Dow Jones Futures: Stock Market Rally Awaits Fed Pivot Signals; AMD, Devon Move On Earnings

Dow Jones futures were little changed overnight, along with S&P 500 futures and Nasdaq futures, with focus on Wednesday’s Federal Reserve meeting and whether policymakers will confirm or dash the Fed’s expectations.


Stocks fell from early gains on Tuesday as stronger-than-expected economic data wasn’t what the Fed wanted to see. Megacap technologies continue to outperform the indices, particularly the Nasdaq. (AMZN) and parent Google Alphabet (GOOGL) while falling to new bear market lows apple (AAPL) and Microsoft (MSFT).

Small advanced devices (AMD), a lithium manufacturer Livent (LTHM), drug distributor McKesson (MCK), Paycom software (PAYC) and shale oil and gas producer Devon Energy (DVN) on overnight key earnings.

AMD shares rose despite weak results. Livent fell because the increase in revenue was not hot enough. Devon Energy shares have declined in dividends, however. Shares of PAYC edged higher on strong earnings, while shares of MCK were still trading flat after mixed results.

DVN shares are in the IBD 50.

Meanwhile Tesla (TSLA) competitor BYD (BYDDF) will soon report October sales, after delivering the best of Nio (NIO), Lee Auto (LI) and Xpeng (XPEV). BYD shares rose 2.6% on Tuesday, while Tesla shares rose 0.1%, both off intraday highs.

Federal meeting

The Federal Reserve is expected to raise rates by 75 basis points for the fourth consecutive meeting. But the market is divided on whether policymakers will raise rates by 50 or 75 basis points in December.

Some relatively tame inflation data and various moves by central banks around the world, including some advice from federal officials, raised hopes for a smaller rate hike from the Fed.

The Fed’s policy statement will be released at 2:00 PM ET Wednesday, followed by Fed Chair Jerome Powell’s news conference at 2:30 PM ET. Investors will be looking for any hints from the Fed. Powell does not want to give clear signals to maintain maximum flexibility.

The Fed chief is likely to include warnings about the response to key data. The October jobs report will be released on Friday after a stronger-than-expected JOLTS survey in September.

Dow Jones futures today

Dow Jones futures were down 0.1% against fair value. S&P 500 futures were down 0.1% and Nasdaq 100 futures were down 0.1%.

Keep in mind that overnight action in Dow futures and elsewhere does not necessarily translate into actual trading in the next stock market session.

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Stock market rally

The stock market rallied on Tuesday. Major indices opened sharply higher, boosted by lower Treasury yields and unconfirmed talk that China may move towards easing its strict zero-Covid policy.

But at 10:00 a.m. in September, job openings rose unexpectedly, while the ISM manufacturing index remained above the 50-mark in October. Treasury yields rebounded and stocks fell quickly.

The Dow Jones Industrial Average was down 0.2% in Tuesday’s trading. The S&P 500 index fell 0.4%. The Nasdaq Composite fell 0.9%. The small-cap Russell 2000 rose 0.25%, its eighth straight advance.

Amazon shares fell 5.5% to their lowest level since April 2020 on Friday. This follows a 13% drop in revenue last week. AMZN shares have fallen for five straight sessions on heavy volume.

Google shares fell 4.3% to their worst since January 2021 after falling 4.8% last week.

Shares of Apple fell 1.75%, bouncing back from its near 200-day line and closing just below its 50-day. AAPL stock rose 5.75% last week.

Shares of Microsoft rose 1.7%, not much off bear market lows. Shares of MSFT fell 2.6% last week.

The 10-year Treasury yield fell 3 basis points to 4.05%, but ended near session highs. The 10-year yield fell to 3.955% after opening, but once again found support at the 21-day moving average. The US dollar pared early losses.

The price of US crude oil increased by 2.1% and reached 88.37 dollars per barrel. Crude futures rose on hopes that China will reform its Covid policy, as well as a report that Saudi Arabia is on high alert for an Iranian attack. Natural gas futures fell 10% after rising nearly 12% on Monday.

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Among the top ETFs, the Innovator IBD 50 ETF ( FFTY ) rose 0.6%. The iShares Expanded Tech-Software Sector ETF ( IGV ) fell 1.3%, and MSFT shares are a key holding. The VanEck Vectors Semiconductor ETF ( SMH ) rose 0.7%, with AMD shares a key component.

The SPDR S&P Metals & Mining ETF ( XME ) gained 1.5% and the Global X USA Infrastructure Development ETF ( PAVE ) rose 0.6%. The Energy Select SPDR ETF ( XLE ) advanced 1%, with DVN shares in the top 10. The Healthcare Select Sector SPDR Fund ( XLV ) rose 0.1%.

Reflecting more speculative stocks, the ARK Innovation ETF ( ARKK ) gained 1 cent, while the ARK Genomics ETF ( ARKG ) rose 1.3%.

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Tesla stock is a major holding in Ark Invest ETFs. Mass production of the Tesla Cybertruck will begin in late 2023, Reuters reported earlier Tuesday.

Cathy Wood has a small stake in BYD stock. BYD’s EV and plug-in hybrid sales have surpassed Tesla’s total, although the US giant is leading the way in all-electric “BEV” deliveries.

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Basic income

AMD’s earnings and sales narrowly missed the bearish outlook after the chip giant reported preliminary earnings that were well below consensus. AMD also signaled that Q4 revenue will fall slightly short of consensus, but will increase by around 14% from a year earlier.

AMD shares rose 4% in overnight trading. Shares fell 0.7% to 59.66 on Tuesday. AMD stock is down a bit since October 13, 2018, at 54.57 in a bear market, but not by much.

Nvidia ( NVDA ), which competes with AMD in graphics chips, made little progress in after-hours trading.

Livevent’s revenue is clearly up, with a huge increase in viewership, but revenue is down slightly, despite doubling from a year ago. LTHM shares fell 6% in broad action. Shares fell 0.8% to 31.33 on Tuesday and fell to their 50-day low. According to MarketSmith analysis, the cattle stock has a buy point of 36.48 cups.

ALB shares were lower in after-hours trading on a similar chart. The lithium giant Albemarle (ALB) reports at the end of Wednesday.

Devon Energy’s earnings beat expectations, but the oil producer is cutting its dividend by 13%. DVN shares fell 2.7% overnight. Shares fell 5 cents to 77.30 on Tuesday and are within a cup buy point of 75.37 with the team. DVN stock remains slightly above the 50-day rising line.

Paycom’s earnings were among the top performers, and earnings guidance is also strong. PAYC shares were little changed in extended trading. Shares fell nearly 1% on Tuesday to 342.72, slightly above the 50-day line and below the trend line. A strong post-earnings move may suggest an early entry. PAYC shares have a consolidated buy point of 402.88.

McKesson’s earnings just missed, while earnings rose slightly. MCK shares were not yet trading overnight. Shares fell 1.85% to 382.16 on Tuesday, but are within a flat buy point at 375.33. This flat base is part of the base pattern.

Cardinal health ( CAH ), which reports Friday, was also not trading after hours. CAH shares are slightly extended from the buy point.

Market Rally Analysis

Major indexes opened strong, but were supported by stronger-than-expected economic data.

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The Dow fell below its 200-day line, while the Russell 2000 moved up. The S&P 500 is still holding the 50-day line, while the Nasdaq is resisting near that area.

Much of Tuesday’s weakness reflected weakness in shares of AMZN, Google and other megacaps.

The Invesco S&P 500 Equal Weight ETF ( RSP ) rose 0.2%, trading between the 200 and 50-day lines.

The rise in stocks led to declines in the NYSE and Nasdaq.

Investors shouldn’t think too much about Tuesday’s market action, which comes ahead of the announcement of the Fed meeting and comments from Fed Chair Powell.

But major indexes and leading stocks rose broadly in anticipation of a Fed hike. If Powell presents a surprise, the stock market rally could see a major sell-off.

Tuesday’s stock market and Treasury yield moves may fade in the wake of the post-Fed reaction.

The post-FED reaction may continue on Thursday, possibly reversing. Friday’s jobs report is likely to shake up the markets as well.

Leading stocks showed mixed action, with big earnings still driving individual names higher or lower.

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What to do now

The stock market rally appears to be in good shape on a technical basis, despite Tuesday’s decline.

Investors should probably hold off on adding exposure until after the Fed rate hike and Powell’s comments. They may choose to take some exposure after Wednesday afternoon’s announcement, depending on their risk tolerance.

While the Fed meeting looks like an earnings report for a market rally, don’t forget about real earnings.

The earnings won’t move the market as much as last week’s megacap releases, but will still have a big impact on individual stocks.

The coming days will be key to the market rally. So prepare your audience list. Wait and be prepared to add or subtract exposure.

Read The Big Picture daily to stay in tune with market direction and leading stocks and sectors.

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


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