Dow Jones Futures: Stock Market Rally on CPI Inflation Report; Amazon leads the megacaps

Dow Jones futures were little changed early Thursday, along with S&P 500 and Nasdaq futures, ahead of Thursday’s CPI inflation report.




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Wednesday’s stock market rally extended recent gains. Investors are betting on tame inflation data, raising the stakes for the critical Fed report.

Amazon.co.uk (AMZN) and Tesla stock led a megacap rally on Wednesday, with Apple (AAPL), Microsoft (MSFT) and parent company of Google Alphabet (GOOGL) having strong sessions. You’re here (TSLA) and AMZN stocks also reflected strong performances in automotive/EV names and e-commerce gaming, respectively.

Celsius Fund (CELH) warmed up on Wednesday, offering a buy signal.

CELH stock was added to SwingTrader on Wednesday and the IBD Leaderboard watchlist. Celsius was also Wednesday’s IBD stock of the day.

Key wins

Knowledge base home (KBH) reported earnings after the close, kicking off housing reports. KBH stock fell slightly as KB Home’s earnings came in well below fiscal first-quarter guidance, with revenue also missing. KB Home stock had rebounded 3.2% on Wednesday to its best level since March 2022, up nearly 13% so far this year.

Homebuilder stocks and housing-related names in general have rallied in recent weeks. How will they react to the results of KB Home?

Taiwan semiconductor (TSM) earnings topped views early Thursday, but earnings were lower. Taiwan Semi, which makes chips for Apple, Nvidia (NVDA) and many others said first-quarter sales could fall from a year earlier. TSMC also cut its capital spending plans for 2023. Shares rose modestly again early Thursday, signaling a test of the 200-day moving average. TSM stock rose 0.6% on Wednesday.

Disney exploits Nike veteran

waltz disney (DIS) named Nike (NKE) President Mike Parker as new President, replacing Susan Arnold. Parker has served on Disney’s board of directors for seven years.

Disney also recommended shareholders vote for its board and not support activist investor Nelson Peltz, who is seeking to join the board of entertainment giant Dow Jones.

DIS stock rose slightly. Nike, another Dow stock like Disney, Apple and Microsoft, was little changed after hours.

CPI Inflation Report

The Consumer Price Index for December will be released at 8:30 a.m. ET.

Economists expect consumer prices to be stable after November’s 0.1% gain. Core CPI should rise 0.3% after November’s 0.2% advance. The headline CPI inflation rate is expected to continue to moderate, dropping to 6.6% from 7.1% in November. Core inflation should slow to 5.7% from 6% in November.

The CPI inflation rate peaked at 9.1% last June, while the core CPI inflation rate hit 6.6% in September, two highs in 40 years.

Other data this week, including the New York Fed’s inflation expectations and small businesses with job postings and hiring plans, point to slowing inflation and labor markets.

A moderate inflation report is expected to lock in a quarter-point Fed rate hike at the Feb. 1 policy meeting, slowing by 50 basis points and 75 basis points in the previous two meetings. More importantly, slowing inflation could raise fears that the Fed will suspend rate hikes, perhaps after the March meeting.

Dow Jones Futures Today

Dow Jones futures tipped higher relative to fair value. S&P 500 futures were about flat and Nasdaq 100 futures fell slightly.

The 10-year Treasury yield fell 2 basis points to 3.53%.

Crude oil futures rose 1%.

The CPI inflation report is sure to rock Dow Jones futures and Treasury yields.

Remember that overnight action on futures contracts on Dow Jones and elsewhere does not necessarily translate into actual trading in the next regular trading session.


Join the experts at IBD as they analyze actionable stocks in the stock market rally on IBD Live


Stock market rally

The stock market rally added to recent gains, with major indices closing near session highs for a second straight session. The Nasdaq led the advance thanks to Amazon and large-cap growth names.

The Dow Jones Industrial Average rose 0.8% in trading on Wednesday. The S&P 500 index climbed 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 optimism in China outweighed a huge jump in US crude inventories.

The 10-year Treasury yield fell 6 basis points to 3.55%.

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Among growth ETFs, the Innovator IBD 50 ETF (FFTY) rose 1.3%. The iShares Expanded Tech-Software Sector ETF (IGV) rose 1.6%, reclaiming its 50-day line, with MSFT stock a major IGV holding. ETF VanEck Vectors Semiconductor (SMH) rose 1.2%, topping its 200-day line. TSM action is one of the main components of SMH.

Reflecting more speculative stocks, ARK Innovation ETF (ARKK) jumped 3.4% and ARK Genomics ETF (ARKG) 3.7%. Tesla stock remains one of Ark Invest’s top ETF stocks. Cathie Wood’s arch has charged on TSLA stocks in recent days and weeks.

The SPDR S&P Metals & Mining ETF (XME) edged up 0.5% and the Global X US Infrastructure Development ETF (PAVE) rose 1.3%. The US Global Jets ETF (JETS) gained 0.4%. The SPDR S&P Homebuilders ETF (XHB) jumped 2.6%. ETF Energy Select SPDR (XLE) rose 0.3% and ETF Financial Select SPDR (XLF) climbed 0.9%. SPDR Health Care Fund (XLV) added 0.6%.


Five best Chinese stocks to watch now


Megacap shares

Tesla stock rose 3.7% to 123.22, extending a rebound from Friday morning’s bear market low of 101.81. Stocks are still below their 21-day long falling line. Tesla is planning a big expansion of the Austin factory and is reportedly close to a preliminary deal for a new factory in Indonesia. The latter could complicate Tesla Shanghai’s demand issues.

The Chinese government on Thursday delayed a further expansion of Tesla Shanghai, which would take annual production capacity to two million from the recently expanded 1.2 million. Reported officials are concerned about Elon Musk’s Starlink.

TSLA stock fell slightly ahead of the open.

Amazon stock jumped 5.8% to 95.09, closing above its 50-day moving average for the first time in four months. AMZN stock also bottomed in the bear market last Friday.

Apple stock jumped 2.1%, returning above its 21-day line. This came despite Barclays slashing its AAPL price target, citing weakening demand for Apple across many product categories.

Google stock gained 3.5%, also retracing the 21-day line. Microsoft stock rose 3%, just below its 21-day line after plunging last week.

Celsius Stock

CELH stock jumped 5.3% to 106.57 on Wednesday in heavy volume, after reversing higher on Tuesday. Stocks broke from the 50-day line, broke a trendline and closed above the 21-day moving average. All of this offered a buy signal. CELH stock hit intraday highs at 108.80 but closed strong.

Market rally analysis

The stock market rally showed more strength on Wednesday ahead of the CPI inflation report.

The S&P 500 index moved away from the 50-day line and broke above Tuesday’s intraday high. Although still below the 200-day line, the benchmark has broken above its 10- and 40-week lines. The Russell 2000 crossed its 200-day line after passing its 50-day mark on Wednesday.

The Nasdaq, which has lagged in recent months, crossed its 50-day line for the first time in nearly a month.

Meanwhile, major stocks showed positive action overall. CELH stock has sent a buy signal. Stocks that have recently broken out have generally held firm or continued to climb.

Apple, Tesla, Amazon and other megacaps are far from actionable, but at least don’t weigh on major indices.

Just looking at major indices and stocks, the stock market rally shows healthy action, but with more resistance levels ahead.

But rallying around critical Fed data or economic events has been risky, at best, in recent months. Yes, a tame CPI inflation report could send the market rally flying. But a warmer-than-expected reading could trigger a big selloff. And the market takes in the “good news”.

Of course, it’s not the news that counts, but the reaction to the news. The November CPI inflation report was colder than expected on Dec. 13, pushing major indices to their best intraday levels in months. But that was the peak of the October-December stock market rally. The indices closed well off the highs that day and slipped 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 in recent days, with indices moving higher and many stocks showing buy signals.

These recent purchases might look good on Thursday, but they could also all explode, according to the December CPI inflation report.

Investors should therefore not have been too exposed to the reading of inflation.

But be ready to act if the major indices show strong action beyond the opening bell. Many quality stocks are giving buy signals or settling.

Don’t forget earnings season. JPMorgan Chase (JPM) and several other banking giants report Friday morning, as well as Delta Airlines (DAL) and UnitedHealth (A H).

Microsoft and Tesla shares are due in two weeks, Apple, Amazon and Google will follow soon.

Earnings and earnings forecasts will be critical in an uncertain economic environment.

Read The Big Picture every day to stay in tune with market direction and top stocks and sectors.

Please follow Ed Carson on Twitter at @IBD_ECarson for stock market updates and more.

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