Dow Jones futures were little changed after hours, along with S&P 500 and Nasdaq futures.
x
Wednesday’s stock market rebound extended recent gains ahead of Thursday’s CPI inflation report. Investors are betting on subdued inflation data, raising the stakes for the Fed’s critical report.
amazon.com (AMZN) and Tesla shares led higher on Wednesday, with Litter (AAPL), Microsoft (MSFT) and parent of Google Alphabet (GOOGL) having solid sessions. tesla (TSLA) and AMZN shares also reflected strong performance in auto/EV names and e-commerce plays, respectively.
Celsius Properties (CELH) warmed up on Wednesday, offering a buy signal.
CELH shares were added to SwingTrader on Wednesday and to the IBD Leaderboard watchlist. Celsius was also IBD’s action of the day on Wednesday.
main earnings
Beginning of the knowledge base (KBH) reported earnings after the close, kicking off housing reports. KBH shares fell modestly as KB Home’s earnings were well below fiscal first quarter views, with revenue also missing. KB Home shares rose 3.2% on Wednesday to their best level since March 2022, up nearly 13% so far this year.
Shares of homebuilders and real estate-related names in general have been rising in recent weeks. How will they react to the KB Home results?
Taiwan semiconductor (TSM) are available on Thursday, the first major chip results of the last quarter. Shares of TSM rose 0.6% on Wednesday, just below the 200-day moving average.
Disney Hires Nike Veteran
walt disney (DIS) named nike (NKE) President Mike Parker as its new president, replacing Susan Arnold. Parker has been on the Disney board for seven years.
Meanwhile, Disney recommended that shareholders vote on its board and not support activist investor Nelson Peltz, who is trying to join the board of entertainment giant Dow Jones.
DIS shares rose modestly. Nike, another Dow stock like Disney, Apple and Microsoft, little changed after hours.
CPI Inflation Report
The Consumer Price Index for December will be released at 8:30 am ET.
Economists expect stable consumer prices after the 0.1% gain in November. Core CPI is expected to rise 0.3% after advancing 0.2% in November. The overall CPI inflation rate should continue to cool down to 6.6% from 7.1% in November. Core inflation should decelerate to 5.7% from 6% in November.
The CPI inflation rate peaked at 9.1% last June, while the core CPI inflation rate reached 6.6% in September, both highs in 40 years.
Other data this week, including New York Fed inflation expectations and small business job openings and hiring plans, point to a cooling of inflation and labor markets.
A moderate inflation report should warrant a quarter-point hike in the Fed’s rate at the Feb. 1 policy meeting, slowing from 50 basis points to 75 basis points at the previous two meetings. More importantly, cooling inflation could raise expectations that the Fed will pause rate hikes, perhaps after the March meeting.
Dow Jones Futures Today
Dow Jones futures were flat relative to fair value. S&P 500 futures were little changed and Nasdaq 100 futures declined.
The 10-year Treasury yield fell 3 basis points to 3.52%.
Keep in mind that overnight action in Dow futures and elsewhere does not necessarily translate to actual trading in the next regular stock market session.
Join the IBD experts as they analyze actionable stocks in the stock market rally on IBD Live
stock market rally
The stock market rally added to the recent gains, with major indexes closing near session highs for the second consecutive session. Nasdaq led the way thanks to Amazon and the rising big names.
The Dow Jones Industrial Average was up 0.8% in Wednesday’s stock market trades. The S&P 500 index rose 1.3%. The Nasdaq composite jumped 1.8%. The small-cap Russell 2000 gained 1.2%.
US crude oil prices rose 3.1% to $77.41 a barrel as China’s optimism outweighed a big jump in US crude inventories.
The 10-year Treasury yield fell 6 basis points to 3.55%.
ETFs
Among growth ETFs, the Innovator IBD 50 ETF (FFTY) rose 1.3%. The iShares Expanded Tech-Software Sector ETF (IGV) advanced 1.6%, recovering its 50-day line, with MSFT shares being one of the top holdings for the IGV. The VanEck Vectors Semiconductor ETF (SMH) rose 1.2%, moving above its 200-day line. TSM stock is one of the main components of SMH.
Reflecting stocks from more speculative stories, the ARK Innovation ETF (ARKK) was up 3.4% and the ARK Genomics ETF (ARKG) was up 3.7%. Tesla stock remains one of the top holdings in Ark Invest’s ETFs. Cathie Wood’s Ark has been carrying TSLA stock over the last few days and weeks.
The SPDR S&P Metals & Mining ETF (XME) was up 0.5% and the Global X US Infrastructure Development ETF (PAVE) was up 1.3%. The US Global Jets ETF (JETS) was up 0.4%. The SPDR S&P Homebuilders ETF (XHB) rose 2.6%. The Energy Select SPDR ETF (XLE) was up 0.3% and the Financial Select SPDR ETF (XLF) was up 0.9%. The Health Care Select Sector SPDR Fund (XLV) added 0.6%.
Five best Chinese stocks to watch right now
Megacap Shares
Tesla shares rose 3.7% to 123.22, extending a rebound from Friday morning’s bear market low of 101.81. Stocks are still below the 21-day decline line. Tesla is planning a major expansion of the Austin factory and is reportedly close to a preliminary deal for a new factory in Indonesia. The latter could complicate Tesla’s demand woes in Shanghai.
Amazon shares jumped 5.8% to 95.09 to close above its 50-day moving average for the first time in four months. AMZN shares also marked a low in the bear market last Friday.
Apple shares rose 2.1%, back to their 21-day line. This came despite Barclays cutting its AAPL price target, citing weakening demand from Apple across many product categories.
Google shares rose 3.5%, also resuming the 21-day line. Microsoft shares gained 3%, just below the 21-day line after falling last week.
Celsius stock
CELH shares jumped 5.3% to 106.57 on Wednesday on heavy volume after Tuesday’s bullish reversal. Stocks rallied from the 50-day line, broke a trendline and closed above the 21-day moving average. All of these provided a buy signal. CELH shares finished intraday highs of 108.80 but saw a strong close.
Market Rally Analysis
The stock market recovery showed more strength on Wednesday towards the CPI inflation report.
The S&P 500 index has pulled back from the 50-day line and topped Tuesday’s intraday high. While still below the 200-day line, the benchmark has topped both its 10-week and 40-week lines. The Russell 2000 cleared its 200-day line after surpassing its 50-day Wednesday.
The Nasdaq, which has been lagging in recent months, has topped its 50-day line for the first time in nearly a month.
Meanwhile, major stocks showed positive action overall. CELH shares gave a buy signal. Stocks that have recently crashed have generally held their ground or continued to rise.
Apple, Tesla, Amazon and other megacaps are far from actionable, but at least they aren’t weighing on major indexes.
Looking at just the major indices and major stocks, the stock market rally shows healthy action albeit with more resistance levels ahead.
But retrieving data or critical economic events from the Fed has been risky at best in recent months. Yes, a harmless CPI inflation report could send the market rally flying. But a warmer-than-expected reading could trigger a big sell-off. And the market is pricing in “good news”.
Of course, it’s not the news that matters, but the reaction to the news. The November CPI inflation report was cooler than expected on Dec. 13, pushing the major indices to their best intraday levels in months. But that was the peak of the October-December market rally. The indices closed far from the highs that day and fell until almost the end of the year.
Time the market with IBD’s ETF market strategy
What to do now
Investors may have added some exposure over the past few days with indices rising and many stocks flashing buy signals.
Those recent buys could look great on Thursday, but they could also explode depending on the December CPI inflation report.
Therefore, investors should not have been too exposed when reading inflation.
But be ready to act if major indices show strong action beyond the opening bell. Plenty of quality stocks are flashing buy signals or gearing up.
Don’t forget earnings season. JPMorgan Chase (JPM) and several other banking giants report on Friday morning, along with Delta Airlines (DAL) and UnitedHealth (UNH).
Microsoft and Tesla stock expire in two weeks, with Apple, Amazon and Google following soon after.
Results and earnings guidance will be critical amid uncertain economic times.
Read The Big Picture every day to stay in sync with market direction and key stocks and sectors.
Follow Ed Carson on Twitter at @IBD_ECarson for stock market updates and more.
YOU MIGHT LIKE:
Why this IBD tool simplifies the search for top stocks
Catch the next big winning stock with MarketSmith
Best growth stocks to buy and watch
IBD Digital: Unlock IBD’s premium stock listings, tools and analytics today
Tesla Vs. BYD: EV giants vying for the crown, but which is the best buy?
0 Comments