Dow Jones futures fell slightly overnight, along with S&P 500 and Nasdaq futures. A strong stock market rally on Tuesday morning faded, becoming briefly mixed after Russian missiles reportedly hit Poland.
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Target (TGT) headlined Wednesday morning earnings, while the chip giant Nvidia (NVDA) looms large on Wednesday night.
The stock market rallied Tuesday morning on another subdued inflation report. walmart (WMT) earnings also helped. Warren Buffett’s Berkshire Hathaway has revealed he’s taken a big new stance in Taiwan semiconductor (TSM).
The major indices pared their gains somewhat, but then quickly turned mixed due to Russian missile news reports. But the Dow Jones recovered to become positive again.
Missile attack in Poland
By mid-afternoon, stocks waned following reports that Russian missiles hit Przewodow, a Polish village just across the border from Ukraine. The missiles reportedly killed two people. It is possible that Russian missiles flew away from targets in Ukraine, or that the Ukrainian military shot down the missiles, landing in Poland. Moscow launched massive attacks on Ukrainian cities on Tuesday.
Russia has denied any responsibility. Poland said the strike appeared to be an “isolated incident”.
Deliberately hitting Poland would be extremely dangerous. All NATO members are committed to defending all other members against attack. NATO ambassadors will meet Wednesday morning for a consultation on Article 4, not the more aggressive defense provision of Article 5. But a much broader conventional war would increase the risks of nuclear weapons, creating an existential threat to the world and of course the stock market.
Missile attack news in Poland aside, the market rally could be due to a pause after a strong run and the S&P 500 approaching key resistance.
Still, Free market (MELI) and Pure storage (PSTG) cleared buy points on Tuesday, although PSTG stock forfeited official entry for a second consecutive session.
Retail revenue
Target, Lowe’s (DOWN) and TJX Cos. (TJX) reports earnings early Wednesday, along with October retail sales. This follows Dow Jones giants Walmart and Home deposit (HD) results early Tuesday. WMT stock jumped 6.5% on strong earnings, guidance and a big buyback, coming out of a handful buy point. The HD stock soared 1.6%, trying to forge a handful.
TGT stock rose 3.6% on Tuesday, but hit resistance at the 200-day line, close to a basic buy point. Lowe’s advanced 2.15%, working on a basic handful. TJX stock climbed 2.9%, still in range from a 10-month cup-handle base.
Nvidia reports Wednesday night. Nvidia stock rose 2.3% on Tuesday, adding to last month’s strong gains, boosting the chip sector. Solid earnings and guidance from Nvidia, plus the chip gear giant Applied materials (AMAT) Thursday night will be important for the sector and the broader market rally.
The video embedded in this article discusses Tuesday’s market rally and analyzes MELI, Pure Storage and Albemarle (ALB).
The MercadoLibre share joined the IBD ranking and was Tuesday’s IBD share of the day. ALB stock is on the rating watch list. MercadoLibre and PSTG stocks are on SwingTrader. Pure Storage is on IBD 50.
Dow Jones Futures Today
Dow Jones futures fell 0.15% from fair value. S&P 500 futures slid 0.15% and Nasdaq 100 futures fell 0.1%.
The 10-year Treasury yield fell 1 basis point to 3.79%.
Amazon.co.uk (AMZN) began laying off business and technology workers on Tuesday, according to LinkedIn posts from affected Amazon staff. The e-commerce and cloud computing giant plans to cut 10,000 jobs. AMZN stock fell 1% overnight.
On Tuesday evening, former President Donald Trump launched his 2024 bid for the White House.
October retail sales are scheduled for 8:30 a.m. ET. Economists expect the Commerce Department to report a 1% gain, or just 0.2% excluding autos and gasoline.
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.
Join the experts at IBD 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 a flat core PPI from September. Revenue from Walmart also helped. TSM stock soared 10.5% on Tuesday night’s news that Warren Buffett had taken a stake. Buffett’s Berkshire also took new positions as well as new stakes in Louisiana-Pacific (LPX) and Jefferies (I F).
But major indices pared their gains, with the Dow Jones briefly turning negative following the report of Russian missiles hitting Poland.
The Dow Jones Industrial Average edged up 0.2% in Tuesday’s trading, even with WMT and Home Depot stocks providing lift. The S&P 500 index climbed 0.5%. The Nasdaq composite jumped 1.45%. Small cap Russell 2000 gained 1.5%.
The 10-year Treasury yield fell 7 basis points to 3.8%. The US dollar also fell.
U.S. crude oil prices rose 1.2% to $86.92 a barrel after briefly rising more than 3% on Russian missile news. Natural gas futures rose 1.7%.
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Among the best ETFs, the Innovator IBD 50 ETF (FFTY) gained 1.4%. The iShares Expanded Tech-Software Sector ETF (IGV) gained 2.3%. ETF VanEck Vectors Semiconductor (SMH) jumped 3.15%, with Taiwan Semi and Nvidia stocking huge components, as well as AMAT.
The SPDR S&P Metals & Mining ETF (XME) climbed 0.85%. The SPDR S&P Homebuilders ETF (XHB) rose 2.1%, with HD stocks and Lowe’s two large holdings. ETF Energy Select SPDR (XLE) rose just over 1% and ETF Financial Select SPDR (XLF) edged up 0.2%. The SPDR healthcare sector fund (XLV) fell 0.1%.
Reflecting more speculative historical stocks, ARK Innovation ETF (ARKK) rebounded 2.7% and ARK Genomics ETF (ARKG) was just above break-even.
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Stocks close to buy points
MELI stock jumped 6.4% to 1,020.68, clearing a buy point of 1,018.10 cup with handle. MercadoLibre volume was below normal, but the recent consolidation has a number of gains on above average volume. The Latin American e-commerce giant is enjoying strong profit growth.
PSTG stock rose 1.6% to 31.56. During the day, Pure Storage came in at 32.47, clearing the 32.07 cup-with-handle buy point for a second straight session, but did not close above that entry, according to MarketSmith. PSTG stock finished well at an early entry of 32.57.
The data storage company is also benefiting from strong earnings growth.
Market rally analysis
The stock market rally started strong on Tuesday, surging on the PPI inflation report. But the main indices pulled back from intraday highs, then turned mixed following news of the missile attack in Poland.
Maybe the inflation/Fed talk has changed. But that doesn’t mean the major indices can’t hit resistance, especially after a recent strong run. And, as Tuesday’s action showed, there’s always the potential for geopolitics or other wildcards to upset a market trend.
The Dow Jones and the Russell 2000 both exceeded their 200-day moving averages. The S&P 500 is approaching the 200-day line, where it encountered powerful resistance on August 16.
The Nasdaq is moving from its 50-day line to its 200-day line, but still has a long way to go.
Notably, the Invesco S&P 500 Equal Weight (RSP) ETF is just above its 200-day line. The Direxion Nasdaq-100 Equal Weighted Index ETF (QQQE) is approaching this key long-term level.
The tech giants are bouncing back with the market, but certainly not leading. Many titans hit bear market lows in the past 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.
However, many sectors are showing strength.
Solar power, grids, contract electronics manufacturers and several medical product companies are doing well. The same goes for a number of chips, with several more trying to settle. A host of housing-related stocks look interesting, from builders to suppliers to housing retailers.
Other retailers look good including WMT stock, Wholesale BJ’s (BJ) and Ultimate beauty (ULTA). BJ reports Thursday.
Trucking companies are advancing as investors bet the worst is over, or at least priced in, for shipping stocks.
Biotechs and health insurers have paused or retired, but are generally in decent shape. Energy stocks are also doing well, although many seem stretched out.
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What to do now
Major indexes look strong, more stocks are giving buy signals and breaking into place. Inflation data may have reached a turning point, raising the prospect of a slowdown in Fed rate hikes and – perhaps – an end to the tightening in the not too distant future.
Investors should therefore benefit from the current market rally. But they want to be careful about what they add in the short term, given the possibility of market pullback or resistance.
Do not chase extended stocks. Beware of stocks that deviate significantly from their 50-day moving averages, even if they are in official buy zones. Don’t be too focused. A portfolio focused on lithium stocks like Albemarle would have been burned on Tuesday.
But work on those watchlists, stay engaged, and be ready to take action.
Read The Big Picture every day to stay in tune with market direction and top stocks and sectors.
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