hathaway, who announced that it was taking a major new position Taiwan semiconductor (TSM).
Major indices held back gains somewhat, but were then quickly mixed by reported Russian missile news. But the Dow recovered to turn positive again.
Missile attack in Poland?
By mid-afternoon, supplies faltered due to reports that Russian missiles had hit Przewodow, a Polish village just across the border from Ukraine. The missiles would have killed two people. It is possible that Russian missiles strayed from targets in Ukraine, or that the Ukrainian military shot down the missiles and landed in Poland. Moscow launched massive attacks on Ukrainian cities on Tuesday.
Russia has denied any responsibility.
Deliberately attacking Poland would be extremely dangerous. All NATO members have pledged to protect all other members from attack. NATO ambassadors will meet on Wednesday morning for an Article 4 consultation, not the more aggressive Article 5 defense provision. But a much broader conventional war would increase the risks of nuclear weapons and pose an existential threat to the world and, of course, the stock market.
Aside from the news of the missile strike in Poland, the market rally could be stalling after a strong run and the S&P 500 is approaching key resistance.
Still, MercadoLibre (MELI) and Pure storage (PSTG) cleared buy points on Tuesday, even though PSTG shares pulled back from the official entry for a second session in a row.
Target, from Lowe (LOW) and TJX Cos. (TJX) will report earnings early Wednesday along with October retail sales. That follows Dow Jones giants Walmart and DIY store (HD) earnings beginning Tuesday. WMT shares rose 6.5% on strong gains, guidance and a large buyback, breaking out of a buy point. HD shares rose 1.6% in an attempt to forge a handle.
TGT shares rose 3.6% on Tuesday but met resistance at the 200-day line, close to a low. Lowe’s advanced 2.15%, working on a handle on the bottom. TJX stock was up 2.9%, still in range on a 10-month cup-with-handle basis.
Nvidia reports this on Wednesday evening. Nvidia shares rose 2.3% on Tuesday, adding to last month’s big gains, which helped support the chip sector. Strong earnings and guidance from Nvidia, as well as from the chip equipment giant Applied materials (AMAT) on Thursday night, will be important for the industry and the wider market rally.
The video embedded in this article reviewed Tuesday’s market rally and analyzed MELI shares, Pure Storage and Albemarle (ALB).
MercadoLibre shares entered IBD Leaderboard and were IBD shares of the day on Tuesday. ALB stocks are on the Leaderboard watchlist. MercadoLibre and PSTG shares are listed on SwingTrader. Pure Storage is located on the IBD 50.
Dow Jones Futures Today
Dow Jones futures fell 0.3% from fair value. S&P 500 futures and Nasdaq 100 futures fell 0.3%.
The yield on 10-year Treasury bills fell 2 basis points to 3.78%.
On Tuesday evening, former President Donald Trump is expected to announce that he will seek re-election for the White House in 2024.
October retail sales are scheduled for 8:30 a.m. ET. Economists expect the Commerce Department to report a 1% gain, or just 0.2% excluding cars and gas.
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 opened strongly as the producer price index came in lower than expected, with a flat core PPI versus September. Walmart revenue also helped. TSM shares skyrocketed 10.5% on Tuesday night’s news that Warren Buffett had taken a stake. Buffett’s Berkshire also took on new positions and new holdings Louisiana Pacific (LPX) and Jefferies (JEF).
But major indices offset gains, with the Dow briefly turning negative following reports of Russian missiles hitting Poland.
The Dow Jones Industrial Average rose 0.2% in market trading on Tuesday, even with WMT stocks and Home Depot providing a lift. The S&P 500 index climbed 0.5%. The Nasdaq composite was up 1.45%. The small-cap Russell 2000 gained 1.5%.
The 10-year Treasury yield fell 7 basis points to 3.8%. The US dollar also fell.
The price of US crude rose 1.2% to $86.92 a barrel after a brief spike of more than 3% on Russian missile news. Natural gas futures rose 1.7%.
Among the top ETFs, the Innovator IBD 50 ETF (FFTY) is up 1.4%. The iShares Expanded Tech-Software Sector ETF (IGV) gained 2.3%. The VanEck Vectors Semiconductor ETF (SMH) was up 3.15%, with Taiwan Semi and Nvidia stocking huge components along with AMAT.
SPDR S&P Metals & Mining ETF (XME) climbed 0.85%. SPDR S&P Homebuilders ETF (XHB) was up 2.1%, with HD stocks and Lowe’s both significant holdings. The Energy Select SPDR ETF (XLE) was up just over 1% and the Financial Select SPDR ETF (XLF) was up 0.2%. The Health Care Select Sector SPDR Fund (XLV) fell 0.1%.
Reflecting more speculative story stocks, ARK Innovation ETF (ARKK) was up 2.7% and ARK Genomics ETF (ARKG) was just above breakeven.
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Stocks near buying points
MELI share rose 6.4% to 1,020.68, clearing a buy point of 1,018.10 cup-with-handle. MercadoLibre’s volume was below normal, but recent consolidation has yielded a number of benefits over above-average volume. The Latin American e-commerce giant is experiencing strong profit growth.
The PSTG share rose 1.6% to 31.56. During the day, Pure Storage reached 32.47, clearing the 32.07 cup-with-handle buy point for a second session in a row, but failed to close above that entry, according to MarketSmith. PSTG shares ended well with an early entry of 32.57.
The data storage company is also enjoying strong earnings growth.
Analysis of the market rally
The stock market rally got off to a strong start on Tuesday, with a spike according to the PPI inflation report. But major indices retreated from intraday highs and were then mixed by reports of the missile attack in Poland.
Perhaps the inflation/Fed narrative has shifted. But that doesn’t mean major indices can’t face resistance, especially after a strong recent run. And, as Tuesday’s action showed, there is always the potential for geopolitics or other wildcards to upend a market trend.
The Dow Jones and Russell 2000 have both outperformed their 200-day moving averages. The S&P 500 is approaching the 200-day mark, where it encountered strong resistance on Aug. 16.
The Nasdaq is moving from its 50-day to its 200-day line, but it still has a long way to go.
Notably, the Invesco S&P 500 Equal Weight ETF (RSP) is just above the 200-day mark. The Direxion Nasdaq-100 Equal Weighted Index ETF (QQQE) is approaching that important long-term level.
Tech giants are bouncing back with the market, but certainly not leading. Many titans hit bear market lows last week. The only semi-exception is Nvidia stock, which has soared over the past month. But even the chip giant is still working on its 200-day line.
However, many sectors are showing strength.
Manufacturers of solar energy, networks, contract electronics and various medical product manufacturers are doing well. So does a select number of chips, while several others try to set up. A host of housing-related stocks look interesting, from builders to suppliers to home sellers.
Other retailers look good, including WMT stock, BJ’s wholesale (BJ) and Ultimate beauty (ULTA). BJ reports Thursday.
Trucking companies are moving up as investors bet the worst is over, or at least priced in, for stock shipping.
Biotech companies and health insurance companies have shut down or pulled out, but are generally in good shape. Energy stocks are also doing well, although many appear to be expanding.
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What to do now
Major indices look strong, more stocks are giving buy signals and gearing up. Inflation data may have reached a turning point, raising the prospect of a slowdown in Fed rate hikes and – perhaps – an end to tightening in the not-too-distant future.
Investors should thus benefit from the current market rally. But they want to be careful about how much they add in the near term given the possibility of market pullback or resistance.
Don’t hunt for extensive supplies. Be wary of buying stocks that have extended significantly from their 50-day moving averages, even if they are in official buy zones. Don’t be too concentrated. A portfolio focused on lithium stocks like Albemarle would have burned on Tuesday.
But work on those watchlists, stay engaged and be ready to act.
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