Dow Jones futures were little changed after hours, along with S&P 500 futures and Nasdaq futures.
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Wednesday’s stock market rally extended recent gains ahead of Thursday’s CPI inflation report. Investors are betting on inflation data, raising stakes for a critical Fed report.
Amazon.com ( AMZN ) and Tesla shares led the megacap rally on Wednesday apple (AAPL), Microsoft (MSFT) and parent Google Alphabet (GOOGL) has had solid sessions. Tesla ( TSLA ) and AMZN shares also reflected strong performance in auto/EV names and e-commerce plays, respectively.
Celsius Holdings ( CELH ) rallied on Wednesday, suggesting a buy signal.
CELH stock was added to SwingTrader and the IBD Leaderboard watch list on Wednesday. Celsius was also Wednesday’s IBD Stock of the Day.
Basic Earnings
KB Home page (KBH), reported earnings after the close that began housing reports. KBH shares were marginally lower as KB Home’s revenue fell well short of fiscal Q1 views, with no revenue. Shares in KB Home rose 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 rallied in recent weeks. How will they react to KB Home’s results?
Taiwan Semiconductor (TSM) earnings are available early Thursday, the first major chip result for the latest quarter. Shares of TSM rose 0.6% on Wednesday, slightly below its 200-day moving average.
Disney taps Nike veteran
Walt Disney (DIS) named Nike (NKE) chairman Mike Parker as the new chairman, replacing Susan Arnold. Parker has been on Disney’s board for seven years.
Disney, meanwhile, advised shareholders to vote out its board and not support activist investor Nelson Pelts, who wants to join the Dow Jones entertainment giant’s board.
DIS shares rose slightly. Nike, a Dow shareholder like Disney, Apple and Microsoft, was little changed after hours.
CPI Inflation Report
The consumer price index for December will be released at 8:30 am.
Economists expect steady consumer prices after November’s 0.1% increase. Core CPI rose 0.3% after November’s 0.2% rise. Headline CPI inflation should continue to cool to 6.6% from 7.1% in November. Core inflation is expected to slow to 5.7% from 6% in November.
The CPI inflation rate peaked at 9.1% last June, while the core CPI inflation rate reached 6.6% in September, both 40-year highs.
Other data this week, including New York Fed inflation expectations and small businesses opening and hiring plans, point to cooling inflation and labor markets.
A soft inflation report should halt a quarterly rate hike at the Fed’s Feb. 1 policy meeting, slowing from 50 basis points and 75 basis points at the previous two meetings. More importantly, cooling inflation could raise expectations that the Fed may hold off on raising interest rates until after the March meeting.
Dow Jones Futures today
Dow Jones futures were even against fair value. S&P 500 futures were flat, while Nasdaq 100 futures were lower.
Remember that an overnight move in Dow futures and elsewhere does not necessarily translate into actual trading in the next regular trading session.
Join IBD’s experts as they analyze the stocks that made the most of the stock rally on IBD Live
Stock market rally
The stock market rally added to recent gains, with major indexes closing near session highs for the second consecutive session. The Nasdaq led the advance thanks to Amazon and big growth names.
The Dow Jones Industrial Average rose 0.8% on Wednesday. The S&P 500 index rose 1.3%. The Nasdaq composite rose 1.8%. The small-cap Russell 2000 gained 1.2%.
The price of crude oil in the United States increased by 3.1% to $77.41 per barrel.
The 10-year Treasury yield fell 6 basis points to 3.55%.
ETFs
Among rising ETFs, the Innovator IBD 50 ETF ( FFTY ) rose 1.3%. The iShares Expanded Tech-Software Sector ETF ( IGV ) advanced 1.6%, retracing its 50-day line, the main IGV holding of MSFT shares. VanEck Vectors Semiconductor ETF (SMH) rose 1.2% and crossed its 200-day line. The TSM fund is the best SMH component.
Reflecting more speculative story stocks, the ARK Innovation ETF ( ARKK ) gained 3.4% and the ARK Genomics ETF ( ARKG ) gained 3.7%. Tesla shares remain the top holding among Ark Invest’s ETFs. Cathie Wood’s Ark has weighed on TSLA stock in recent days and weeks.
The SPDR S&P Metals & Mining ETF ( XME ) rose 0.5%, while the Global X US Infrastructure Development ETF ( PAVE ) rose 1.3%. The US Global Jets ETF (JETS) rose 0.4%. The SPDR S&P Homebuilders ETF ( XHB ) gained 2.6%. The Energy Select SPDR ETF ( XLE ) rose 0.3%, while the Financial Select SPDR ETF ( XLF ) rose 0.9%. The Healthcare Select Sector SPDR Fund ( XLV ) added 0.6%.
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Megacap Stocks
Shares of Tesla rose 3.7% to 123.22, extending their retreat from Friday morning’s bear market low of 101.81. Shares are still below a long-term 21-day low. Tesla is planning a major expansion of its Austin plant and is reportedly close to a preliminary agreement for a new factory in Indonesia. The latter could complicate Tesla Shanghai demand issues.
Amazon shares rose 5.8% to 95.09, closing above their 50-day moving average for the first time in four months. AMZN stock also ended last Friday’s bear market.
Shares of Apple gained 2.1%, leaving behind a 21-day high. This comes despite Barclays cutting its AAPL price target, citing weak demand for Apple in many product categories.
Google shares also retook the 21-day line, gaining 3.5%. Shares of Microsoft advanced 3%, just below their 21-day line, after falling last week.
Celsius reserve
CELH shares rose 5.3% to 106.57 on Tuesday. Shares broke above the 50-day line, broke the trend line and closed above the 21-day moving average. All this suggested a buy signal. CELH shares finished off intraday highs at 108.80, but posted a strong close.
Market rally analysis
The stock market rally showed more strength heading into Wednesday’s CPI inflation report.
The S&P 500 index rose further above its 50-day line, surpassing its intraday high on Tuesday. Although still below the 200-day line, the benchmark index broke above the 10-week and 40-week lines. The Russell 2000 cleared its 200-day line after crossing the 50-day Wednesday.
The Nasdaq, which has been lagging in recent months, cleared its 50-day line for the first time in nearly a month.
Meanwhile, leading stocks performed positively overall. CELH shares issued a buy signal. Stocks that have come out recently have generally stalled or continued to rise.
Apple, Tesla, Amazon and other megacaps are far from moving, but at least they’re not outmatched by the major indexes.
Looking at just the major indices and leading stocks, the stock market rally is performing healthy, although there are more resistance levels ahead.
But gathering critical Fed economic data or events over the past few months has been difficult at best. Yes, a tepid CPI inflation report can blow a market rally. But a hotter-than-expected reading could lead to a big selloff. The market puts a price on “good news”.
Of course, the important thing is not the news, but the reaction to the news. November’s CPI inflation report was cooler than expected on December 13, sending the main indexes to their best intraday levels in months. But this was the peak of the October-December market rally. Indices closed off highs that day and fell almost to the end of the year.
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What to do now
Investors may have taken a bit of a hit in recent days with indices rising and many stocks flashing buy signals.
Those recent purchases may look great on Thursday, but they could all blow up depending on the December CPI inflation report.
Hence, investors should not have too much exposure to the inflation report.
But if the major indexes show strong moves beyond the opening bell, be prepared to take action. Many quality stocks are flashing or building with buy signals.
Don’t forget about the earnings season. JPMorgan Chase ( JPM ) and several other banking giants in a report Friday morning Delta Airlines (DAL) and UnitedHealth (UNH).
Shares of Microsoft and Tesla will expire in two weeks, with Apple, Amazon and Google soon to follow.
In uncertain economic times, earnings results and management will be critical.
Read The Big Picture daily to stay in sync with market direction and leading stocks and sectors.
Follow Ed Carson on Twitter @IBD_ECarson for stock updates and more.
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