Stock Market Rally Awaits Fed Chief Powell, Key Economic Data; Apple Extends Slide

Dow Jones futures rose slightly overnight, along with S&P 500 futures and Nasdaq futures, with Fed chief Jerome Powell and the start of key economic data on tap.

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The stock market rally closed mixed Tuesday with Apple (AAPL) once again a drag on the major indexes, along with Amazon.com (AMZN) and Tesla (TSLA). Meanwhile, Apple’s fellow Dow giants Boeing (BA), Chevron (CVX) and Goldman Sachs (GS) are near buy points.

Hewlett Packard Enterprise (HPE) and NetApp (NTAP) headlined earnings reports late Tuesday, with CrowdStrike (CRWD) and Workday (WDAY) kicking off big software reports this week.

HPE stock rose modestly in overnight trade after HPE earnings topped views. HP Enterprise stock, above its 200-day line, is working on a long cup base. NTAP stock plunged in extended action on weak NetApp revenue and guidance. WDAY stock jumped overnight on a Q3 beat and a $500 million buyback. CRWD stock dived despite beating Q3 views as subscriptions came in light and the cybersecurity firm implied a Q4 revenue miss.

On Wednesday morning, ADP will release its November employment estimate of private payrolls. The Labor Department will release job openings in the October JOLTS report. Job openings are watched closely by Fed chief Jerome Powell, who will speak Wednesday afternoon.

All that foreshadows the Fed’s favorite inflation gauge, the PCE price index, on Thursday morning, along with the November jobs report on Friday, as well as several other notable economic releases.

Investors should be cautious about opening new positions until there’s more clarity on the economy and Fed rate hike outlook. If anything they may want to be lightening positions in the very short term.

CVX stock is on IBD Leaderboard. BA stock is on SwingTrader.

Fed Chief Powell Speech

Fed Chief Jerome Powell will speak at the Brookings Institution at 1:30 p.m. ET on Wednesday. He’s expected to reinforce expectations that the central bank will shift to a 50-basis-point rate hike on Dec. 14. Markets see a 67.5% chance of a half-point move, but still a decent chance of a fifth straight Fed rate hike of 75 basis points. But he’ll also likely indicate that rate hikes will continue into 2023.

Whatever Powell says will quickly be overtaken by economic data. If inflation starts to show significant cooling and labor markets ease, even the most-hawkish Fed policymakers will favor slowing the pace of rate hikes and ending earlier than markets may expect. Hot price and employment data will stiffen the resolve of many Fed doves. Of course, the economic data in the coming days may show mixed results, or marginal improvement.

Dow Jones Futures Today

Dow Jones futures climbed slightly vs. fair value, along with S&P 500 futures. Nasdaq 100 futures rose 0.1%.

The 10-year Treasury yield fell 1 basis point to 3.74%. Crude oil futures rose 1%.

China’s official manufacturing index fell 1.2 points to 48 in November, falling further below the neutral 50 level and views for 49. The services index sank to 46.7 vs. forecasts for 48. China’s Covid lockdowns have taken a serious toll on the economy.

Remember that overnight action in Dow futures and elsewhere doesn’t necessarily translate into actual trading in the next regular stock market session.

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

Stock Market Rally

After Monday’s sharp selling, the stock market rally closed mixed Tuesday.

The Dow Jones Industrial Average closed just above break-even in Tuesday’s stock market trading. The S&P 500 index fell about 0.2%. The Nasdaq composite declined 0.6%. The small-cap Russell 2000 rose 0.3%.

Apple stock fell 2.1%, its third straight significant decline, as China Covid cases, lockdowns and protests weigh on the tech giant. On Tuesday, shares fell 2.6%, below their 50-day moving average. Above the 50-day line looms 200-day resistance for AAPL stock. Apple has seen unrest at a massive Foxconn iPhone assembly factory in China.

Amazon stock declined 1.6% and Tesla stock fell 1.1%, both retreating from near their 21-day lines. Both are relatively close to bear market lows.

U.S. crude oil prices climbed 2.4% to $79.62 a barrel. Intraday Monday, crude oil futures hit their lowest levels of the year.

The 10-year Treasury yield rose 5 basis points to 3.75%.

ETFs

Among the best ETFs, the Innovator IBD 50 ETF (FFTY) dipped 0.2%, while the Innovator IBD Breakout Opportunities ETF (BOUT) rose 0.5%. The iShares Expanded Tech-Software Sector ETF (IGV) sank 0.8%. The VanEck Vectors Semiconductor ETF (SMH) fell 0.3%.

SPDR S&P Metals & Mining ETF (XME) gained 2.3% and the Global X U.S. Infrastructure Development ETF (PAVE) 0.1%. U.S. Global Jets ETF (JETS) ascended 1.8%. The Financial Select SPDR ETF (XLF) climbed 0.6%. The Health Care Select Sector SPDR Fund (XLV) fell 0.25%.

Reflecting more-speculative story stocks, ARK Innovation ETF (ARKK) edged down 0.5% and ARK Genomics ETF (ARKG) dipped 0.4%. Tesla stock is a major holding across Ark Invest’s ETFs.

Five Best Chinese Stocks To Watch Now

Dow Stocks Near Buy Points

Boeing stock rose 2% to 175.32 on Tuesday, back above a 173.95 cup-base buy point, according to MarketSmith analysis. Shares have been trading tightly in light volume near the buy point after a big run-up on optimism for the aerospace giant. Analysts expect Boeing to return to profitability in 2023 after four years of losses. The recent pause in BA stock has the 21-day line catching up.

Chevron stock climbed 1.45% to 180.94, slightly below the 182.50 buy point and just above the 21-day line. CVX stock has been trading around that official buy point all month. An early entry near 167 on Oct. 19 was probably the safer bet initially. But with Chevron stock right at the 21-day and no longer extended from the 50-day, it’s looking more interesting.

GS stock edged up 0.35% on Tuesday to 383.71. The investment bank has a 389.68 buy point from a 35%-deep cup-with-handle base going back to November 2021. Investors also could view the recent pause as a shelf just above the buy range from a bottoming base that Goldman stock cleared in early November. The 21-day moving average is close to catching up, while the 50-day line is starting to gain ground. The relative strength line is at a multiyear high reflecting GS stock’s outperformance vs. the S&P 500.

Market Rally Analysis

The stock market rally is pulling back with key technical tests and economic data on tap, along with uncertainty over China’s Covid policies.

The S&P 500 index is extending a pullback from just below the 200-day moving average, but still above its 21-day line. The Russell 2000, which dropped back below the 200-day and 21-day lines on Monday, nudged back above the 21-day.

The laggard Nasdaq fell below the 21-day line and is closing in on its 50-day line.

Apple stock, Tesla and other megacaps have been weighing on the Nasdaq and the S&P 500 index.

The Invesco S&P 500 Equal Weight ETF (RSP) is still above its 200-day moving average.

But don’t exaggerate Apple’s impact. Many leading stocks are testing or falling below buy points or round-tripping decent gains.

The silver lining is that the stock market isn’t rallying into Fed speeches and important economic data. That could mean that markets could bounce if there are no negative surprises, with the possibility of bigger gains if upcoming headlines are positive.

But the market rally is going to do what it’s going to do.

Time The Market With IBD’s ETF Market Strategy

What To Do Now

With the markets pulling back there aren’t a whole lot of stocks flashing buy signals. Investors probably should wait for Powell’s speech and the economic data to roll in before making significant new buys. Investors may want to take at least some partial profits in winners, especially if the winning stocks are retreating back to buy points.

If the market rally revs higher soon, a large of number of stocks will look actionable. But a lot of interesting stocks today will start looking damaged if the major indexes fall significantly from here.

So investors need to stay engaged and flexible. Keep your watchlists up to date but have exit strategies for your holdings as well.

Read The Big Picture every day to stay in sync with the 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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