Dow Jones Futures: Nasdaq Rallies Up To Resistance On Nvidia; All Eyes On PCE Inflation Report

Dow Jones futures edged lower after hours, along with S&P 500 futures and Nasdaq futures. Booking Holdings, MercadoLibre and Square were notable earnings reports late Thursday, while Boeing (BA) halted 787 Dreamliner deliveries once again. All eyes will turn Friday to the Fed’s favorite inflation gauge, the PCE price index.

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The stock market rally had an up-and-down day, but closed near session highs. Nvidia (NVDA) soared on earnings and many other chip plays also rallied.

The S&P 500 held key support while the Nasdaq and Russell 2000 moved to close near resistance.

The stock market rally remains under pressure and investors should act accordingly.

MercadoLibre (MELI), Booking Holdings (BKNG), Autodesk (ADSK), Intuit (INTU), Floor & Decor (FND) and Square-parent Block (SQ) reported late Thursday.

Boeing is halting 787 Dreamliner jet deliveries for “additional analysis on a fuselage component,” the FAA said. Deliveries won’t resume until Boeing shows regulators the problem is solved. The Dow Jones aerospace giant resumed 787 deliveries in late 2022 after a halt of more than a year. BA stock fell 3% in late trading, signaling a 50-day line test.

MELI stock and Floor & Decor are on the IBD 50 list. BKNG stock is on the IBD Big Cap 20.

PCE Inflation Rate

The Commerce Department will release the January personal consumption expenditures index at 8:30 a.m. ET, as part of the income and spending report.

The PCE price index should show a 0.4% gain vs. December. The core PCE index, which excludes food and energy, also is seen up 0.4%. The PCE inflation rate should dip to 4.9% from December’s 5%, with core PCE inflation nudging down to 4.3% from 4.4%.

Keep a close eye on nonenergy services prices excluding housing. Fed chief Jerome Powell has said he’s paying close attention to this super-core inflation measure.

Meanwhile, economists expect a 1% gain for personal income with consumer spending rising 1.2%.

Dow Jones Futures Today

Dow Jones futures fell 0.1% vs. fair value, with Boeing stock weighing on blue chips. S&P 500 futures tilted lower and Nasdaq 100 futures declined 0.1%.

The 10-year Treasury yield dipped 2 basis points to 3.86%.

The PCE inflation rate will be sure to swing Dow Jones futures, Treasury yields and more.

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

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Key Earnings

MELI stock gained 6% in late trading as MercadoLibre earnings crushed views with revenue also topping for the Latin American e-commerce and payments giant. Shares rose 1.6% on Thursday to 1,136.26, above the 21-day line. MELI stock was technically in range from a 1,095.44 buy point. But MercadoLibre stock is set to break a short trendline at Thursday’s open.

BKNG stock were flat after hours even as Booking earnings topped views. Shares undercut the 21-day line intraday Thursday but closed down just 22 cents at 2,426.49. Booking stock, which has had a strong 2023, now has a handle on a long consolidation with a 2537.10 buy point.

ADSK stock declined 3% in extended action as Autodesk earnings slightly topped views but the design software maker generally guided lower. Autodesk stock climbed 2.1% on Thursday to 221.16. Shares have a 232.25 handle buy point on a double-bottom base.

INTU stock tilted higher overnight. Intuit earnings comfortably beat Q2 views, but the TurboTax software maker only reiterated in-line fiscal 2023 guidance. Shares advanced 1.35% on Thursday to 411.88, back above the 200-day line after retaking its 50-day on Wednesday. Intuit stock has a 490.93 consolidation buy point, but could have some early entries.

FND stock rose 5% after Floor & Decor earnings topped views while revenue just fell short. Floor & Decor stock advanced 1.9% to 90.83, above an 88.82 cup-with-handle buy point. FND stock wiped out a double-digit gain on Tuesday, according to MarketSmith analysis.

SQ stock jumped 9% in extended trade after Block earnings missed but revenue topped. Block stock rose 1.6% to 76.11 on Thursday, slightly above the 50-day line. A decisive move by SQ stock from the 50-day line could offer an early entry in a bottoming base.

Stock Market Rally Thursday

The stock market rally opened solidly higher on Nvidia earnings, reversed to modest losses by midday before reviving once again.

The Dow Jones Industrial Average closed up 0.3% in Thursday’s stock market trading. The S&P 500 index climbed 0.5%, with Nvidia stock the top performer. The Nasdaq composite rose 0.7%. The small-cap Russell 2000 advanced 0.7%.

U.S. crude oil prices rose nearly 2% to $75.39 a barrel, ending a six-day losing streak. Natural gas popped 6.4%, a second straight solid gain.

Copper futures tumbled 3.1%.

The 10-year Treasury yield fell 4 basis points to 3.88%.

ETFs

Among growth ETFs, the Innovator IBD 50 ETF (FFTY) rose 1.1%. The iShares Expanded Tech-Software Sector ETF (IGV) advanced 0.9%. The VanEck Vectors Semiconductor ETF (SMH) jumped 3.5%. NVDA stock is a major holding.

SPDR S&P Metals & Mining ETF (XME) gave up 1%. The Global X U.S. Infrastructure Development ETF (PAVE) climbed 0.9%. U.S. Global Jets ETF (JETS) ascended 1.3%. SPDR S&P Homebuilders ETF (XHB) stepped up 1%. The Energy Select SPDR ETF (XLE) bounced 1.5% and the Financial Select SPDR ETF (XLF) edged up 0.1%. The Health Care Select Sector SPDR Fund (XLV) rose 0.3%.

Reflecting more-speculative story stocks, ARK Innovation ETF (ARKK) retreated 1.5% and ARK Genomics ETF (ARKG) sank 1.35%.

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Market Rally Analysis

The stock market rally had a decent close after a ping-pong session. Falling Treasury yields likely contributed to the afternoon bounce. Ultimately the indexes are still within a tight trading area.

The Nasdaq composite came up to its 21-day moving average near the open, fell back to just above its 200-day line, before reversing again and nearing its morning intraday highs. Nvidia was a key driver. NVDA stock leapt 14% while also spurring a broad chip advanced.

The S&P 500 fell below its 50-day moving line for much of the day before pushing higher again.

The Russell 2000, like the Nasdaq, also hit resistance at the 21-day moving average.

A number of stocks gapped higher on earnings like Nvidia. Overall, leading stocks closed well, but definitely followed the broad market’s intraday shifts.

The stock market rally is under pressure, and acting like it. The major indexes are trying to hold support but quickly hitting upside resistance.

Just because the S&P 500 has held the 50-day line for the past two sessions doesn’t mean it’ll continue doing so. The Dow Jones tested its 50-day line for four weeks before breaking lower on Tuesday. The Dow hit a two-month intraday low Thursday before bouncing.

Friday’s PCE inflation report looms large. A tame reading could be a positive catalyst. But a hot inflation rate that sends the 10-year Treasury yield soaring toward 4% could slam the fragile market rally.

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What To Do Now

Thursday’s market action is why investors should refrain from getting too excited about a strong open. Stocks that looked actionable or promising in the first few minutes of trading quickly fell back, with few exceptions.

Wait for the major indexes and leading stocks to show some real strength, with the Nasdaq decisively reclaiming its 21-day moving average along with the big-cap S&P 500 and small-cap Russell 2000. Even then, investors should gradually bring exposure back up, not rush in.

In the meantime, update your watchlists for possible buys and review your portfolio for potential changes.

If the market deteriorates further, be ready to take a more-defensive posture.

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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