Dow Jones Futures: Fed Minutes Boost Market Rally, Microsoft Makes Important Move; Tesla competitors are in buy zones

Dow Jones futures were little changed overnight, along with S&P 500 futures and Nasdaq futures. The stock market rally edged higher in an up-and-down session on Wednesday as the Fed’s hawkish minutes held few surprises. Government bond yields recovered and still warn of a recession. Crude oil prices fell again, but hit lows.




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Microsoft stock and Google parent company alphabet (GOOGL) reclaimed its 50-day moving averages. Amazon.com (AMZN) and Apple (AAPL) moved above their 10-week moving average. Microsoft (MSFT) and Google shares are IBD Long-Term Leaders.

Tesla rivals BYD (BYDDF) and Li car (LI) are located in buying zones. BYD stock edged up within a buy zone while Li Auto slipped back into the range. Tesla stock is down.

GME stock split

After Wednesday’s close, original meme stock GameStop (GME) announced plans for a 4:1 stock split. GME shares rose 9% overnight after falling 2.4% to 117.30.

Stock splits are popular again. Amazon’s 20-for-1 stock split in early June. Google stock will split 10-for-1 on July 15, while Tesla has proposed a 3-for-1 split. But these tech titans have or have had high share prices, making it difficult to trade AMZN stock options, for example. That’s not the case with GME stocks.

Dow Jones futures today

Dow Jones futures rose 0.1% from fair value. S&P 500 futures and Nasdaq 100 futures were up 0.1%.

At 8:15 am ET, ADP will release its June estimate of private sector recruitment. At 8:30 am ET, the Department of Labor releases its weekly jobless claims report. These come ahead of Friday’s June jobs report.

Keep in mind that overnight action in Dow futures and elsewhere doesn’t necessarily translate to actual trading in the next regular trading session.


Join IBD experts as they analyze actionable stocks in the stock market rally on IBD Live


Fed minutes, economic data

Fed minutes from the June 14-15 monetary policy meeting showed policymakers saying that “restrictive policy” was needed and may need to become “more restrictive” amid concerns that inflation could “take hold”. .

According to the minutes of the Fed meeting, policymakers thought a 50 or 75 basis point hike was likely in late July. Fed Chair Jerome Powell said so after the meeting.

In general, the Fed minutes offered no real surprises and underlined the big change in economic conditions over the past three weeks.

The Fed Minutes mentioned “inflation” 90 times, but not once “recession”. Since the Fed’s mid-June meeting, fears of a recession have increased while commodity prices have fallen sharply.

The Fed minutes slightly boosted 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 Wednesday, the Labor Department’s JOLTS survey showed that 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-on-month decline since August 2020.

The June ISM non-manufacturing index fell to a two-year low but beat expectations and still pointed to solid growth. The employment sub-index fell to 47.4 from 50.2, below the 50 break-even level.

stock market rally

The stock market rally ranged between modest gains and losses for most of Wednesday’s trading. The main indices gained momentum after the Fed minutes were released at 2:00pm ET, but then scaled the gain in the closing minutes.

The Dow Jones Industrial Average rose 0.2% in trading on Wednesday. The S&P 500 index rose 0.4%. The Nasdaq Composite gained 0.35%. Small-cap Russell 2000 fell 0.8%.

Microsoft and Google shares are up just over 1%, trading above their 50-day moving average. Amazon shares gained 0.7%, coming right at the 50-day moving average and above its 10-week moving average. Apple stock trailed its 50-day mark, but Wednesday’s 1% gain pushed the iPhone giant above its 10-week moving average.

U.S. crude prices fell 1% to $98.53 a barrel, well below morning lows after falling 8.2% on Tuesday. Gasoline futures, which were above $4 a gallon a few weeks ago, are down 4% to $3.20. Prices at the pump have fallen over the last three weeks and will fall significantly in the coming weeks.

The 10-year government bond yield rebounded 10 basis points to 2.9% after falling 30 basis points in the previous three sessions. The two-year Treasury yield rose 15 basis points to 2.97%. The Treasury yield curve is now slightly more inverted, reflecting rising recession risks.

ETFs

Among the best ETFs, Innovator IBD 50 ETF (FFTY) was flat, while Innovator IBD Breakout Opportunities ETF (BOUT) was up 1%. The iShares Expanded Tech-Software Sector ETF (IGV) was modestly up 0.1%, with MSFT shares taking the lead. The VanEck Vectors Semiconductor ETF (SMH) is up 0.7%.

SPDR S&P Metals & Mining ETF (XME) fell 0.7% and 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%. The Energy Select SPDR ETF (XLE) is down 1.7% and the Financial Select SPDR ETF (XLF) is down 0.25%. The Health Care Select Sector SPDR Fund (XLV) rose 0.7%.

Mirroring more speculative story stocks, ARK Innovation ETF (ARKK) fell 2.25% and ARK Genomics ETF (ARKG) 0.2% after both surpassed their 50-day moving averages on Tuesday. Tesla stock is a key position in Ark Invest’s ETFs. Cathie Woods Ark Invest also owns some BYD shares.


The five best Chinese stocks to watch right now


China EV stocks in buy zones

BYD stock rose 1.1% to 40.55 after briefly testing its buy point of 39.81 from a deep cup-and-handle basis for a fifth straight session in one day. On Sunday, BYD reported sales of 134,036 electric vehicles and plug-in hybrids in June, up 224% year over year. In the second quarter, BYD’s sales exceeded Tesla’s deliveries by more than 100,000 vehicles. Tesla continues to lead in sales of all-electric “BEVs,” although that gap has narrowed significantly over the past year.

Li Auto’s stock fell 3.5% to 38.60. For the day, shares dropped to 37.10 but closed above the 37.55 buy point from a long low base. LI stock is still 39% above its 50-day moving average. Ideally, the hybrid SUV maker would provide a short base here and let Li-Auto stock digest its huge gains from early May through late June. Li Auto will begin deliveries of its second premium SUV, the L9, in late August.

Tesla shares fell 0.6% to 695.20 on Wednesday, just below the 21-day moving average.


Tesla vs BYD: Which EV Giant is the Better Buy?


Analysis of the market rally

The stock market rally helped Tuesday’s rebound from intraday lows, but the major indices still appeared to be looking for direction.

The Nasdaq Composite rose above its 21-day moving average on Wednesday, but the S&P 500 and Dow Jones encountered resistance at the short-term moving average. All three major indices are now back above the lows of their subsequent days of June 24th. Plunging below their FTDs over the past week has put the market rally “under pressure” where it is staying.

The late June and 50-day moving averages are above the 21-day moving averages, with the early June peaks above them.

While major indices rose on Wednesday, breadth was weak, with losers on the Nasdaq and NYSE slightly outpacing gainers.

Good news about inflation and Fed rate hikes, including falling commodity prices and easing in labor markets, is bad news for a possible recession. So the markets don’t know exactly how to deal with economic data.

It is possible that the market will trend sideways for some time. This could provide a lot of groundwork and clarity about the economy and Fed policy. But even that happens, there could be head fakes and market shakeouts for individual stocks and the overall market along the way.

Medical stocks remain the clear leaders right now, including the IBD 50 members Evolved Health (EVH), McKesson (MCK), UnitedHealth (UNH), Harmony Life Sciences (HRMY) and AstraZeneca (AZN).


Time the market with IBD’s ETF market strategy


What now

The stock market rally is under pressure with the major indices still facing many key resistance levels. While a number of medical stocks and a handful of other stocks are doing well, even they can be vulnerable to notable market shakeouts.

So when taking positions, make them small and look for early entries. Consider taking at least partial profits quickly to lock in some wins. Don’t hesitate to cut losses.

Read The Big Picture every day to keep up to date 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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