S&P 500 rises above Fed Chief Powell’s key level, but inflation, jobs report loom

Dow Jones futures were little changed overnight, along with S&P 500 futures and Nasdaq futures. Salesforce.com posted earnings overnight, but while investor focus will be on Thursday’s PCE inflation report, Federal Reserve Chairman Jerome Powell sparked a tech-led stock market rally on Wednesday.




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The pace of rate hikes could begin to slow at the December meeting, Fed Chairman Powell said on Wednesday, providing more apparent support for a small increase at the upcoming meeting. But Pavel stuck to his vision The Fed funds rate is 5% or higher. The current Fed funds rate range is 3.75%-4%. Powell also noted that many of the factors driving inflation are easing. Suggesting a slowdown may be necessary, the central bank chief said a “soft landing” was still possible.

Nasdaq led the way, too Apple (AAPL), Microsoft (MSFT), Nvidia (NVDA), Tesla (D.S.L.A) and Google Parents letters (Google) are all greater than the composite. Notably, the S&P 500 index rose to clear the 200-day moving average, a key resistance area.

On Thursday, investors will get the October PCE price index, and the November jobs report will be released on Friday morning.

So while Wednesday’s action is encouraging, investors will have to wait for the market’s reaction to the central bank’s key data.

Main revenue

Salesforce.com (CRM), Snowflake (Snow) and the box (the box) led many software revenue reports. Pure savings (PSTG) and Victoria’s Secret (VSCO) has also been reported.

CRM stock fell sharply in overnight trade Salesforce revenue is number one But the guidance was light. Co-CEO Brett Taylor will step down, with Marc Benioff remaining as sole CEO. SNOW stock initially fell in weak extended action Snowflake Revenue Guidance, but managed losses significantly. Box stock was little changed as EPS topped out and sales missed a bit.

PSTG stock rose modestly overnight Pure Storage tops Q3 views and raised guidance. Shares fell about 1% after an intraday decline on weak results and guidance NetApp (NTAP) VSCO shares fell slightly as Victoria’s Secret earnings topped the quarter, but sales were less subdued.

Thursday morning, Dollar General (DG) and Hooks (KR) is the pipe. Chinese EV makers Neo (NIO), Li Auto (LI) and Expeng (XPEV) to report November sales, and those stocks and other Chinese names were rising on Wednesday on hopes of a Covid reopening.

Inflation Report

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

The October PCE price index should show a 0.4% increase versus September. Year-over-year, PCE inflation should ease to 6% from 6.2% in September. Excluding food and energy, core PCE is expected to increase by 0.3%. Core PCE inflation rate falls to 5% from 5.1% in September.

The PCE inflation report, along with the November jobs report on Friday, will help shape Fed rate hike expectations. The November consumer price index will be released on December 13, a day before the central bank’s December meeting announcement.

Earlier on Wednesday, the ATP reported a sharp slowdown in private sector hiring in November. Also, the JOLTs survey showed job openings were lower than expected in October. Q3 GDP growth was revised higher than expected, along with the reported inflation rate.

Dow Jones Futures Today

Dow Jones futures flat vs. fair value, CRM stock drags on blue chips S&P 500 futures and Nasdaq 100 futures rose.

The 10-year Treasury yield fell 9 basis points to 3.61%.

Remember that it is an overnight operation Dow futures The next routine elsewhere doesn’t necessarily translate into actual trading stock market session.


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Stock market rally

Stocks rallied for much of Wednesday’s session, then ended the session on a high with comments from Fed Chair Powell.

The Dow Jones industrial average rose 2.2% on Wednesday Stock market trading. The S&P 500 index rose 3.1%. The Nasdaq composite rose 4.4%. The small-cap Russell 2000 rose 2.7%.

Apple shares rose 4.9% and Google shares rose 6.1%, both above their 50-day highs. Microsoft stock and Nvidia, already above their 50-day lines, rose 6.2% and 8.2%, respectively. Tesla shares rose 7.7%, snapping a 21-day hitting streak.

US crude oil prices rose 3% to $80.55 a barrel, but fell 6.9% for the month. Copper futures were also boosted by hopes of China reopening due to Covid.

Treasury yield and central bank rate hike anomalies

The 10-year Treasury yield fell 5 basis points to 3.7%. The two-year Treasury yield, more closely tied to central bank policy, fell to 4.33%.

The odds of a 50-basis-point Fed rate hike are now 79% versus 66% after Tuesday. Markets still see another half-point move in February as a slight favorite, but odds of a quarter-point move have reached 45%.


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ETFs

in the middle Best ETFsInnovator IBD 50 ETF (FFTY) rose 1.8%, while the Innovator IBD Breakout Opportunities ETF (Bot2% up. iShares Expanded Technology-Software Sector ETF (IGV) rose 4.4% with two major components, Microsoft and CRM. VanEck Vectors Semiconductor ETF (SMH) rose 5.7%, with Nvidia stock leading the way.

SPDR S&P Metals & Mining ETF (XME) advanced 3.75% and the Global X US Infrastructure Development ETF (sidewalk2.4% up. Energy Select SPDR ETF (XLErose 0.5% and fund pick SPDR ETF (451.7% up. Health Care Select Sector SPDR Fund (XLV) added 2.4%.

Reflecting the more speculative story stocks, the ARK Innovation ETF (ARKKrose 7.7% and the ARK Genomics ETF (ARKG) 6.5% Tesla stock is the dominant holding across Arc Invest’s ETFs.


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Market rally analysis

The stock market rally took a big, bullish move higher Wednesday on Fed Chairman Powell’s comments.

The S&P 500 index moved above its 200-day line for the first time in seven months, moving above the 4,000 level from near its 21-day line.

The Nasdaq composite was on the upside on Wednesday after lagging the market rally. It retook its 21-day line and the 11,000 level and settled on a two-month closing high. Shares of Apple, Microsoft, Google, Nvidia and Tesla posted strong gains on Wednesday, but it’s not clear that any of them will lead the current rally.

The Russell 2000, which broke its 21-day streak intraday, rebounded to reclaim its 200-day. The Dow Jones, the leader of the current market rally, has once again hit a new seven-month high.

Advancers beat losers with broad-based gains. Several leading stocks under pressure rallied on Wednesday.

Despite a lot of positive action on Wednesday, the S&P 500 remained below its 200-day moving average. Thursday’s October PCE inflation report and Friday’s November jobs report could reinforce Wednesday’s volatility or trigger a bearish pullback.

Remember that the current market rally consists of many big one-day gains, but struggles to advance over the next few days or weeks.


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What to do now

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

Investors may have been tempted to increase exposure on Wednesday, and doing so may have paid off.

But there are good reasons not to increase exposure just yet. The S&P 500 is above its 200-day line, but not decisively. Doing so would mean topping the long, falling-tops trendline on the weekly chart. A decisive break above this area can be a strong signal that the current uptrend is higher than a bear market rally.

But the upcoming PCE inflation data and jobs report will require a positive reaction.

Investors should work furiously on their watch lists, looking for promising stocks from various sectors. But definitely stay engaged. The market rally may be at a turning point, but which way will it turn?

According to Big picture Each day should be in sync with the direction of the market and the leading stocks and sectors.

Follow Ed Carson on Twitter @IBD_ECarson For stock market updates and more.

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