Dow Jones futures rose modestly early Thursday, along with S&P 500 futures and Nasdaq futures, with Treasury yields tumbling through key levels. Adobe fell overnight on weak guidance.
The stock market rally rose strongly Wednesday after the Federal Reserve forecast three rate cuts in 2024, even as Fed chief Jerome Powell sees an "uncertain" path forward. The Dow Jones ran to a record high while the S&P 500 and Nasdaq hit their best levels since January 2022. Treasury yields plunged.
Netflix and Freshworks triggered buy signals while Datadog is right on the cusp. Nvidia advanced a little further into a buy zone Wednesday, still buyable and now with the Fed risk factor off the table. Arm Holdings rebounded to close back in a buy area after up-and-down trading.
Tesla undercut its 50-day line intraday on a variety of headlines, but rebounded to close slightly higher.
Nvidia, Arm Holdings and DDOG stock are on IBD Leaderboard. Datadog, Nvidia and NFLX stock are on SwingTrader. Nvidia stock and Datadog are on the IBD 50. Adobe stock and Datadog are on the IBD Big Cap 20. Datadog was Wednesday's IBD Stock Of The Day. FRSH stock was Tuesday's selection.
The video embedded in the article highlighted Vertex Pharmaceuticals, Eli Lilly and Samsara.
Federal Reserve
The Fed left rates unchanged at a 5.25%-5.5% range, as expected, with the rate-cut outlook in focus. Fed chief Jerome Powell said the rate outlook is "uncertain," with the central bank still committed to bringing inflation down to 2%.
But investors focused on the median dot plot of where Fed policymakers think rates are headed. They forecast a 4.6% fed funds rate at the end of 2024, essentially signaling three quarter-point cuts. Back in September, the projection was for just one cut.
Markets are even more dovish. They're now betting on six rate cuts, up from four or five before the Fed announcement. They now see a 75% chance of a March rate cut, up from 41% on Tuesday.
Dow Jones Futures Today
Dow Jones futures advanced 0.3% vs. fair value. S&P 500 futures climbed 0.2% and Nasdaq 100 futures rose 0.3%.
The 10-year Treasury yield fell several basis points to 3.95%, undercutting the 4% level for the first time in months.
Crude oil futures rose 2%.
Remember that overnight action in Dow futures and elsewhere doesn't necessarily translate into actual trading in the next regular stock market session.
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Adobe Earnings
ADBE stock fell more than 3% early Thursday, off overnight lows, after Adobe topped fiscal Q4 views but guided low on 2024. The software maker also disclosed an FTC inquiry into its subscriptions. Shares declined 1.5% to 624.26 on Wednesday after hitting a two-year high on Tuesday. Adobe stock is extended from any buy point.
Regeneron Pharmaceuticals reports Thursday morning. Shares climbed 1.4% to 876.12 on Wednesday. REGN stock is in a buy zone from an 853.97 flat-base buy point.
Stock Market Rally
The stock market rally was little changed heading into the 2 p.m. ET Fed announcement, but then ran higher into the close.
The Dow Jones Industrial Average jumped 1.4% in Wednesday's stock market trading, hitting a record high. The S&P 500 index and Nasdaq composite also popped 1.4%, both decisively above their recent ranges and July peaks.
Market breadth was very strong.
The small-cap Russell 2000 surged 3.5% to a four-month high. The Invesco S&P 500 Equal Weight ETF leapt 2.1%, closing in on 2023 highs.
The First Trust Nasdaq 100 Equal Weighted Index ETF ran up 1.9%, continuing to rally after breaking out on Monday.
U.S. crude oil prices rose 1.3% to $69.47 a barrel, rebounding from multimonth lows.
The 10-year Treasury yield dived 17 basis points to 4.03%, a four-month low.
The two-year Treasury yield, more closely tied to Fed policy, plunged 25 basis points to 4.48%, the lowest close since June 1.
The CBOE Volatility Index, or VIX, edged higher on Wednesday, but after tumbling to the lowest level in nearly four years on Tuesday. When the market fear gauge is unusually low, it's a sign of excessive bullishness or complacency. That raises the risk of a market pullback. But it doesn't have to happen right away and it doesn't have to be deep or long lasting
ETFs
Among growth ETFs, the iShares Expanded Tech-Software Sector ETF rose 1.2%. Adobe stock is a major IGV holding, with DDOG stock also in IGV. The VanEck Vectors Semiconductor ETF also climbed 1.2%, with Nvidia stock the No. 1 holding.
Reflecting more-speculative story stocks, ARK Innovation ETF popped 3.7% and ARK Genomics ETF jumped 5.7%. TSLA stock is a major holding across Ark Invest's ETFs.
SPDR S&P Metals & Mining ETF vaulted 3.7%. SPDR S&P Homebuilders ETF popped 2.5%, setting another record. The Energy Select SPDR ETF climbed 1.4% and the Health Care Select Sector SPDR Fund advanced 1.8% with LLY stock and Vertex both members.
The Industrial Select Sector SPDR Fund popped 1.1%, hitting a record high.
The Financial Select SPDR ETF rallied 1.6% to a 52-week high. The SPDR S&P Regional Banking ETF surged 5.9% to a nine-month best.
Stocks Near Buy Points
Nvidia stock edged up 0.9% to 490.88, lagging the market Wednesday. But that built on Tuesday's upside reversal to back above the 476.09 double-bottom buy point, according to MarketSmith analysis.
NFLX stock popped 3.7% to 479.98, clearly breaking the downtrend of a handle to offer an early entry. The official Netflix stock buy point is 482.70.
FRSH stock jumped 4.5% to 22.19, clearing a 21.50 cup-with-handle buy point.
DDOG stock climbed 2.2% to 117.23, moving toward a 120.26 high-handle buy point from a consolidation going back to late July. Investors could use Wednesday's intraday high of 117.46 as an early entry from breaking a downtrend in that high handle.
ARM stock jumped to 66.50 soon after the open, then quickly reversed to 62.75 before rebounding to close up 1.4% to 65.61. That's back above a 64.92 cup-with-handle IPO base. Despite the volatility, the wireless chip design giant has closed tightly this week.
Tesla Stock
Tesla stock fell as low as 228.20 intraday, undercutting the 50-day line and nearing the 200-day, but then reversed higher after the Fed meeting. Shares closed up nearly 1% to 239.29. TSLA stock continues to trade relatively tightly on a daily or weekly basis.
Tesla has a 278.98 double-bottom buy point. Investors could use the Nov. 29 high of 252.75 or even a downward-sloping trend line around 248.
Late Wednesday, Tesla's website disclosed that the RWD and Long Range Model 3 variants will lose all $7,500 of the IRA tax credit in 2024, not just $3,750. Early Thursday, Tesla announced plans for an over-the-air "recall" to address Autopilot monitoring concerns.
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What To Do Now
The stock market rally is at 52-week highs and appears to be starting a new leg higher. Leading stocks are acting well, though many are extended. Not many stocks flashed buy signals Wednesday.
In this environment, investors who bought leading stocks in November don't need to make a lot of moves. Ride the market trend with your substantial exposure, possibly adding incrementally as new buying opportunities arise.
Definitely work on your watchlists. Some stocks are setting up for new breakouts.
Read The Big Picture every day to stay in sync with the market direction and leading stocks and sectors.
Please follow Ed Carson on X/Twitter at @IBD_ECarson, Threads at @edcarson1971 and Bluesky at @edcarson.bsky.social for stock market updates and more.
