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S&P 500 rises above key levels at Fed Chair Powell, but inflation, jobs announce

S&P 500 rises above key levels at Fed Chair Powell, but inflation, jobs announce
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Dow Jones futures fell overnight along with S&P 500 futures and Nasdaq futures. Salesforce.com made headlines overnight, but investors will focus on Thursday’s PCE inflation report after Fed Chair Jerome Powell sparked a tech-led stock market rally on Wednesday.




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The pace of rate hikes could slow at the December meeting, Fed Chair Powell said on Wednesday, more supportive of a smaller hike at the upcoming meeting. leg Powell stood by his view that the fed funds rate is likely to reach 5% or more. The current key interest rate range is between 3.75% and 4%. Powell also noted that many factors supporting inflation are easing. The Fed chair, who has hinted a recession may be necessary, said a “soft landing” is still possible.

The Nasdaq went ahead, with Apple (AAPL), Microsoft (MSFT), NVIDIA (NVDA), Tesla (TSLA) and Google parent alphabet (GOOGLE), all of which outperform the composite. Notably, the S&P 500 Index shot up and broke above 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 due Friday morning.

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

key income

salesforce.com (CRM), snowflake (SNOW) and Crate (CRATE) led a number of software earnings reports. Pure storage (PSTG) and Victoria’s Secret (VSCO) also reported.

CRM stock fell solidly in overnight trading Salesforce revenue surpassed but leadership was easy. Co-CEO Bret Taylor will step down, leaving Marc Benioff as sole CEO. SNOW stock initially plummeted to weak in extended action Snowflake Sales Forecast, but significantly reduced casualties. Box inventory was little changed as earnings per share just topped and sales fell slightly.

PSTG shares rose slightly overnight after that Pure Storage beat Q3 views and increased leadership. Shares closed about 1% after falling for the day on weak earnings and guidance NetApp (NTAP). VSCO stock fell slightly as Victoria’s Secret profits topped but sales just lagged behind.

early thursday, Dollar General (DG) and Kroger (KR) are on the program. Chinese EV manufacturers He did not do it (NEVER), Li car (LI) and Xpeng (XPEV) report November sales, with these stocks and other Chinese names surging on Wednesday as Covid reignites hopes.

inflation report

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

The October PCE price index should show a 0.4% increase yoy. September. Year-on-year, PCE inflation should cool to 6% from 6.2% in September. Core PCE, which excludes food and energy, is expected to rise 0.3%. PCE core inflation is expected to ease to 5% from 5.1% in September.

The PCE inflation report, along with Friday’s jobs report, will help shape expectations for a Fed rate hike. The consumer price index for November is published on December 1st. 13, a day ahead of the December Fed meeting announcement.

Earlier on Wednesday, ADP reported a sharp fall in private sector hiring in November. In addition, the JOLTs survey showed that job openings fell more than expected in October. Q3 GDP growth was revised higher than expected, along with the report’s inflation gauge.

Dow Jones futures today

Dow Jones futures were a fraction below fair value and CRM stock weighed on blue chips. S&P 500 futures and Nasdaq 100 futures fell.

The 10-year government bond yield fell 7 basis points to 3.63%.

Think about the night action in Dow futures and elsewhere not necessarily translated into actual trading in the next regular time stock market Meeting.


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stock market rally

The stock market rally was a mixed bag for much of Wednesday’s session, then picked up steam on comments from Fed Chair Powell and finished at session highs.

The Dow Jones Industrial Average was up 2.2% on Wednesday stock exchange trading. The S&P 500 index rose 3.1%. The Nasdaq Composite rose 4.4%. Small-cap Russell 2000 is up 2.7%.

Apple stock is up 4.9% and Google stock is up 6.1%, both back above their 50-day prices. Microsoft shares and Nvidia, which are already above their 50-day moving averages, rose 6.2% and 8.2%, respectively. Tesla stock rose 7.7%, hitting its 21-day moving average.

US crude prices rose 3% to $80.55 a barrel but fell 6.9% over the month. China Covid reopening hopes also pushed copper futures higher.

Treasury yields and Fed rate hike chances

The 10-year Treasury yield reversed lower, falling 5 basis points to 3.7%. The two-year Treasury yield, which is more closely linked to Fed policy, fell to 4.33%, although Powell expected the Fed’s top rate to be at least 5%.

The probability of a 50 basis point Fed rate hike is now around 79% vs. 66% after Tuesday. Markets still see another half-point move in February as slight favorites, but the probability of a quarter-point move is over 45%.


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ETFs

among the The best ETFsthe innovator IBD 50 ETF (FFTY) rose 1.8%, while innovator IBD Breakout Opportunities ETF (STRUGGLE) rose 2%. The iShares Expanded Tech Software Sector ETF (IGV) rose 4.4% with Microsoft and CRM shares both being major components. The VanEck Vectors Semiconductor ETF (SMH) rose 5.7%, with Nvidia stock taking the lead.

SPDR S&P Metals & Mining ETF (XME) rose 3.75% and the Global X US Infrastructure Development ETF (PAVE) rose by 2.4%. The Energy Select SPDR ETF (XL) rose 0.5% and the Financial Select SPDR ETF (XLF) rose by 1.7%. The SPDR Fund for Selected Healthcare Sectors (XLV) 2.4% added.

The ARK Innovation ETF (ARKK) rose 7.7% and ARK Genomics ETF (ARKG) 6.5%. Tesla stock remains a key position in Ark Invest’s ETFs.


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Analysis of the market rally

The stock market rally made a big, big volume bullish move on Wednesday on comments from Fed Chair Powell.

The S&P 500 index rebounded above the 4,000 mark from near its 21-day moving average and rose above its 200-day moving average for the first time in seven months.

The Nasdaq Composite, the laggard in the market rally, led the rally on Wednesday. It recaptured its 21-day moving average and 11,000 to settle at a two-month closing high. Apple shares, Microsoft, Google, Nvidia and Tesla all posted strong gains on Wednesday, but it’s not clear if any of them will lead the current uptrend.

The Russell 2000, which had breached its 21-day moving average for the day, rallied and reclaimed its 200-day moving average. The Dow Jones, which has led the current market rally, is back to a fresh seven-month high.

Risers beat losers with broad-based gains. Many pressured benchmarks were supported on Wednesday.

Despite plenty of positive action on Wednesday, the S&P 500 remains below its 200-day moving average. October PCE inflation report on Thursday and November jobs report on Friday could add to Wednesday’s bullish rebound or trigger a bearish pullback.

Remember that the current market rally has had numerous large daily gains but then struggled to make any progress over the next few days or weeks.


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What now

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

Investors were likely tempted to add exposure on Wednesday, and that might work.

But there remain good reasons not to increase exposure just yet. The S&P 500 is above its 200-day moving average, but not decisively. This would likely mean surpassing a long trend line with falling spikes on a weekly chart. A decisive break above this range could be a strong signal that the current uptrend is more than a bear market rally.

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

Investors should be working hard on their watch lists and looking at promising stocks across a variety of sectors. But by all means, stay engaged. The market rally could be at an inflection 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.

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

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