Dow Jones futures were down after hours, along with S&P 500 futures and Nasdaq futures. Booking Holdings, MercadoLibre and Square were all notable earnings reports Thursday night, while Boeing (BA) once again halted deliveries of 787 Dreamliners. All eyes will be on the Fed’s favorite inflation gauge, the PCE price index, on Friday.
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The stock market rally had an up and down day but closed near the session highs. nvidia (NVDA) skyrocketed on the gains and many other token games rallied as well.
The S&P 500 held key support while the Nasdaq and Russell 2000 moved to close near resistance.
The stock market rally remains under pressure and investors should act accordingly.
free market (MELI), stock reserve (BKNG), autodesk (ADSK), to sense (INTU), floor and decoration (FND) and square parent Block (SQ) reported Thursday night.
Boeing is halting deliveries of 787 Dreamliner aircraft for “additional analysis of an airframe component,” the FAA said. Deliveries will not resume until Boeing shows regulators that the problem is resolved. Aerospace giant Dow Jones resumed 787 deliveries at the end of 2022 after a hiatus of more than a year. BA shares fell 3% in late trading, indicating a 50-day line test.
MELI and Floor & Decor stocks are on the IBD 50 list. BKNG shares are on the IBD Big Cap 20.
PCE inflation rate
The Commerce Department will release the Personal Consumption Expenditures Index for January at 8:30 am ET as part of the Income and Expenditure Report.
The PCE price index should show a gain of 0.4% compared to December. The core PCE index, which excludes food and energy, is also expected to rise 0.4%. The PCE inflation rate should fall to 4.9% from 5% in December, and the core PCE inflation should decline to 4.3% from 4.4%.
Keep an eye on prices for non-energy services, excluding housing. Fed chief Jerome Powell has said that he is paying close attention to this super-core inflation measure.
Meanwhile, economists expect a 1% gain for personal income with consumer spending rising 1.2%.
Dow Jones Futures Today
Dow Jones futures fell 0.1% against fair value, with shares of Boeing weighing on blue chips. S&P 500 futures edged lower and Nasdaq 100 futures fell 0.1%.
The 10-year Treasury yield fell 2 basis points to 3.86%.
The PCE inflation rate is sure to rock Dow Jones futures, Treasury yields and more.
Remember that overnight action in Dow futures and elsewhere doesn’t necessarily translate into actual trading at the next regular stock market session.
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key gains
MELI shares rose 6% in late trading as MercadoLibre’s earnings crushed views and revenue also outpaced the Latin American payments and e-commerce giant. The shares rose 1.6% on Thursday to 1,136.26, above the 21-day line. MELI shares were technically in the one-point buy range of 1,095.44. But MercadoLibre shares are poised to break a short trend line at the open on Thursday.
Shares of BKNG were unchanged after hours, even as Booking’s earnings outpaced views. Shares undermined the 21-day intraday line on Thursday but closed just 22 cents lower at 2,426.49. The stock of reserves, which has had a strong 2023, is now in control of a long consolidation with a buy point of 2537.10.
ADSK shares fell 3% in extended action as Autodesk earnings slightly outpaced views, but the design software maker was angling lower overall. Autodesk shares rose 2.1% on Thursday to 221.16. The shares have a buy point of 232.25 on a double bottom basis.
INTU shares edged higher overnight. Intuit’s earnings comfortably beat second-quarter views, but software maker TurboTax only reiterated online guidance for fiscal 2023. The shares advanced 1.35% on Thursday to 411.88, again above the 200-day line after resuming its 50-day line on Wednesday. Intuit shares have a consolidation buy point of 490.93, but could see some early entries.
FND shares rose 5% after Floor & Decor earnings topped views, while revenue fell short. Shares of Floor & Decor rose 1.9% to 90.83, above a buy point of 88.82 for cup-handle. FND shares wiped out a double-digit gain on Tuesday, according to MarketSmith analysis.
SQ shares rose 9% in extended trading after Block’s earnings fell short, but revenue topped. Block shares rose 1.6% to 76.11 on Thursday, slightly above the 50-day line. A decisive move in SQ shares from the 50-day line could offer early entry on a bottoming basis.
Thursday stock rally
The stock market rally opened strongly higher on the back of Nvidia’s gains, reversing to modest losses at midday before picking up once more.
The Dow Jones Industrial Average closed up 0.3% in trading on Thursday. The S&P 500 index rose 0.5%, with Nvidia shares the best performer. The Nasdaq Composite rose 0.7%. The small-cap Russell 2000 rose 0.7%.
US crude prices rose nearly 2% to $75.39 a barrel, ending a six-day losing streak. Natural gas rose 6.4%, a second solid gain in a row.
Copper futures fell 3.1%.
The 10-year Treasury yield fell 4 basis points to 3.88%.
ETFs
Among growth ETFs, the Innovator IBD 50 ETF (FFTY) rose 1.1%. The iShares Expanded Technology Software (IGV) Sector ETF rose 0.9%. The VanEck Vectors Semiconductor (SMH) ETF jumped 3.5%. NVDA shares are a major holding.
SPDR S&P Metals & Mining ETF (XME) was down 1%. The Global X US Infrastructure Development ETF (PAVE) rose 0.9%. The US Global Jets ETF (JETS) rose 1.3%. SPDR S&P Homebuilders ETF (XHB) was up 1%. The Energy Select SPDR ETF (XLE) rebounded 1.5% and the Financial Select SPDR ETF (XLF) rose 0.1%. The SPDR Select Healthcare Sector Fund (XLV) rose 0.3%.
Reflecting more speculative historical stocks, the ARK Innovation ETF (ARKK) fell 1.5% and the ARK Genomics ETF (ARKG) sank 1.35%.
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Market recovery analysis
The stock rally had a decent close after a ping-pong session. Falling Treasury yields likely contributed to the afternoon bounce. Ultimately, the indices are still within a tight trading area.
The Nasdaq Composite rose to its 21-day moving average near the open, pulled back to just above its 200-day line, before reversing again and nearing its morning intraday highs. Nvidia was a key factor. NVDA shares rose 14% at the same time as fueling a broad advance for the chip.
The S&P 500 fell below its 50-day moving line for much of the day before rising again.
The Russell 2000, like the Nasdaq, also found resistance at the 21-day moving average.
Several stocks rose with gains like Nvidia. In general, the leading stocks closed well, but definitely followed the intraday changes of the general market.
The stock market rally is under pressure and acting like it. The major indices are trying to hold support but are quickly finding bullish resistance.
Just because the S&P 500 has held the 50-day line for the past two sessions doesn’t mean it will continue to do so. The Dow Jones tested its 50-day line for four weeks before breaking lower on Tuesday. The Dow hit a two-month intraday low on Thursday before rebounding.
Friday’s PCE inflation report looms large. A tame reading could be a positive catalyst. But a high inflation rate that sends the 10-year Treasury yield soaring toward 4% could kill the market’s fragile rally.
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What to do now
Thursday’s market action is why investors should refrain from getting too excited about a strong open. Stocks that looked actionable or promising in the first few minutes of trading fell back quickly, with few exceptions.
Wait for the major indices and leading stocks to show some real strength, with the Nasdaq decisively retrieving its 21-day moving average along with the large-cap S&P 500 and small-cap Russell 2000. Even then, investors should gradually regain exposure. , Do not rush.
In the meantime, update your watchlists for potential purchases and check your portfolio for potential changes.
If the market deteriorates further, be prepared to take a more defensive stance.
Read The Big Picture every day to stay in sync with market direction and major stocks and sectors.
Follow Ed Carson on Twitter at @IBD_ECarson for stock market updates and more.
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