Dow Jones futures rose slightly early Thursday, along with S&P 500 futures and Nasdaq futures. The stock market rally advanced Wednesday, extending a rebound but with the major indexes closing well off session highs.
XApple chipmaker Taiwan Semiconductor (TSM) is signaling a breakout on strong earnings before Thursday's open, also giving Applied Materials stock a boost. KB Home (KBH) and Delta Air Lines (DAL) also climbed on quarterly results.
Consumer inflation came in slightly hotter than expected on Wednesday, hitting a fresh 39-year high of 7%. But investors appeared relieved that the December inflation report wasn't even worse. Meanwhile, crude oil and copper prices continued to rally, with energy, mining and other commodity-related stocks rallying.
Still, the major indexes backed off morning highs, with the Nasdaq hitting resistance after rebounding since Monday afternoon. Applied Materials (AMAT) rebounded bullishly from its 50-day line while Mosaic (MOS) broke out past a buy point. Tesla (TSLA) was among Wednesday's big movers, reclaiming key support, but is not yet actionable.
Key Earnings
KB Home reported earnings after the close while Taiwan Semiconductor and Delta Air Lines reported early Thursday, kicking off quarterly results for their respective sectors.
KB Home earnings beat views. Sales came in a little light, but the homebuilder gave bullish guidance on revenue, selling prices and profit margins. KBH stock, which was a laggard when rivals were breaking out, rose solidly overnight, signaling moves above the 50-day and 200-day lines.
Taiwan Semiconductor earnings topped estimates, with the chip foundry also guiding up for Q1 revenue. TSM stock rose 4.4% to 138.01, signaling a breakout from an 11-month cup-with-handle base with a 135.60 buy point. As a chip contractor, Taiwan Semi makes chips for Apple (AAPL), Nvidia (NVDA) and many other fabless chipmakers. Meanwhile, TSM also gave a bullish 2022 capital spending forecast. That's good news for chip-equipment makers such as Applied Materials
Apple stock edged lower in premarket trade, still actionable from its 10-week line. Nvidia stock rose a fraction, still below its 50-day line after last week's sell-off.
Delta earnings and revenue slightly topped views. The carrier expects a Q1 loss as the omicron variant spurs major flight cancellations, but it stuck to forecasts for a 2022 profit. DAL stock rose modestly before the open. Shares have been rallying for the past several weeks but are well off 2021 highs, along with other airline stocks. But Delta earnings are important not only for other airlines, but for hotels and online travel sites that are performing better.
Tesla stock and Nvidia are on IBD Leaderboard. Applied Materials and MOS stock are on SwingTrader. AMAT stock is on the IBD 50 list. Mosaic was Wednesday's IBD Stock Of The Day.
The video embedded in this article discusses Wednesday's market action and analyzes AMAT, Mosaic and TSM stock.
Dow Jones Futures Today
Dow Jones futures rose 0.1% vs. fair value, as Boeing (BA) rallied on a report that China could allow 737 Max flights to resume this month. S&P 500 futures and Nasdaq 100 futures were just above break-even.
The 10-year Treasury yield rose slightly to 1.74%, after pulling back in the prior two sessions. Crude prices edged lower while natural gas prices fell after big recent gains.
Remember that overnight action in Dow futures and elsewhere doesn't necessarily translate into actual trading in the next regular stock market session.
Join IBD experts as they analyze actionable stocks in the stock market rally on IBD Live
Stock Market Rally
The stock market rally closed well off morning highs, but the major indexes closed positive.
The Dow Jones Industrial Average rose 0.1% in Wednesday's stock market trading. The S&P 500 index climbed 0.3%. The Nasdaq composite advanced 0.2%. The small-cap Russell 2000 sank 0.7%.
The 10-year Treasury yield fell about 2 basis points to 1.725%, continuing to retreat from Monday's 23-month intraday peak of 1.81%. Crude oil prices climbed 1.8% to $82.64 per barrel, while natural gas shot up more than 10%. Copper prices climbed about 3%.
Among the best ETFs, the Innovator IBD 50 ETF (FFTY) rose 1%, while the Innovator IBD Breakout Opportunities ETF (BOUT) advanced 0.8%. The iShares Expanded Tech-Software Sector ETF (IGV) dipped 0.3%. The VanEck Vectors Semiconductor ETF (SMH) climbed 0.85%. TSM stock, Nvidia and AMAT are major SMH components.
SPDR S&P Metals & Mining ETF (XME) rallied 2.3% and Global X U.S. Infrastructure Development ETF (PAVE) edged up 0.5%. U.S. Global Jets ETF (JETS) retreated 0.9%, with DAL stock a notable JETS holding. SPDR S&P Homebuilders ETF (XHB) closed just below break-even. The Energy Select SPDR ETF (XLE) edged up 0.2% and the Financial Select SPDR ETF (XLF) nudged 0.1% higher. The Health Care Select Sector SPDR Fund (XLV) dipped 0.3%.
Reflecting more-speculative story stocks, ARK Innovation ETF (ARKK) slumped 2.8% and ARK Genomics ETF (ARKG) 4.1%. Tesla stock remains the No. 1 holding across ARK Invest's ETFs.
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Mosaic Stock
Mosaic stock rose 3.8% to 41.91 on Wednesday, clearing a 41.25 cup-with-handle buy point in above-average volume, according to MarketSmith analysis. MOS stock did back off intraday highs of 42.61.
AMAT Stock
AMAT stock popped 4.7% to 159.55, rebounding bullishly from its 50-day line and breaking a very short trend line entry. It's actionable now. Applied Materials stock also is back above a prior buy point of 159.10, though it's technically no longer valid.
AMAT stock rose nearly 3% before Thursday's open, buoyed by a strong TSM capital spending report. Several other chip-equipment makers rallied.
Tesla Stock
Tesla stock climbed 3.9% to 1,106.22, convincingly reclaiming its 50-day line. From Monday's lows, TSLA stock has rebounded more than 125 points. The 50-day line often offers an early entry, but the EV giant is trying to go straight up after plunging from its Jan. 4 intraday high. For now, Tesla stock remains actionable just above the 1,200 level. Ideally, shares would pause just below or around 1,200 before breaking out.
Market Rally Analysis
The stock market rally continued to rebound Wednesday but definitely backed off early highs.
The Nasdaq composite, up more than 1% intraday, pulled back after hitting its 10-day line and nearly reaching its 21-day moving average. It's still below its 50-day line. The Dow Jones and S&P 500, above their 21-day and 50-day lines, also ran into resistance at their 10-day lines.
The Russell 2000 also reversed from short-term moving averages. But the small-cap index also closed lower.
The market rally was due for a bounce at Monday's lows. Well, we got it. But it's still unclear if that bounce has real legs. Can the Nasdaq reclaim its 50-day line and its year-end levels? Can the S&P 500 and Dow Jones hit new highs? Or will the market rally falter yet again?
We don't have to have an answer right away. A short pause in the major indexes could be constructive. It would be unusual for stocks to race straight up. A little sideways action would let stocks repair themselves, while leaders could stand out.
Energy stocks remain strong, though Wednesday's gains were tame given the big moves in crude oil and natural gas. Financials are looking good. Investors may want to wait for Friday's earnings from JPMorgan Chase (JPM), Wells Fargo (WFC) and Citigroup (C) before making substantial new bets on bank stocks.
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What To Do Now
The market direction may be the most important part of CAN SLIM. You can find top stocks with great fundamentals, but if the market goes south, those leaders will likely falter too. If the market is generally trending higher, most stocks will rise.
If you buy Nvidia stock, Tesla stock or Microsoft (MSFT) right now, you're not only betting on those stocks too early, you're betting the market will show strength. But instead of trying to predict where the market will go, pay attention to what the market is doing now. While it's still a stock market rally, it's under pressure with the market direction in flux.
Complicating matters is that while most growth stocks are struggling, commodity-related stocks and financials are not.
Read The Big Picture every day to stay in sync with the 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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