Dow Jones Futures: Stocks Rise on CPI Inflation Report; Amazon carries Megacaps

Dow Jones futures were little changed after hours, along with S&P 500 futures and Nasdaq futures.


The stock market rally on Wednesday extended recent gains ahead of Thursday’s CPI inflation report. Investors are betting on tame inflation data, raising the stakes for the Fed-critical report. (AMZN) and Tesla stock led a megacap rally Wednesday, with Apple (AAPL), Microsoft (MSFT) and Google Parent Alphabet (GOOGLE) have solid sessions. Tesla (TSLA) and AMZN shares also reflected strong performance in auto/EV names and e-commerce, respectively.

Celsius Holdings (CELH) warmed up on Wednesday and gives a buy signal.

CELH stock was added SwingTrader Wednesday and the IBD Leaderboard watch list. Celsius was also Wednesday’s Today’s IBD stock.

Key earnings

KB Home (KBH) reported earnings after the close, and start housing reports. The KBH share fell modestly as KB Home earnings fell well short of fiscal Q1 views, which also lacked revenue. KB Home shares were up 3.2% on Wednesday to their best level since March 2022, up nearly 13% so far this year.

Homebuilder stocks and housing-related names in general have been rising in recent weeks. How will they react to KB Home’s results?

Taiwan Semiconductor (TSM) earnings are on tap early Thursday, the first major chip result for the most recent quarter. TSM stock rose 0.6% on Wednesday, just below its 200-day moving average.

Disney Taps Nike Veteran

Walt Disney (HAZE) named Nike (OF) Chairman Mike Parker as its new chairman, replacing Susan Arnold. Parker has served on Disney’s board of directors for seven years.

Meanwhile, Disney recommended that shareholders vote for its board slate and not support activist investor Nelson Peltz, who is seeking to join the Dow Jones entertainment giant’s board.

DIS’s share rose modestly. Nike, another Dow stock like Disney, Apple and Microsoft, was little changed after hours.

CPI Inflation Report

That December consumer price index published at 8:30 ET.

Economists expect flat consumer prices after November’s 0.1% increase. Core CPI is seen rising 0.3% after November’s increase of 0.2%. Headline CPI inflation is expected to continue to decline to 6.6% from November’s 7.1%. Core inflation is expected to ease to 5.7% from November’s 6%.

CPI inflation peaked at 9.1% last June, while core CPI inflation hit 6.6% in September, both 40-year highs.

Other data this week, including New York Fed inflation expectations and small business job openings and plans to hire, point to cooling inflation and labor markets.

A tame inflation report should lock in a quarter-point Fed rate hike at the Feb. 1 policy meeting, down from 50 basis points and 75 basis points in the previous two meetings. More importantly, cooling inflation could raise expectations that the Fed will pause rate hikes, perhaps after the March meeting.

Dow Jones Futures Today

Dow Jones futures were flat relative to fair value. S&P 500 futures were little changed and Nasdaq 100 futures fell.

The 10-year Treasury yield fell 3 basis points to 3.52%.

Remember the action overnight Dow futures and elsewhere does not 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 added to recent gains, with the major indexes closing near session highs for a second straight session. The Nasdaq led the gains thanks to Amazon and big growth names.

The Dow Jones Industrial Average rose 0.8% on Wednesday stock exchange trading. The S&P 500 index rose 1.3 per cent. The Nasdaq index rose 1.8 per cent. The small-cap Russell 2000 rose 1.2 per cent.

U.S. crude oil prices rose 3.1% to $77.41 a barrel. barrel as China’s optimism offsets a big jump in US crude inventories.

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


Among growth ETFs is the Innovator IBD 50 ETF (FFTY) rose 1.3%. iShares Expanded Tech-Software Sector ETF (IGV) advanced 1.6% and retook its 50-day line, with MSFT shares as a major IGV holding. VanEck Vectors Semiconductor ETF (SMH) rose 1.2% and moved above its 200-day line. TSM shares are a top SMH component.

Reflecting more speculative history stocks, the ARK Innovation ETF (SHEET) rose 3.4% and the ARK Genomics ETF (ARKG) 3.7%. Tesla stock remains a top holding across Ark Invest’s ETFs. Cathie Wood’s Ark has loaded up on TSLA stock in recent days and weeks.

SPDR S&P Metals & Mining ETF (XME) rose 0.5% and the Global X US Infrastructure Development ETF (POPE) increased by 1.3 per cent. US Global Jets ETF (JETS) rose 0.4%. SPDR S&P Homebuilders ETF (XHB) rose 2.6%. Energy Select SPDR ETF (XLE) moved 0.3% higher and the Financial Select SPDR ETF (45) rose 0.9%. Health Care Select Sector SPDR Fund (XLV) added 0.6%.

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Megacap stocks

Tesla shares rose 3.7% to 123.22, extending a rally from Friday morning’s market low of 101.81. Shares are still below their long-declining 21-day line. Tesla is planning a major expansion of the Austin factory and is reportedly close to a tentative agreement on a new factory in Indonesia. The latter could complicate Tesla Shanghai demand issues.

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

Apple shares rose 2.1%, back above its 21-day line. This came despite Barclays lowering its AAPL price target, cited weakening of Apple’s demand across many product categories.

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

Celsius warehouse

CELH shares jumped 5.3% to 106.57 on Wednesday on heavy volume, following Tuesday’s upturn. Shares rose from the 50-day line, broke a trend line and closed above the 21-day moving average. All that offered a buy signal. CELH stock finished off an intraday high of 108.80, but had a strong close.

Analysis of market rally

The stock market rally showed more strength on Wednesday heading into the CPI inflation report.

The S&P 500 index moved further from the 50-day line and topped Tuesday’s intraday high. While still below the 200-day line, the benchmark index topped its 10-week and 40-week lines. The Russell 2000 cleared its 200-day line after topping its 50-day Wednesday.

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

Meanwhile, leading stocks showed positive action overall. CELH stock flashed a buy signal. Stocks that recently broke out generally held ground or continued to climb.

Apple, Tesla, Amazon and other megacaps are far from actionable, but at least they don’t weigh down the major indexes.

Just looking at the major indexes and leading stocks, the stock market rally shows healthy action, albeit with several resistance levels ahead.

But gathering in Fed-critical economic data or events has been difficult at best over the past several 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 prices “good news”.

Of course, it is not the news that matters, but the reaction to the news. That November CPI inflation report was cooler than expected on Dec. 13, pushing the major indexes to their best intraday levels in months. But that was the peak for the October-December market rally. The indices closed well off highs that day and slid down until almost the turn of the year.

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What should I do now

Investors may have added some exposure in recent days, with indexes rising and many stocks flashing buy signals.

The latest purchases could look good on Thursday, but they could also all explode, depending on the December CPI inflation report.

So investors should not have been too exposed heading into the inflation reading.

But be ready to trade if the major indexes show strong action beyond the opening bell. A lot of quality stocks are flashing buy signals or sitting up.

Don’t forget the earnings season. JPMorgan Chase (JPM) and several other banking giants report on Friday morning along with Delta Air Lines (VALLEY) and UnitedHealth (UNH).

Microsoft and Tesla shares expire in two weeks, with Apple, Amazon and Google soon to follow.

Earnings results and guidance will be critical amid uncertain economic times.

Read The big picture every day to stay in sync with 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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