Dow Jones Futures Rise Ahead Of CPI Inflation Report; U.S. Airline Flights Grounded

Dow Jones futures edged higher early Wednesday, along with S&P 500 futures and Nasdaq futures. US domestic flights were grounded, while WWE, Wells Fargo, Axcelis Technologies and Impinj were also in focus ahead of the opening.




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The stock market rally was indecisive for much of Tuesday, but the major indexes gained steam, with the S&P 500 clearing its 50-day moving average. Investors await the December CPI inflation report on Thursday morning.

Medpace (MEDP) rose solidly on Tuesday, with a new buy signal after a similar move ended at the end of 2022. First Solar (FSLR) bounced off its 50-day line, also providing early entry. But ELF Beauty (THOUSAND) and Super Micro Computer (SMCI) fell after Monday’s reversal.

MEDP stock and ELF Beauty are on IBD Leaderboard. SMCI stock is on the IBD 50. Medpace was the IBD of the Day on Tuesday.

Tesla (TSLA) and UnitedHealth (UNH) edged lower, as many large caps continue to struggle.

Investors should remain cautious, especially with the CPI inflation report looming.

Business News

The FAA grounded all domestic flights until 9 am ET due to a significant systems outage. Flights had been disrupted since early Wednesday morning. The FAA expects to “repopulate” the system soon, but airlines will have to scramble to get back on schedule. Airline stocks included Delta Air Lines (DAL) and United Airlines (UAL) decreased slightly.

Vince McMahon is once again chairman at World Wrestling Entertainment (WWE), after his daughter Stephanie stepped down as chairwoman and co-CEO on Tuesday night. Mr McMahon, a major shareholder, resigned last year over charges related to sexual misconduct claims. WWE stock rose steadily in pre-market trading, having been buoyed in recent days by reports of his expected return to lead a sale of the company.

Meanwhile, Wells Fargo (WFC) will largely exit the mortgage business amid regulatory pressure, CNBC reported late Tuesday. It will only offer home loans to existing bank and wealth management customers and borrowers in minority communities. WFC stock was little changed in extended trading.

Axcelis Technologies (ACLS), which made a strong move during recent sessions, said revenue for the fourth quarter ended in December reached $250 million against the chip maker’s prior guidance of ‘$232 million to $240 million. ACLS stock rose after hours.

Commitment (PI) says Q4 sales exceeded $76 million vs. the RFID-chip maker’s prior guidance of $71.5 million – $73.5 million. PI stock, already slightly above the 50-day line, rose solidly overnight. This could offer early entry or get close to the flat base buy point of Impinj stock. PI stock is also on Leaderboard.

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Earnings season also begins to increase late in the week. Taiwan Semiconductor (TSM) reports Thursday morning. on friday, JPMorgan Chase (JPM), Bank of America (BAC), Citigroup (C) and Wells Fargo all report ahead of the open, along with Delta Air and UnitedHealth.

Dow Jones Futures Today

Dow Jones futures rose 0.15% against fair value. S&P 500 futures rose 0.2% and Nasdaq 100 futures advanced 0.1%.

The 10-year Treasury yield fell 4 basis points to 3.58%.

Crude oil futures edged higher despite the American Petroleum Institute estimating a big weekly jump in US inventories. The Energy Information Administration will release US crude and oil data at 10:30 am ET.

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


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Stock market rally

After Monday’s disappointing fade, the stock market rally strengthened Tuesday afternoon, closing near session highs.

The Dow Jones Industrial Average rose 0.6% in Tuesday’s stock trading. The S&P 500 index rose 0.7%. The Nasdaq composite rose 1%. The small-cap Russell 2000 fell 1.5%

Tesla stock fell 0.8% Tuesday after surging 5.9% on Monday. Shares rebounded higher on Friday after setting a market low of 101.06 after the EV giant announced major price cuts in China and other key Asian markets. TSLA stock needs a lot of fixing.

Shares rose 2% before Wednesday’s open. Tesla has applied to Texas for a major expansion of its Austin assembly plant, the Austin Business Journal reported late Tuesday. Tesla Austin is still ramping up to its existing capacity.

UNH stock fell 0.8%, hitting its worst level since last June. The Dow Jones health insurer fell by 8.3% already in 2023, after finishing 2022 in reasonably good shape. UnitedHealth’s earnings and guidance Friday will be important for the sector in a flash.

US crude oil prices rose 0.7% to $75.12 a barrel. Natural gas prices fell by 6.9%.

The 10-year Treasury yield jumped 10 basis points to 3.62% after skidding 20 basis points in the previous two sessions.


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ETFs

Among the growth ETFs, the Innovator IBD 50 ETF (FFTY) rose 1.1%, while the Innovator IBD Breakout Opportunities ETF (BOUT) rose 0.15%. The iShares Expanded Tech-Software Sector ETF ( IGV ) gained 0.1%. The VanEck Vectors Semiconductor ETF (SMH) advanced 1.3%, just above the 200-day line after clearing the 50-day on Friday. TSM stock is a great SMH holding.

Reflecting historically more speculative stocks, ARK Innovation ETF (ARKK) jumped 2.5% and ARK Genomics ETF (ARKG) 3.6%. Tesla stock remains a major holding at Ark Invest, with Cathie Wood strengthening her position in recent weeks.

The SPDR S&P Metals & Mining ETF (XME) rose 2.5% and the Global ETF X US Infrastructure Development (PAVE) climbed 1.6%. US Global Jets ETF (JETS) rose 2.4%, with DAL stock among the notable holdings. SPDR S&P Homebuilders ETF (XHB) rose 1%. The Energy Select SPDR ETF (XLE) advanced 0.7% and the Financial Select SPDR ETF (XLF) gained 0.6%. The Healthcare Select Sector SPDR Fund ( XLV ) closed up 0.8%, with UNH stock as the top XLV holding.


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Market Rally Analysis

The stock market rally spent most of the morning around break-even, but ended Tuesday with a relatively strong performance.

LS&P 500 rose above the 50-day line. The 200-day average is modestly higher than that.

The Dow Jones rebounded from a test of its 50-day line after moving above that key level on Friday. The Nasdaq rose from its 21-day line with the 50-day line not far behind.

The Russell 2000 is back above its 50-day line, just below its 200-day.

LS&P MidCap 400 rose on Tuesday after finding support at the 50-day. This after it jumped above its 21-day, 50-day and 200-day lines on Friday. Invesco S&P 500 Equal Weight ETF (RSP) looks quite similar.

RSP and the MidCap 400 highlight both the large caps like Apple (AAPL), Tesla stock and UNH weighed on the market.

A sustained stock market rally may not happen until there is clarity on when the Federal Reserve will stop hiking rates. Markets strongly expect only a quarter-point increase at the policy meeting on February 1 and again at the end of March.

Thursday’s CPI inflation report could lock in expectations for a quarter-point increase. Inflation should continue to decline in the coming months, if only because year-on-year comparisons are so steep.

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Mixed Leading Stocks

A number of major stocks have issued buy signals in recent days and weeks. But most soon failed. In some cases, like the MEDP stock, they come back a few days later.

Medpace jumped 5.9% to 223.29 on heavy volume, rebounding from the 50-day line and clearing its December 29 high, when MEDP tried to break away.

First Solar rose 7.4% to 171.01, continuing a mini-win streak. The move from the 50-day line offered an early entry into a new base, but it is now looking a little extended. But the official buy point of 173.78 is not far away.

Other names keep dropping.

ELF stock had a promising breakout Friday, but gave up most of those gains Monday and fell 8.3% Tuesday to 51.15, knifing below the 50-day line and falling the low of its flat base.

SMCI stock rose Monday morning, offering early gains, but closed only fractionally higher. On Tuesday, shares fell 7.55%, below the 50-day line, following a short seller report.

Many other stocks are hovering right around potential buy points.


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What To Do Now

The stock market rally is still in place, but major indices, sectors and especially major stocks are prone to reversals. Thursday’s CPI inflation report could lead to big gains, with the main indices pushing decisively above some key levels. But it can also go the other way.

Investors should be cautious about their exposure and beware of new purchases, especially before the CPI report.

If you make a new purchase, know your exit strategy before you go in. Consider taking partial profits quickly to lock in some gains.

This is still a window shopping market. But there are many intriguing stocks to watch from a variety of sectors. Get those watch lists ready.

Read The Big Picture daily to stay in sync with market direction and key stocks and sectors.

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

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