Dow Jones futures were little changed overnight, as were S&P 500 and Nasdaq futures. The stock market rally edged higher on Wednesday in a choppy session as hawkish Fed minutes held few surprises. Treasury yields rebounded, still showing a recession warning. Crude oil prices fell again, but hit lows.
Stock Microsoft and parent Google Alphabet (GOOGL) recovered their 50-day moving averages. Amazon.co.uk (AMZN) and Apple (AAPL) topped its 10-week lines. Microsoft (MSFT) and Google Stock are long-term IBD leaders.
Tesla rivals BYD (BYDDF) and Li-Auto (LI) are in the buy zones. BYD stock edged higher into a buy zone while Li Auto fell back into the range. Tesla stock fell slightly.
GME stock split
After Wednesday’s close, the original meme stock GameStop (GME) announced plans for a 4-for-1 stock split. GME stock jumped 9% overnight after closing down 2.4% at 117.30.
Stock splits have come back into favor. Amazon shares split 20-to-1 in early June. Google shares will split 10-for-1 on July 15 while Tesla has proposed a 3-for-1 split. But these tech titans have or had high stock prices, making it difficult to trade, say, options on AMZN shares. This is not the case with GME stocks.
Dow Jones Futures Today
Dow Jones futures were about flat to fair value. S&P 500 and Nasdaq 100 futures were just above break-even.
At 8:15 a.m. ET, ADP will release its June private sector hiring estimate. At 8:30 a.m. ET, the Labor Department releases its weekly unemployment claims report. These precede Friday’s June jobs report.
Remember that overnight action on futures contracts on Dow Jones and elsewhere does not necessarily translate into actual trading in the next regular trading session.
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Fed minutes, economic data
Minutes of the Fed’s June 14-15 policy meeting revealed policymakers said “restrictive policy” was needed and may need to become “more restrictive”, fearing inflation could escalate. rooted.
Policymakers saw a late-July hike of 50 or 75 basis points as likely, according to the Fed’s meeting minutes. But Fed chief Jerome Powell said so after the meeting.
More generally, the Fed minutes offered no real surprises and highlighted the big change in economic conditions over the past three weeks.
The Fed minutes mentioned “inflation” 90 times but not “recession” once. Since the Fed’s mid-June meeting, recession fears have swelled as commodity prices have fallen sharply.
The Fed minutes slightly bolstered market expectations for a 75 basis point rate hike later this month, with 50 basis points in September. December still marks the likely end of Fed rate hikes.
Earlier on Wednesday, the Labor Department’s JOLTS survey showed job vacancies fell to 11.254 million in May from an upwardly revised 11.68 million in April. That was slightly higher than expected, but the biggest month-over-month decline since August 2020.
June’s ISM non-manufacturing index dipped to a two-year low, but beat the sights and still pointed to solid growth. The jobs sub-index fell to 47.4 from 50.2, below the break-even point of 50.
Stock market rally
The stock market rally fluctuated between slim gains or losses for most of Wednesday’s trading. The major indices gained momentum after the Fed meeting minutes were released at 2 p.m. ET, but then narrowed the lead in the final minutes.
The Dow Jones Industrial Average rose 0.2% in trading on Wednesday. The S&P 500 index climbed 0.4%. The Nasdaq composite advanced 0.35%. The small-cap Russell 2000 fell 0.8%.
Shares of Microsoft and Google rose just over 1% to top their 50-day moving averages. Amazon stock edged up 0.7%, reaching the 50-day line and above its 10-week line. Apple stock fell below its 50-day mark, but Wednesday’s 1% gain pushed the iPhone giant above its 10-week line.
U.S. crude oil prices fell 1% to $98.53 a barrel, well off morning lows but after plunging 8.2% on Tuesday. Gasoline futures, which were above $4 a gallon just a few weeks ago, fell 4% to $3.20. Prices at the pump have been falling for three weeks and should drop significantly in the coming weeks.
The 10-year Treasury yield rebounded 10 basis points to 2.9% after plunging 30 basis points in the previous three sessions. The two-year Treasury yield jumped 15 basis points to 2.97%. The Treasury yield curve is now slightly more inverted, reflecting rising recession risks.
Among the top ETFs, the Innovator IBD 50 ETF (FFTY) was flat, while the Innovator IBD Breakout Opportunities ETF (BOUT) gained 1%. The iShares Expanded Tech-Software Sector ETF (IGV) edged up 0.1%, with MSFT stock topping the list. ETF VanEck Vectors Semiconductor (SMH) rose 0.7%.
The SPDR S&P Metals & Mining ETF (XME) fell 0.7% and the Global X US Infrastructure Development ETF (PAVE) rose 0.1%. The US Global Jets ETF (JETS) fell 1.5%. The SPDR S&P Homebuilders ETF (XHB) lost 0.6%. ETF Energy Select SPDR (XLE) fell 1.7% and ETF Financial Select SPDR (XLF) fell 0.25%. The SPDR health care sector fund (XLV) rose 0.7%.
Reflecting more speculative historical stocks, ARK Innovation ETF (ARKK) fell 2.25% and ARK Genomics ETF (ARKG) fell 0.2% after both breaching their 50-day lines on Tuesday. Tesla stock is a major holding in Ark Invest’s ETFs. Cathie Wood’s Ark Invest also owns BYD stock.
Five best Chinese stocks to watch now
China Electric Vehicle Stocks in Buying Areas
BYD stock rose 1.1% to 40.55, after briefly testing its buy point of 39.81 from a deep base with a handle for a fifth straight intraday session. On Sunday, BYD reported June sales of 134,036 electric and plug-in hybrid vehicles, up 224% from a year earlier. In the second quarter, BYD sales exceeded Tesla’s shipments by more than 100,000 vehicles. Tesla continues to lead all-electric “BEV” sales, although that gap has narrowed significantly over the past year.
Li Auto shares fell 3.5% to 38.60. During the day, shares fell to 37.10, but closed above the buy point of 37.55 from a long and deep base. LI stock is still 39% above its 50-day line. Ideally, the hybrid SUV maker would form a short base here, leaving Li Auto’s stock to digest its huge gains from early May to late June. Li Auto will begin deliveries of its second premium SUV, the L9, at the end of August.
Tesla stock edged down 0.6% to 695.20 on Wednesday, just below the 21-day line.
Tesla vs. BYD: Which electric giant is the best buy?
Market rally analysis
The stock market rally added to Tuesday’s rebound from intraday lows, but the major indexes still seemed to be looking for direction.
The Nasdaq composite broke above its 21-day moving average on Wednesday, but the S&P 500 and Dow Jones hit resistance at that near-term average. All three major indices are now back above the lows of their June 24 tracking days. Falling below their FTDs last week pushed the market rally to “under pressure,” where it remains.
Late June and the 50-day line sit above the 21-day lines, with the early June peaks above.
While major indexes rose on Wednesday, the momentum was small, with losers easily outpacing gainers on the Nasdaq and NYSE.
Good news about inflation and Fed rate hikes, including falling commodity prices and easing labor markets, is bad news for a possible recession. The markets therefore do not know very well how to manage economic data.
It is possible that the market will move sideways for some time. This would allow many bases to form and clarity to develop on the economy and Fed policy. But even that happens, there could be counterfeits and upheavals along the way for individual stocks and the broader market.
Medical stocks remain the undisputed leaders right now, including members of the IBD 50 Evolutionary Health (EVH), McKesson (MCK), UnitedHealth (A H), Harmony Biosciences (HRMY) and Astra Zeneca (AZN).
Time the Market with IBD’s ETF Market Strategy
What to do now
The stock market rally is under pressure, with major indices still facing many key resistance levels. Although a number of medical actions and a handful of other actions work well, even they can be subject to noticeable jerks.
So if you are going to take positions, make them small and look for early entries. Consider taking at least partial profits quickly to lock in some gains. Do not hesitate to cut losses short.
Read The Big Picture every day to stay in tune with market direction and top stocks and sectors.
Please follow Ed Carson on Twitter at @IBD_ECarson for stock market updates and more.
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