Dow Jones futures fell modestly early Thursday, while S&P 500 futures and especially Nasdaq futures rose with Facebook parent Meta Platforms soaring on its earnings report. That followed a big day for the stock market rally as investors hailed Fed chief Jerome Powell's comments.
Apple, Amazon and Google parent Alphabet are on tap.
The major indexes rebounded Wednesday, turning higher after the much-anticipated Fed meeting and especially Fed chief Powell. The Federal Reserve raised rates by a quarter point and said it still sees "ongoing increases" ahead. Powell backed that up, but said it's a "good thing" and "gratifying" that inflation is coming down even without labor markets weakening.
The market rally cleared more key levels Wednesday, while a large number of stocks broke out or flashed other buy signals, including China search-and-AI giant Baidu, chip-gear maker Lam Research, network-monitoring software maker Dynatrace, Delta Air Lines and more.
Key Earnings
Meta Platforms earnings fell short, but revenue, sales guidance and Facebook users topped views. It also announced a $40 billion stock buyback. The Facebook and Instagram parent slashed its forecast for expenses, including capital spending. META stock spiked 19% after hours. Shares rose 2.8% to 153.12 in Wednesday's session, retaking the 200-day line for the first time in more than a year and shrugging off weak revenue guidance from Snap.
Qorvo topped fiscal Q3 earnings. But, like many other chip stocks, Qorvo guided sharply lower for the current quarter. QRVO stock fell 3% in extended trading. Shares of the 5G and Apple iPhone-chip maker popped 4.5% to 113.53 on Wednesday.
ELF Beauty crushed earnings views and comfortably beat on revenue. EPS doubled, with growth accelerating for a third straight quarter. Sales swelled 49%, picking up the pace for the fourth quarter in a row. The cosmetics maker also guided up. ELF stock spiked 14% to a record high in overnight action. Shares rose 1.8% to 58.58 on Wednesday, just below the Jan. 6 record high.
Early Thursday, Merck modestly topped Q4 views but guided low on 2023 EPS. Eli Lilly topped profit views but missed on sales, but guided slightly higher on 2023 EPS. Bristol Myers Squibb beat. MRK stock and LLY stock declined slightly. BMY edged higher.
Big pharma, which fared well in 2022's bear market, is lagging so far in a growth-led 2023 market rally. LLY stock, Merck and Bristol Myers are all below their 50-day moving averages.
Late Thursday, Apple, Amazon.com and Google report. All are rebounding in 2023, but below their 200-day line. GOOGL stock and Amazon rose 4% overnight in sympathy with Meta.
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Dow Jones Futures Today
Dow Jones futures fell 0.2% vs. fair value, with MRK stock and Honeywell acting as drags. S&P 500 futures rose 0.6%. Nasdaq 100 futures jumped 1.6%, with META stock leading the way, along with Google and AMZN stock. Tesla also helped, rising on Blackstone disclosing a big TSLA stake.
The 10-year Treasury yield dipped 2 basis points to 3.38%.
Gold futures rose solidly and silver jumped. Copper prices also rebounded. Much of this likely reflects metals prices catching up to the Fed-led rally. Metals futures settle at 1:30 p.m. ET.
Meanwhile, the Bank of England and European Central Bank both hiked rates by 50 basis points Thursday morning.
Remember that overnight action in Dow futures and elsewhere doesn't necessarily translate into actual trading in the next regular stock market session.
Fed Rate Hikes 'Ongoing'
As expected, the Fed raised rates by a quarter point Wednesday, lifting the fed funds rate to 4.5%-4.75%. That follows a half-point Fed rate hike in December and four straight 75-basis-point moves before that.
The Fed policy statement still stated that policymakers anticipate "ongoing increases" in the fed funds rate, a clear signal that Fed rate hikes aren't finished.
Fed Chief Powell's 'Good Thing'
Fed chief Jerome Powell backed that up, saying there's "more work to do," later specifying that "we're talking about a couple more rate increases." He added that labor markets remain "extremely tight."
However, Powell also said that the "disinflation process has started." He noted that inflation is coming down even without job conditions easing substantially, saying that's a "good thing" and "gratifying." He also said that policymakers "have no incentive, desire to overtighten."
That statement appeared to trigger an afternoon rally.
On Wednesday morning, the Labor Department reported that job openings popped to 11.01 million, well above views. On Friday, the January jobs report is on tap. But Powell's comments suggest that markets need not be quite as fixed on labor data as they have been.
The market overwhelmingly expects another quarter-point Fed rate hike in late March, with the odds rising slightly Wednesday to 86%.
But despite Powell backing a "couple more" increases, investors still lean toward March's Fed rate hike being the climax. That would leave the fed funds rate range at 4.75%-5%, below the Fed's forecast for 5%-5.25%.
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Stock Market Rally Wednesday
The stock market rally was down modestly before the Fed news, but ramped up as Fed chief Powell spoke.
The Dow Jones Industrial Average rose a fraction in Wednesday's stock market trading, but after being down more than 1% intraday before the Fed announcement. The S&P 500 index jumped just over 1%. The Nasdaq composite leapt 2%. The small-cap Russell 2000 gained 1.5%.
U.S. crude oil prices skidded 3.1% to $76.41 a barrel as domestic crude inventories rose for a sixth straight week. Natural gas prices plunged 8%, continuing an epic collapse. Copper futures declined 2.8%, with prices settling before the Fed rate hike announcement.
The 10-year Treasury yield skidded 13 basis points to 3.4%. The two-year Treasury yield, more closely tied to Fed policy, fell 10 basis points to 4.11%. That's well below the current fed funds rate range.
The U.S. dollar fell to an eight-month low.
ETFs
Among growth ETFs, the Innovator IBD 50 ETF rose 1.5%. The iShares Expanded Tech-Software Sector ETF leapt 2.85%. The VanEck Vectors Semiconductor ETF soared 4.7%. Lam Research and AMAT stock are big SMH holdings, with QRVO stock also a component.
Reflecting more-speculative story stocks, ARK Innovation ETF sprinted 4.4% and ARK Genomics ETF gained 2.4%.
SPDR S&P Metals & Mining ETF 1.8% and the Global X U.S. Infrastructure Development ETF 1.5%. U.S. Global Jets ETF ascended 1%, with DAL stock a top component. SPDR S&P Homebuilders ETF popped 2%. The Energy Select SPDR ETF sank 2% and the Financial Select SPDR ETF was flat. The Health Care Select Sector SPDR Fund edged up 0.5%.
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Market Rally Analysis
The major indexes continued to build momentum, with big improvements after Fed chief Powell began speaking.
The Nasdaq appears to be decisively above its 200-day moving average and late 2022 highs. The Russell 2000 clearly has cleared that level.
The S&P 500 also looks to be leaving its 200-day line behind. The benchmark index also moved its December highs.
The Dow Jones, now the laggard index, tested its 200-day line before bouncing for a slim gain.
Keep in mind that the market often has a day-two reaction to Fed meetings.
Meanwhile, the rest of the week remains jam-packed with news. Huge earnings on Thursday night are due from Apple, Amazon, Google, Qualcomm, Ford Motor and more, with the January jobs report on Friday.
The S&P 500's biggest daily winners and losers over the past couple of weeks are dominated by earnings movers.
DT stock, O-I Glass, Stryker and Atkore gapped out of bases on earnings Wednesday.
But there were a lot of good moves without earnings Wednesday, especially after the Fed chief Powell's statements.
LRCX stock and fellow equipment giant Applied Materials broke out of bottoming bases, while DAL stock and J.B. Hunt Transport Services and Performance Food Group cleared traditional buy points. BIDU stock also broke out.
Arista Networks, Pure Storage and Global Foundries all cleared early entries Wednesday. However, Meta Platforms' lowered capex plans could hit Arista and Pure Storage. ANET stock fell modestly after hours.
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What To Do Now
The stock market rally continues to power higher, with the Nasdaq, Russell 2000 and leading stocks in the vanguard. The Fed meeting is out of the way, while there's increasing clarity on the central bank's endgame.
There is growing evidence that the current market rally will be a lasting uptrend.
So investors could have added new positions on Wednesday, taking advantage of a fresh crop of buying opportunities. It's still wise to do so gradually, not buying extended or getting too concentrated. If this market rally has legs, steadily increasing exposure can quickly get you fully invested or beyond. If this market rally stumbles, even if only for a short time, you won't get caught out. With Apple and Google earnings looming and the Nasdaq running up so quickly in 2023, a pullback would not be a surprise.
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