S&P 500 Rises Above Fed’s Powell’s Baseline, But Inflation, Jobs Report Approaches

S&P 500 Rises Above Fed's Powell's Baseline, But Inflation, Jobs Report Approaches
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Dow Jones futures changed little overnight, along with S&P 500 futures and Nasdaq futures. drove gains overnight, but investors’ attention will be on Thursday’s PCE inflation report after Fed chair Jerome Powell triggered a tech-focused stock market rally on Wednesday.


Fed Chairman Powell said on Wednesday that the pace of rate hikes could begin to slow at the December meeting, providing more explicit support for a smaller hike at the upcoming meeting. But Powell stuck to his opinion that the federal funds rate will likely reach 5% or more. The current federal funds rate range is 3.75% – 4%. Powell also noted that many factors that support inflation are beginning to loosen. Suggesting that a recession may be necessary, the Fed chair said a “soft landing” is still possible.

Nasdaq led the way Apple (AAPL), Microsoft (MSFT), Nvidia (NVDA), tesla (TSLA) and Google top Alphabet (GOOGLE) outperforms all composite. Notably, the S&P 500 index jumped to break the 200-day moving average, which is a key resistance area.

On Thursday, investors will receive the October PCE price index with the November jobs report due Friday morning.

So, while Wednesday’s move was encouraging, investors should await the market reaction to the critical data from the Fed’s point of view.

Significant Earnings (CRM), Snowflake (SNOW) and Box (BOX) directed a series of software earnings reports. Pure Storage (PSTG) and Victoria’s Secret (VSCO) also reported.

CRM stock fell strongly in overnight trading. Salesforce earnings peak but the guidance was light. Co-CEO Bret Taylor will step down, leaving Marc Benioff as sole CEO. SNOW stock initially weak on protracted move snowflake income guide, but significantly reduced losses. Box stock has changed little as EPS peaks and sales drop slightly.

PSTG stock rose moderately overnight. Pure Storage tops third-quarter viewership and elevated guidance. Stocks closed down nearly 1% after falling sharply on the day, driven by weak results and the US. NetApp (NTAP). VSCO stock fell slightly as Victoria’s Secret earnings peaked, but sales fell short.

Thursday early, Dollar General (DG) and kroger (CR) open. Chinese EV manufacturers No (NIO), Li Car (IF) and xpeng (XPEV) reported November sales, these stocks and other Chinese names soared on Wednesday as Covid reopened hopes.

Inflation Report

The Commerce Department will release the Fed’s favorite inflation indicator, the PCE price index, at 8:30 a.m. ET as part of its revenue and expenditure report.

The October PCE price index should show an increase of 0.4% compared to the same period of the previous year. September. Year-over-year, PCE inflation should drop to 6% from 6.2% in September. Core PCE, which excludes food and energy, is expected to increase by 0.3%. The core PCE inflation rate appears to have dropped to 5% from 5.1% in September.

The PCE inflation report and Friday’s November jobs report will help shape the Fed’s rate hike expectations. November consumer price index will be announced on 24 December. 13, the day before the Fed’s December meeting announcement.

Earlier on Wednesday, ADP reported a sharp slowdown in private sector hiring in November. Also, the JOLTs survey showed that job postings fell more than expected in October. Third-quarter GDP growth was revised more than expected, along with the report’s inflation gauge.

Dow Jones Futures Today

Dow Jones futures were flat. drag with fair value, CRM stock, and blue chips. S&P 500 futures rose 0.1% and Nasdaq 100 futures rose 0.1%.

Remember, overnight action Dow futures and elsewhere it doesn’t necessarily turn into real trade on the next regular trade Exchange session.

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Stock Rally

The stock market rally was mixed for most of Wednesday’s session, then rose on Fed chair Powell’s comments and closed the session higher.

The Dow Jones Industrial Average rose 2.2% on Wednesday. stock market trading. The S&P 500 index rose 3.1%. The Nasdaq composite was up 4.4%. The small-cap Russell 2000 was up 2.7%.

Apple shares rose 4.9% and Google shares rose 6.1%, both rising above their 50-day levels. Microsoft stock and Nvidia, which are already above their 50-day lines, are up 6.2% and 8.2%, respectively. Tesla stock rose 7.7% and retraced its 21-day line.

U.S. crude oil prices rose 3% to $80.55 a barrel, but are down 6.9% this month. Hopes for a reopening of the Chinese Covid also boosted copper futures.

Treasury Yields and Fed Rate Increases

The 10-year Treasury yield moved downwards, falling 5 basis points to 3.7%. The two-year Treasury yield, which is more closely tied to Fed policy, fell to 4.33% despite Powell’s expectation of a federal funds rate of at least 5%.

The probability of a 50 basis point rate hike by the Fed is around 79% versus 79%. 66% after Tuesday. Markets see another half-point move in February as a slight favourite, but the probability of a quarter-point move exceeds 45%.

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Between best ETFsInnovative IBD 50 ETF (fifty) rose 1.8%, while the Innovator IBD Breakout Opportunities ETF (STRUGGLE) climbed 2%. iShares Extended Technology-Software Industry ETF (IGV) rose 4.4%, with Microsoft and CRM stocking both major components. VanEck Vectors Semiconductor ETF (SMH) jumped 5.7%, with Nvidia stock holding the largest share.

SPDR S&P Metals & Mining ETF (XME) was up 3.75% and the Global X US Infrastructure Development ETF (FLOOR) rose 2.4%. Energy Select SPDR ETF (XLE) rose 0.5% and the Financial Select SPDR ETF (XLF) rose 1.7%. Health Sector Selected SPDR Fund (XLV) added 2.4%.

Reflecting more speculative story stocks, the ARK Innovation ETF (ARKK) increased 7.7%, and the ARK Genomics ETF (ARKG) 6.5%. Tesla stock remains a major holding in Ark Invest’s ETFs.

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Market Rally Analysis

The stock market rally made a big, bullish move in heavy volume Wednesday, following comments from Fed chair Powell.

The S&P 500 index rebounded from near the 21-day line to break above the 4,000 mark, breaking above the 200-day line for the first time in seven months.

The lagged Nasdaq composite on the market rally led the gains on Wednesday. It retraced the 21-day line and the 11,000 level, reaching the highest close in two months. Apple stock, Microsoft, Google, Nvidia and Tesla all made strong gains on Wednesday, but it’s unclear whether any of them will lead the current uptrend.

Underlining the 21-day line on the day, Russell 2000 rallied to retrace the 200-day level. The Dow Jones, leading the current market rally, is back at seven-month highs.

The movers beat the losers with broad-based gains. Many leading stocks, which came under pressure, gained support on Wednesday.

Although there was a lot of positive movement on Wednesday, the S&P 500 remains below its 200-day moving average. Thursday’s October PCE inflation report and Friday’s November jobs report could reinforce Wednesday’s bullish bounce or trigger a bearish trend.

Keep in mind that the current market rally has had a lot of big one-day gains, but struggled to make any progress over the next few days or weeks.

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what to do now

The stock market rally had a strong session as major indices and leading stocks made encouraging moves.

Investors were probably more inclined to increase their risk on Wednesday, and doing so could pay off.

But there are good reasons not to increase exposure just yet. The S&P 500 is above the 200-day line, but it certainly isn’t. Doing so would likely mean climbing to the top of the long, falling tops trendline on the weekly chart. Resolutely breaking above this area could be a strong signal that the current uptrend is more than just a bear market rally.

However, this will require a positive response to the upcoming PCE inflation data and employment report.

Investors should furiously work their way through their watch lists, looking at promising stocks from a variety of industries. But definitely stay busy. The market rally may be at a turning point, but which way will it turn?

To read big picture Staying in sync with market direction and leading stocks and industries every day.

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


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