Dow Jones futures tilted lower early Wednesday, along with S&P 500 futures and Nasdaq futures, with Target earnings in focus. A strong stock market rally Tuesday morning faded, briefly turning mixed after Russian-made missiles hit Poland.
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Target (TGT) headlined Wednesday morning earnings, while chip giant Nvidia (NVDA) looms large Wednesday night.
The stock market rallied Tuesday morning on yet another tame inflation report. Walmart (WMT) earnings also helped. So did Warren Buffett’s Berkshire Hathaway disclosing that it took a big new position in Taiwan Semiconductor (TSM).
The major indexes pared gains somewhat, but then quickly turned mixed on the reported Russian missile news. But the Dow recovered to turn positive again.
Poland Missile Crash
In midafternoon Tuesday, stocks faltered on reports that Russian missiles hit Przewodow, a Polish village just across the border from Ukraine, killing two people. The crash was from a Ukrainian air-defense system, according to NATO’s chief Wednesday.
Setting aside the Poland missile crash, the market rally could be due for a pause after a strong run and the S&P 500 nearing key resistance.
Still, MercadoLibre (MELI) and Pure Storage (PSTG) cleared buy points on Tuesday, though PSTG stock backed off the official entry for a second straight session.
Retail Earnings
Target, Lowe’s (LOW) and TJX Cos. (TJX) report earnings early Wednesday, along with October retail sales. That follows Dow Jones giants Walmart and Home Depot (HD) earnings early Tuesday. WMT stock jumped 6.5% on strong earnings, guidance and a big buyback, breaking out from a handle buy point. HD stock climbed 1.6%, trying to forge a handle.
Target earnings came in well below views, though sales narrowly beat views. The discount giant warned on the holiday fourth quarter, saying spending patterns changed in October, at the end of fiscal Q3.
Target stock dived more than 10%. TGT stock rose 3.6% Tuesday, but hit resistance at the 200-day line, close to a bottoming-base buy point. WMT stock, which jumped on its results Tuesday, fell slightly.
Lowe’s earnings and sales topped views. The home improvement giant raised full-year EPS and revenue targets. LOW stock popped 2.5% early Wednesday. Lowe’s advanced 2.15% following Tuesday’s Home Depot earnings, working on a bottoming base.
TJX stock climbed 2.9%, still in range from a 10-month cup-with-handle base.
Nvidia reports Wednesday night. Nvidia stock rose 2.3% on Tuesday, adding to big gains over the past month, buoying the chip sector. Strong earnings and guidance from Nvidia, as well as from chip-equipment giant Applied Materials (AMAT) on Thursday night, will be important for the sector and broader market rally.
The video embedded in this article discussed Tuesday’s market rally and analyzed MELI stock, Pure Storage and Albemarle (ALB).
MercadoLibre stock has joined IBD Leaderboard and was Tuesday’s IBD Stock Of The Day. ALB stock is on the Leaderboard watchlist. MercadoLibre and PSTG stock are on SwingTrader. Pure Storage is on the IBD 50.
Dow Jones Futures Today
Dow Jones futures lost a fraction vs. fair value. S&P 500 futures and Nasdaq 100 futures edged lower.
The 10-year Treasury yield dipped 3 basis points to 3.77%.
Amazon.com (AMZN) began cutting corporate and tech workers on Tuesday, according to LinkedIn posts from affected Amazon staff. The e-commerce and cloud-computing giant reportedly plans to cut 10,000 jobs. AMZN stock fell 1% overnight.
On Tuesday night, former President Donald Trump launched his 2024 candidacy for the White House.
October retail sales are due at 8:30 a.m. ET. Economists expect the Commerce Department to report a 1% gain, or just 0.2% excluding autos and gas.
Remember that overnight action in Dow futures and elsewhere doesn’t 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 opened strongly as the producer price index came in lower than expected, with core PPI flat vs. September. Walmart earnings also helped. TSM stock skyrocketed 10.5% on Tuesday night news that Warren Buffett had take a stake. Buffett’s Berkshire also took new positions in as well as new stakes in Louisiana-Pacific (LPX) and Jefferies (JEF).
But the major indexes pared gains, with the Dow briefly turning negative on the report of Russian missiles striking Poland.
The Dow Jones Industrial Average edged up 0.2% in Tuesday’s stock market trading, even with WMT stock and Home Depot providing a lift. The S&P 500 index climbed 0.5%. The Nasdaq composite popped 1.45%. The small-cap Russell 2000 gained 1.5%.
The 10-year Treasury yield fell 7 basis points to 3.8%. The U.S. dollar also declined.
U.S. crude oil prices rose 1.2% to $86.92 a barrel after briefly spiking more than 3% on the Russian missile news. Natural gas futures advanced 1.7%.
ETFs
Among the best ETFs, the Innovator IBD 50 ETF (FFTY) rise 1.4%. The iShares Expanded Tech-Software Sector ETF (IGV) gained 2.3%. The VanEck Vectors Semiconductor ETF (SMH) leapt 3.15%, with Taiwan Semi and Nvidia stock huge components, along with AMAT.
SPDR S&P Metals & Mining ETF (XME) climbed 0.85%. SPDR S&P Homebuilders ETF (XHB) advanced 2.1%, with HD stock and Lowe’s both significant holdings. The Energy Select SPDR ETF (XLE) rose just over 1% and the Financial Select SPDR ETF (XLF) edged up 0.2%. The Health Care Select Sector SPDR Fund (XLV) dipped 0.1%.
Reflecting more-speculative story stocks, ARK Innovation ETF (ARKK) rallied 2.7% and ARK Genomics ETF (ARKG) was just above break-even.
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Stocks Near Buy Points
MELI stock popped 6.4% to 1,020.68, clearing a 1,018.10 cup-with-handle buy point. MercadoLibre’s volume was below normal, but the recent consolidation has a number of gains on above-average volume. The Latin American e-commerce giant enjoys strong earnings growth.
PSTG stock rose 1.6% to 31.56. Intraday, Pure Storage got to 32.47, clearing the 32.07 cup-with-handle buy point for a second straight session but failing to close above that entry, according to MarketSmith. PSTG stock did finish right at an early entry of 32.57.
The data storage firm also enjoys strong earnings growth.
Market Rally Analysis
The stock market rally started Tuesday strong, booming on the PPI inflation report. But the major indexes backed off intraday highs, then turned mixed on reports of the Poland missile attack.
Perhaps the inflation/Fed narrative has shifted. But that doesn’t mean the major indexes can’t hit resistance, especially after a strong recent run. And, as Tuesday’s action showed, there’s always the potential for geopolitics or other wild cards upending a market trend.
The Dow Jones and Russell 2000 have both surpassed their 200-day moving averages. The S&P 500 is getting close to the 200-day line, where it hit powerful resistance back on Aug. 16.
The Nasdaq is moving from its 50-day toward its 200-day line, but has a long way to go.
Notably, the Invesco S&P 500 Equal Weight ETF (RSP) is just above its 200-day line. The Direxion Nasdaq-100 Equal Weighted Index ETF (QQQE) is closing in on that key long-term level.
Of course, just because one can argue that the major indexes are “due” for a pause or a pullback or a bounce, and the market will do what it’s going to do.
Tech giants are rebounding with the market, but definitely aren’t leading. Many titans hit bear-market lows just last week. The one semi-exception is Nvidia stock, which has surged over the past month. But even the chip giant is still working toward its 200-day line.
A lot of sectors are showing strength, however.
Solar, networking, contract electronics manufacturers and several medical products firms are doing well. So are a select number of chips, with several others trying to set up. A slew of housing-related stocks are looking interesting, from builders to suppliers to housing retailers.
Other retailers looking good, including WMT stock, BJ’s Wholesale (BJ) and Ulta Beauty (ULTA). BJ’s reports Thursday.
Trucking firms are moving on up, as investors bet the worst is over, or at least priced in, for shipping stocks.
Biotechs and health insurers have paused or pulled back but generally are in decent shape. Energy stocks also are doing well, though many look extended.
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What To Do Now
The major indexes are looking strong, more stocks are flashing buy signals and setting up. Inflation data may have reached a turning point, raising the prospect of a slowdown in Fed rate hikes and — perhaps — an end to tightening in the not-too-distant-future.
So investors should be taking advantage of the current market rally. But they want to be cautious about how much they add in the short term, given the possibility of a market pullback or resistance.
Do not chase extended stocks. Be wary of buying stocks that are significantly extended from their 50-day moving averages, even if they are in official buy zones. Don’t be too concentrated. A portfolio focused on lithium stocks such as Albemarle would have been burned Tuesday.
But work on those watchlists, stay engaged and be ready to act.
Read The Big Picture every day to stay in sync with the market direction and leading stocks and sectors.
Please follow Ed Carson on Twitter at @IBD_ECarson for stock market updates and more.
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