Dow Jones futures and S&P 500 futures were little changed early Thursday, while Nasdaq futures rose slightly as crude oil prices fell sharply on reports that President Joe Biden is considering a major release from strategic reserves over several months to combat inflation. Key inflation data is on tap Thursday.
The major indexes retreated modestly Wednesday amid a strong stock market rally since March 14. Crude oil futures and other commodity prices rebounded while Treasury yields fell.
Banks were big losers as Treasury yields fell with the yield curve close to inverting. Chips and software also pulled back, though often after several days of gains. Apple stock, Tesla, Microsoft and Google parent Alphabet barely budged. Apple is in buy range, though a market pause would be helpful. Microsoft and Google stock are above early entries, while Tesla stock is closing in on buy points.
Meanwhile, energy, fertilizer and other commodity plays rebounded Wednesday after retreating Tuesday. Many are extended. But oil major Shell is just below a buy point while quasi-sector laggard Philips 66 is hovering around a potential entry.
Strategic Reserves Release
U.S. crude oil prices tumbled 6%.
President Biden's team is considering a plan to release about one million barrels per day from strategic reserves over several months to combat high gasoline prices and supply issues amid Russia's Ukraine invasion. That's according to multiple reports Wednesday night. An announcement could come Thursday, as Biden speaks on ways to reduce energy prices.
Biden's approval rating has tumbled with inflation at 40-year highs. Polls suggest Republicans will retake control of Congress in November.
OPEC+ will meet today to discuss crude oil prices and supply. OPEC+, which includes Russia, is expected to continue its slow pace of expanding output.
Inflation Data
At 8:30 a.m. ET on Thursday, the Commerce Department will release fresh inflation data as part of the February income and spending report. The personal consumptions expenditures price index, the Fed's favorite inflation gauge, is expected to show a 6.4% gain vs. a year earlier. Core PCE inflation is seen hitting 5%. On Friday, the Labor Department will release the March jobs report.
The Federal Reserve's next policy meeting isn't until May 3-4, so there will be a few inflation readings before then. Still, the inflation and jobs report will signal whether policymakers will hike rates by 50 basis points in early May and future meetings, vs. quarter-point moves.
Tesla and Microsoft stock are on IBD Leaderboard. Microsoft and Google stock are on IBD Long-Term Leaders. Tesla stock, Google, and Microsoft are on the IBD 50.
Dow Jones Futures Today
Dow Jones futures fell slightly vs. fair value. S&P 500 futures climbed less than 0.1%. Nasdaq 100 futures rose 0.3%.
The 10-year Treasury yield fell 4 basis points to 2.32%.
China's manufacturing and services sectors contracted in March, the first time they both declined since February 2020, when the coronavirus crisis first hit Wuhan.
Thursday's inflation report will likely move Dow futures and Treasury yields.
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 had a down session, led by techs and small caps.
The Dow Jones Industrial Average dipped 0.2% in Wednesday's stock market trading. The S&P 500 index sank 0.6%, with PSX stock among the top performers. The Nasdaq composite slumped 1.2%. The small-cap Russell 2000 gave up 1.9%.
Crude oil prices popped 3.4% to $107.82 a barrel, though off morning highs. Gold and base metals also advanced.
The 10-year Treasury yield fell 4 basis points to 2.36%. The 2-year yield dipped 4 basis points to 2.31%, with the spread at just 5 basis points. The yield curve is getting close to inverting, and actually did briefly on Tuesday. An inverted yield curve is bad news for traditional lenders, with regional banks big losers on Wednesday.
It's also a possible recession signal, though the general upward trend in rates suggests otherwise. Also, an inverted yield curve doesn't usually signal a recession or stock market correction for several months.
ETFs
Among the best ETFs, the Innovator IBD 50 ETF sank 1.4%, while the Innovator IBD Breakout Opportunities ETF dipped 0.4%. The iShares Expanded Tech-Software Sector ETF retreated 1.9%, with MSFT stock a major IGV component. The VanEck Vectors Semiconductor ETF sank 2.9%.
SPDR S&P Metals & Mining ETF climbed 1.1% and Global X U.S. Infrastructure Development ETF fell 0.9%. U.S. Global Jets ETF descended 0.3%. SPDR S&P Homebuilders ETF tumbled 3.6%, as RH led some housing retailers sharply lower. The Energy Select SPDR ETF climbed 1.2% and the Financial Select SPDR ETF gave up 0.7%, though regional banks were much-harder hit. The Health Care Select Sector SPDR Fund edged up 0.2%.
Reflecting more-speculative story stocks, ARK Innovation ETF slumped 3.8% and ARK Genomics ETF retreated 3.6%. Both held above their 50-day moving averages. Tesla stock remains the No. 1 holding across Ark Invest's ETFs.
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Shell Stock
Shell stock rose 4% to 55.61, rebounding from its 50-day moving average. Investors could buy SHEL stock now, or wait for a breakout from the official 56.23 flat-base buy point. The flat base is part of a base-on-base formation.
The relative strength line for SHEL stock is holding near highs after a strong late 2021 advance.
Phillips 66 Stock
PSX stock popped 4.8% to 87.44, retaking its 50-day moving average, as refiners and other energy plays rebounded along with crude oil prices. Phillips 66 has an official buy point of 94.44 in a consolidation going back to last June. Investors could use 93.64, just above the February short-term high, as an early entry. But aggressive traders could have used Wednesday's move as a place to start a position, from both the 50-day line and breaking a short-term trendline.
Apple Stock
Apple stock sank 0.7% to 177.77, ending an 11-day winning streak.
On Tuesday, shares rose 1.9% to 178.96, clearing a 176.75 double-bottom buy point.
Investors could still buy AAPL stock, or wait for a pause or handle. The RS line is at record highs again, reflecting Apple stock's performance vs. the S&P 500 index. The RS line is the blue line in the charts provided.
Google Stock
Google stock tilted down 0.4% to 2,838.77, continuing to trade tightly over the last several sessions. GOOGL stock is actionable from the 200-day line as an early entry or as a Long-Term Leader. A handle around current levels would also be positive. The official buy point currently is 3,0313.03. The RS line is just below highs, but has been moving sideways since early September.
Microsoft Stock
Microsoft stock dipped 0.5% to 313.86 after rebounding from its 200-day line in the prior two sessions. Investors could buy MSFT stock as an early entry or Long-Term Leader here, or after topping Wednesday's intraday high. The official buy point is 349.77.
Tesla Stock
Tesla stock edged down 0.5% to 1,093.99, but after rising in 10 of the prior 11 sessions. The EV giant has been racing up toward a 1208.10 cup-base buy point and an early entry around 1,150. Ideally, Tesla stock would form a handle, creating a lower-priced, lower-risk buy point. And that handle should be noticeable. A barely perceptible handle on a daily chart probably won't shake out many weak holders from a fast-charging TSLA stock.
Tesla Shanghai, shut down on Monday as the city faces a Covid shutdown, reportedly will not resume production on Friday or Saturday.
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Market Rally Analysis
To paraphrase the Rolling Stones, you can't always get what you want, but sometimes you get what you need. The stock market rally can't go up every day, with the key indexes retreating Wednesday. But that's in the context of a rapid ascent for the past few weeks. The Nasdaq hitting resistance near its 200-day moving average is natural.
The slim losses in Apple, Microsoft, Google and Tesla stock helped mask the decline in the major indexes, along with gains in commodity plays.
But even so, the indexes and leading stocks don't look damaged. Arguably, the market rally could use several days to pause or pull back. That would help Apple and Tesla stock form handles, among others. But the market is going to do what it's going to do.
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What To Do Now
The stock market rally can't go up every day. So investors should remain bullish, but levelheaded. Is this a long-awaited market pause, and will it last for more than a day or two? Don't try to predict, just be ready to respond to the market's actions.
The moves between commodity and growth stocks over the past two sessions show the upside of having a portfolio of diversified leaders. It's also a reason why investors should gradually boost exposure, to avoid making big new bets right at short-term tops.
Keep working on a broad watchlist, closely tracking a select group of stocks in or near buy zones.
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.
