Dow Jones futures fell slightly overnight, along with S&P 500 futures and Nasdaq futures, with Meta Platforms and Qualcomm reporting earnings.
X
The stock market rally made big gains on Wednesday after the Federal Reserve raised rates by 75 basis points for the second meeting in a row. Fed chief Jerome Powell has signaled that policymakers are looking at slowing the pace of tightening on the road, even as the economy remains stressed and focused on inflation.
Major indexes were moderate to higher, boosted by positive reactions to earnings from Microsoft (MSFT), parent of Google Alphabet (GOOGL) and Enphase Energy (ENPH).
Sen. Joe Manchin, DW.V., announced an agreement with Senate Majority Leader Chuck Schumer on Wednesday on a reconciliation bill with tax, climate and energy provisions. The deal, which could face some hurdles, includes a 15% minimum corporate tax rate, drug price controls, ObamaCare subsidy increases and pro-solar provisions.
Fed meeting
The Federal Reserve raised rates by 75 basis points on Wednesday afternoon, raising the rate to a target range of 2.25%-2.5%.
The central bank slightly downgraded its outlook on the economy, noting that “spending and production have softened.” But “job gains have been robust” while “inflation remains high.”
Fed chief Powell, speaking after the Fed meeting, emphasized that policymakers are “strongly committed to lowering inflation.” He said the economy is “resilient” with labor markets that are “very tight.”
Powell said it would likely be “appropriate” to slow Fed rate hikes as they become “tighter.” He expects Fed rates to be “moderately restrictive” by the end of the year, which he said will be in the 3%-3.5% range.
After the Fed rate hike and Powell’s comments, the odds of a 50-basis-point move on Sept. 21 rose to 56% from about 50-50 before the Fed’s announcement. Furthermore, markets expect moderate movements in the last two Fed meetings of the year, to end the year around 3.25%-3.5%.
Basic Incomes
Meta Platforms (META) and Qualcomm (QCOM) headlines primary income, with a chip-equipment maker Lam Research (LRCX), Service Today (NOW), O’Reilly Auto (ORLY), Ford Motor (F) and Teladoc Health (TDOC) also reporting late Wednesday.
Meta stock retreated slightly after Facebook’s parent missed earnings, reported its first-ever profit decline and lowered guidance.
Qualcomm stock fell modestly overnight on weak earnings guidance.
LRCX stock rose slightly after better-than-expected quarterly results.
TODAY’s stock fell as the business software giant cut subscription revenue guidance after narrowly beating its Q2 view.
Ford stock emerged after easily beating views, with a 423% EPS gain.
ORLY stock fell after earnings fell and the auto parts retailer guided lower.
TDOC stock plunged after the telemedicine specialist guided to the low end of full-year targets. Teladoc reported a big loss in Q2 due to a large impairment charge, though revenue beat slightly.
Meanwhile, Best Buy (BBY) cut its full-year forecast, citing weaker consumer spending amid high inflation. BBY stock fell weakly.
early Thursday, Pfizer (PFE) and Merck (MRK) is on tap. Pfizer stock is near a trendline entry. Merck stock has been trading near its 50-day line as it has rallied over the past two months.
last thursday, Apple (AAPL) and Amazon.com (AMZN) is on tap. Apple stock is modestly below its 200-day line after breaking above its 50-day earlier this month. AMZN stock is also slightly above its 50-day line.
Dow Jones Futures Today
Dow Jones futures fell 0.1% versus fair value. S&P 500 futures were down 0.1%. Nasdaq 100 futures lost 0.3%.
At 8:30 am ET, the Commerce Department will release second-quarter GDP. Economists had expected a 0.5% annualized gain, following a 1.6% drop in Q1. Back-to-back GDP declines would not officially mark a US recession. Economists of the National Bureau of Economic Research reign in changes in the business cycle, often long after the fact.
Note that overnight action in Dow futures and elsewhere does not 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
The stock market rally rose on Wednesday, led by big technology gains, then added to gains on the Fed rate hike decision and Fed chief Powell’s comments.
The Dow Jones Industrial Average rose 1.4% in stock market trading on Wednesday. The S&P 500 index fell 2.6%. The Nasdaq composite rose 4.1%. The small-cap Russell 2000 gained 2.3%.
US crude oil prices rose 2.4% to $97.26 per barrel. Natural gas futures fell 3.4%.
ETFs
Among the best ETFs, the Innovator IBD 50 ETF (FFTY) rose 2.3%, while the Innovator IBD Breakout Opportunities ETF (BOUT) climbed 1.1%. The iShares Expanded Tech-Software Sector ETF (IGV) jumped 4.3%, with Microsoft stock a major component. The VanEck Vectors Semiconductor ETF (SMH) jumped 4.7%, with key components QCOM stock and Lam Research.
The SPDR S&P Metals & Mining ETF (XME) gained 3.4% and the Global X US Infrastructure Development ETF (PAVE) advanced 2.1%. The US Global Jets ETF (JETS) climbed 3.1%. The SPDR S&P Homebuilders ETF (XHB) climbed 2.1%. The Energy Select SPDR ETF (XLE) bounced 2.3% and the Financial Select SPDR ETF (XLF) 1.5%. The Health Care Select Sector SPDR Fund (XLV) rose 0.6%, with Pfizer and MRK stock major holdings.
Reflecting stocks with a more speculative story, the ARK Innovation ETF (ARKK) rose 6.7% and the ARK Genomics ETF (ARKG) gained 3.9%.
Five Best Chinese Stocks to Watch Today
Meta Earnings
Facebook-parent Meta Platform’s revenue and earnings fell, with the social media giant also guiding for lower Q3 earnings.
The meta stock fell 3.5% in overnight action. Shares were up 6.55% to 169.58 on Wednesday, riding on Google earnings and the overall market rally. META stock has sold off 13% in the previous three sessions following a weak Snap (SNAP) report and guidance.
Qualcomm Revenues
Qualcomm’s earnings and revenue slightly beat fiscal Q3 EPS and earnings views, though gross margin was slightly lighter. The wireless chip giant also guided to lower earnings in Q4 earnings.
QCOM stock sank more than 2% in extended trading. Shares rose 2.3% to 153.42 in Wednesday’s trading, resting above the 200-day line.
Market Rally Analysis
The stock market rally enjoyed big gains on Wednesday after some notable losses over the past few sessions. The Nasdaq and S&P 500 rebounded from near their 50-day lines.
But watch out for a two-day reaction. Major indexes also rallied after the previous two Fed meetings, but then sold off the next day.
While investors cheered Powell’s slightly dovish hints on Wednesday, they could focus on why Fed rate hikes may begin to slow, especially given the weak economy. Because of this, the Q2 GDP report is especially important.
Meanwhile, a lift off last week’s highs is the next test for the major indexes, followed by early June peaks.
Still not much stock to buy. Growth stocks can break out in three-day conglomerations but often on ugly charts.
It’s encouraging to see Microsoft and Google rising sharply despite missing revenue views. Tempur-Sealy (TPX) rebounded despite weak results and lowered guidance.
Time The Market With IBD’s ETF Market Strategy
What should be done now?
With the Fed meeting and plenty of big earnings out, some of the extreme uncertainty facing investors is fading. The market rally that has wrapped up this news-filled week has, so far, been decidedly positive.
There could still be a “two-day” reversal of the Fed meeting. Also, Apple and more are still reporting this week, including GDP data and other key economic reports.
With a limited number of good stocks in position, investors may want to increase exposure through broad market or sector ETFs.
But if the market continues to improve, buying opportunities will present themselves and new positions will deliver solid gains. So work on your watchlists.
Read The Big Picture daily to stay in sync with market direction and top stocks and sectors.
Please follow Ed Carson on Twitter at @IBD_ECarson for stock market updates and more.
YOU MAY ALSO LIKE:
Why This IBD Tool Simplifies the Search For Top Stocks
Look Out For The Next Big Winning Stock On MarketSmith
Best Growth Stocks To Buy And Watch
IBD Digital: Unlock IBD’s Premium Stock Lists, Tools & Analysis
Tesla vs. BYD: Which EV Giant is the Better Buy?