Dow Jones futures and S&P 500 futures rose overnight, while Nasdaq futures rose weakly, as Tesla (TSLA) the main revenues after closing. The stock market erased sharp intraday gains on Wednesday as Treasury yields jumped after the Federal Reserve said it “expects” to raise interest rates soon with Fed chief Jerome Powell hinting at aggressive rate increases and balance cuts to come.
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Major indices closed the worst levels and did not lower lows on Monday, but it was another frustrating session for the unproven attempt of the stock market rally.
Microsoft (MSFT) boosted market gains and optimism ahead of the Fed’s decision. MSFT stock rose back above its 200-day moving average, even as it closed near session lows.
Tesla’s earnings were comfortably beaten by watches late Wednesday. Tesla stock was slightly higher in volatility in overnight trading.
Meanwhile, Seagate technology (STX), Lam Research (LRCX), Teradyne (TER), Intel (INTC), Silicon Motion Technology (SIMO), United Rentals (URI), Ameriprise Financial (AMP), Vertex Pharmaceuticals (VRTX), Edwards Lifesciences (EW) at Service Today (NOW) also reported earnings late Wednesday.
STX stock and ServiceNow dramatically won overnight, while Edwards, LRCX stock and especially Teradyne lost.
Tesla stock and Microsoft are on the IBD Leaderboard. Microsoft’s stock and NOW are in IBD Long-Term Leaders.
Fed meeting
The Fed meeting ended Wednesday afternoon during which policymakers indicated a March rate hike, saying “it will soon be appropriate.” Asset purchases will end in early March, as planned, despite some speculation that bond purchases may end in February.
Fed chief Jerome Powell followed up at his press conference, saying there was “quite a bit of room” to raise rates without hurting the job market. He will not exclude raising rates at every meeting in 2022, starting in March.
Powell reiterated that the Fed could move sooner and faster to cut its large balance sheet than in the last cycle, saying the economy is stronger now. He stressed that the Fed has not made any decision about the speed or timing of any balance sheet cuts, but said they will come after the initial rate increase.
Powell said nothing surprising, but he seemed to be a Fed leader focused on fighting high inflation, not bowing backwards to relieve troubled markets.
The 10-year Treasury yield rose 7 basis points to 1.85, mostly as Powell spoke. That’s slightly less than the two-year high of 1.87% set on Jan. 19. The 2-year Treasury yield jumped 13 basis points to 1.15%, while the yield spread continued to decline.
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Dow Jones Futures Today
Dow Jones futures tilted higher compared to the fair value. S&P 500 futures are up. Nasdaq 100 futures rose 0.5%. Tesla stock gave modest gains on Nasdaq and S&P 500 futures.
Note that overnight action on Dow futures and elsewhere does not necessarily translate into actual trading in the next regular stock market session.
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Stock Market Rally
The stock market rally rose sharply for most of the session, while Microsoft led. Major indexes hit session highs shortly after the announcement of the Fed meeting at 2 pm ET, but soon retreated, erasing gains and becoming negative on Fed chief Powell’s hawkish comments. .
The Dow Jones Industrial Average fell 0.5% in stock market trading on Wednesday. The S&P 500 index retreated 0.15%. The Nasdaq composite closed just above the break-even. The small-cap Russell 2000 fell 1.5%.
Of the best ETFs, the Innovator IBD 50 ETF (FFTY) was down 0.1%, while the Innovator IBD Breakout Opportunities ETF (BOUT) was down 0.1%. The iShares Expanded Tech-Software Sector ETF (IGV) has fallen more than 1%, even though Microsoft stock is a major component. NOW the stock is also a key holding. VanEck Vectors Semiconductor ETF (SMH) rose 1.4%. Intel and LRCX stocks are prominent components of SMH.
Reflecting more speculative story stocks, the ARK Innovation ETF (ARKK) retreated 2.5% and the ARK Genomics ETF (ARKG) was 2.25%. Tesla stock remains No. 1 holding in ARK Invest ETFs.
The SPDR S&P Metals & Mining ETF (XME) fell 2.6% and the Global X US Infrastructure Development ETF (PAVE) fell 0.9%. The US Global Jets ETF (JETS) was down 0.7%. The SPDR S&P Homebuilders ETF (XHB) gave up 2.4%. The Energy Select SPDR ETF (XLE) was down 0.2% and the Financial Select SPDR ETF (XLF) was up 0.3%. The Health Care Select Sector SPDR Fund (XLV) dropped 0.5%.
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Tesla Revenues
Tesla’s earnings and earnings were comfortably beaten by Wall Street views. CEO Elon Musk said supply chain issues will be the “major limiting factor” for growth in 2021. Tesla has navigated supply chain problems in 2021 more than most automakers, many of which they have seen a dramatic decline in production due to chip shortages and more.
Tesla continues to expect 50% growth in deliveries annually over the next few years, easily beating that mark in 2021 with an 87% jump.
Investors are hoping for guidance on the call to earnings on 2022 deliveries and when the Berlin and Austin plants could open. They also want to get a product roadmap, especially for Cybertruck and 4680 battery updates.
Tesla stock rose a fraction on volatile overnight trading. Shares rose 2.1% to 937.41 on Wednesday, after hitting 987.69 intraday. TSLA stock is in a consolidation with 1,243.49 buy points, but it may offer a variety of earlier entries.
Other Revenues
Lam Research’s profits were narrowly beaten, but the chip-gear giant missed out on sales and gave poor guidance. LRCX stock has fallen sharply.
Teradyne’s earnings outperformed views, but the chip-equipment maker led lower than the consensus for Q1, citing a “slower technology transition at one of our key ends of the market.” TER stock crashed.
Intel’s earnings topped the views, but INTC stock fell slightly overnight on weak earnings guidance.
Seagate’s earnings were slightly ahead of the views, with memory play rising to guide sales in 2022. STX stock jumped in extended trading.
ServiceNow revenues exceeded predictions. NOW the stock jumps into late action.
Earnings and earnings of Edwards Lifesciences missed views. EW stock sank.
Ameriprise earnings topped the views and the financial firm announced a $ 3 billion stock buyback. AMP stock is inactive.
Vertex’s revenues are easy to beat by guiding biotech higher. VRTX stock changed slightly overnight.
United Rentals ’revenues topped the deal. URI stock increased slightly with extended action.
Silicon Motion has not yet reported earnings.
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Market Rally Analysis
The stock market fell into a correction in 2022 in no wise part due to Fed tightening fears, so it’s not surprising to see the nascent rally attempt to erase heavy gains following the Fed’s hawkish comments, but it’s disappointing .
The Nasdaq, which rose more than 3% intraday to just above the 1,4000 level, took advantage thanks to Microsoft and Tesla. The S&P 500 index hit resistance around the 200-day line, moving from a 2.2% intraday gain to a small loss.
Even in high sessions, none of the major indices came close to the 10-day moving average.
Investors can still look for a follow-through day to confirm the new stock market rally attempt. A follow-through day, involving strong price increases in one or more of the major indices at higher volumes than the previous session, indicates large institutions are ready to support the new uptrend.
But while dropping to their low Monday, major indexes have all dropped for the week, hardly a sign of a strong new rally.
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What to do now
The whipsaw action of recent days has offered strong bounces in the short term, but also large sell-offs. Without a crystal ball, it is difficult to select safe entries for stocks or ETFs.
Microsoft’s stock arguably offers an entry as a Long-Term Leader from the 200-day line, though the closure isn’t inspiring. Most tech stocks seem to have been badly damaged after near-vertical dives. The high value of growth stocks is particularly weak, although Tesla stocks have avoided breaking even.
Energy stocks were clearly leaders, despite pullbacks on Wednesday. Many have already extended the rise in crude prices to multiyear highs.
Shipping stocks include, Matson (MATX) exit a base while and Zim Integrated Shipping (ZIM) re-claimed an earlier buy point after triggering a 7% -8% sale rule on Monday. More broadly, a number of ground shipping stocks also look interesting.
The finances have struggled in recent weeks, but not broken. However, a flattening yield curve is not good for banks ’lending margins.
Really work with your watchlists, trying to find stocks that set up potential entries. Note that the earnings season remains full, with a small fruit seller named Apple reporting on Thursday night.
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