S&P 500 Rallies Above Key on Fed Chair Powell, But Inflation and Jobs Report Loom

Dow Jones futures were little changed overnight, along with S&P 500 futures and Nasdaq futures. Salesforce.com’s headline gains overnight but investors’ focus will be on Thursday’s PCE inflation report after Fed Chairman Jerome Powell launched a technology-led stock market rally on Wednesday.

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Fed Chair Powell said on Wednesday that the pace of rate hikes may start to slow at the December meeting, providing more clear support for a smaller hike at the next 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 of the factors that support inflation are declining. The Fed chief, who indicated that a recession might be necessary, said a “soft landing” was still possible.

Nasdaq got in the way, with apple (AAPL), Microsoft (MSFT), nvidia (NVDA), Tesla (TSLA) and the parent of Google the alphabet (The Google) are all compound outweighs. Notably, the S&P 500 rose to clear the 200-day moving average, which is a major resistance area.

On Thursday, investors will get the personal consumption expenditures price index for October, with the November jobs report due Friday morning.

So while Wednesday’s action was encouraging, investors should wait for the market’s reaction to the important Fed data.

Main earnings

Salesforce.com (CRM), snowflake (snow) And the can (can) led a number of software earnings reports. pure storage (PSTG) And the Victoria’s Secret (VSCO) also reported.

CRM stock fell strongly in overnight trading Salesforce earnings topped But the guidance was light. Co-CEO Brett Taylor will step down, leaving Marc Benioff as sole CEO. SNOW stock initially fell in an extended move on weakness Snowflake revenue routing, but greatly reduced losses. Fund inventory was changed slightly as EPS and sales were outpaced slightly.

PSTG stock rose modestly overnight after that Pure Storage topped Q3 views And raise the extension. The stocks closed down about 1% after falling for the day on weak results and guidance from NetApp (NTAP). VSCO stock fell slightly as Victoria’s Secret’s earnings topped but sales fell slightly.

early Thursday, dollar general (DJ) And the Kruger (K) on tap. Chinese electric car makers New (nio), Lee Otto (L.I) And the Xpeng (XPEV) November sales report, with those stocks and other Chinese names higher on Wednesday after Covid hopes reopen.

inflation report

The Commerce Department will release the Personal Consumption Expenditure Price Index, the Fed’s preferred measure of inflation, at 8:30 a.m. ET as part of its Income and Spending Report.

The PCE price index for October is supposed to show an increase of 0.4% compared to September. On a yearly basis, PCE inflation should ease to 6% from 6.2% in September. Core personal consumption expenditures, which exclude food and energy, are expected to rise 0.3%. Core PCE inflation is expected to ease to 5% from 5.1% in September.

The PCE inflation report, along with Friday’s November jobs report, will help shape expectations for a Fed rate hike. The Consumer Price Index for November will be released on December 13, one day before the announcement of the December Federal Reserve meeting.

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

Dow jones futures today

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

The 10-year Treasury yield fell 8 basis points, to 3.62%.

Remember to work in overnight Dow Jones futures contracts and elsewhere that does not necessarily translate into actual trading in the next regular session Stock market session.

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Stock market rise

The stock market rally was mixed for most of the Wednesday session, then took off after Fed Chair Powell’s remarks, and closed at session highs.

The Dow Jones Industrial Average rose 2.2% on Wednesday Stock market trading. The S&P 500 jumped 3.1%. The Nasdaq Composite jumped 4.4%. Small Capital Russell 2000 rose 2.7%.

Apple shares rose 4.9 percent and Google shares rose 6.1 percent, both of which rose above 50 days. Microsoft and Nvidia stocks, already above their 50-day lines, jumped 6.2% and 8.2%, respectively. Tesla stock rose 7.7%, regaining the 21-day streak.

US crude oil prices rose 3% to $80.55 a barrel, but fell 6.9% for the month. China Covid hopes of reopening also lifted copper futures prices.

Treasury yields and the prospects for higher federal interest rates

The 10-year Treasury yield reversed lower, falling 5 basis points to 3.7%. The two-year Treasury yield, which is closely tied to Fed policy, fell to 4.33%, despite Powell expecting the federal funds rate to peak at least 5%.

The odds of a 50 basis point rate hike are now around 79% vs. 66% after Tuesday. Markets still see another half-point move as a slight favorite in February, but the odds of a quarter-point move are over 45%.

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Exchange Traded Funds

between the The best mutual fundsThe Innovator IBD 50 ETF (fifty(up 1.8%, while the Innovator IBD Breakout Opportunities ETF)fit) increased by 2%. iShares Expanded Technology and Software ETF (IGV) down 4.4%, with Microsoft and CRM stocks both major components. VanEck Vectors Semiconductor Corporation (SMH) jumped 5.7%, with Nvidia stock holding the highest.

SPDR S&P Metals & Mining ETFs (XME) advanced 3.75% and the Global Infrastructure Development Fund (ETF) in the USA (cradle) by 2.4%. Energy Defined Fund SPDR ETF (xle(Up 0.5% and Financial Select SPDR ETF)XLF) increased by 1.7%. SPDR Health Care Sector Selection Fund (XLV) added 2.4%.

Reflecting more speculative stories, the ARK Innovation ETF (ARK)ark(up 7.7% and ARK Genomics ETF)ARKG) 6.5%. Tesla stock remains a major holding via Ark Invest’s ETF.

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Market rally analysis

The stock market rally made a significant upward move in heavy volume on Wednesday following Fed Chair Powell’s comments.

The S&P 500 has rebounded from near the 21-day line to a high of 4,000 and is moving above the 200-day line for the first time in seven months.

The Nasdaq Composite Index, which has been slowing the market rally, led the upside on Wednesday. It recovered the 21-day line and the 11,000 level, to settle at the highest closing level in two months. Apple, Microsoft, Google, Nvidia and Tesla stocks made strong gains on Wednesday, but it’s not clear which of them will lead the current bullish trend.

Russell 2000, who snapped a 21-day streak during the day, rebounded to regain the 200-day lead. The Dow Jones index, which has led the current market rally, is back at its highest level in seven months.

Losing investors were routed by wide-ranging gains. Many of the blue chips that were under pressure on Wednesday rallied.

While there was a lot of positive action on Wednesday, the S&P 500 remained below the 200-day moving average. The PCE inflation report for October on Thursday and the jobs report for November on Friday could reinforce the upward rebound on Wednesday or lead to a downward pullback.

Keep in mind that the current market rally made several big gains in one day, but then struggled to make headway over the next few days or weeks.

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What are you doing now

The stock market witnessed a strong session, as the main indices and blue-chip stocks took encouraging steps.

Investors will probably tend to increase exposure on Wednesday, and that could work.

But there are still good reasons not to increase exposure yet. The S&P 500 crosses the 200-day line, but not decisively. Doing so would likely mean the top of a long-term lower peaks trend line on the weekly chart. Reaching decisively above this area could be a strong sign that the current bullish trend is more than bearish market rally.

But this will require a positive reaction to inflation data and the upcoming PCE jobs report.

Investors should work diligently on their watch lists, looking at promising stocks from a variety of sectors. But definitely stay tuned. The market rally may be at a turning point, but in which direction it will turn.

Read The Big Picture Every day to keep up with the market trend, stocks and leading sectors.

Please follow Ed Carson on Twitter at @tweet For stock market updates and more.

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