Dow Jones Futures: Stocks Hit Highs Despite This Fed Rate Shift; Broadcom Jumps Late
Dow Jones futures fell slightly after hours, while S&P 500 futures and Nasdaq futures rose. Broadcom (AVGO) jumped late on strong earnings and a big stock split.
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The stock market rally surged Wednesday morning on tame CPI inflation data, with the S&P 500 and Nasdaq hitting fresh all-time highs. They largely held those gains even after the Federal Reserve forecast just one rate cut in 2024. But stocks faded somewhat into the close.
Apple (AAPL) rose again, with Nvidia (NVDA) and Tesla (TSLA) rose strongly. Small caps jumped but closed near session lows.
Oracle (ORCL), Booking Holdings (BKNG), ASML (ASML), Reddit (RDDT) and ELF Beauty (ELF) and Mr. Cooper Group (COOP) cleared new buy points.
On Thursday, Tesla will be in focus as it holds its annual shareholder meeting, with investors voting on Elon Musk’s huge pay deal.
Federal Reserve Sees Just One Rate Cut In 2024
Federal Reserve policymakers guided to just one Fed rate cut this year, defying market expectations for two cuts. That’s based on the “dot plot” of individual forecasts, with four members predicting no moves at all in 2024.
In March, Fed officials narrowly supported three rate cuts.
Fed chief Jerome Powell said that was the main reason for the reduced rate-cut forecast was a raised target for year-end core PCE inflation. But there are reasons to believe inflation could undershoot Fed targets. That would give more room to cut rates sooner.
Powell sounded relatively pleased with the overall economy, with growth holding up while labor markets and inflation slowly ease.
CPI Inflation Tame
Before the open, the Labor Department reported the May consumer price index was flat vs. April, slightly below views. CPI inflation came in at 3.3%, with the annual gain unexpectedly cooling slightly for a second straight month.
Core CPI rose 0.2%, also lighter than expected. Core inflation was 3.4% vs. a year earlier, the smallest advance since April 2021.
After the Fed news, and the CPI inflation report, the odds of a September rate cut rose to 61.5% vs. 52.8% on Tuesday. Markets see at least one 2024 rate cut as a virtual lock (92.8%), with a 60.7% chance of two Fed rate cuts this year.
Nvidia, ELF Beauty and ASML stock are on IBD Leaderboard. Booking stock is on SwingTrader. ELF stock and Nvidia are on the IBD 50. Nvidia stock is on the IBD Big Cap 20 index. Booking Holdings was Wednesday’s IBD Stock Of The Day.
The video embedded in this article discusses Wednesday’s market action and analyzed BKNG stock, Fair Isaac (FICO) and KB Home (KBH).
Dow Jones Futures Today
Dow Jones futures fell 0.2% vs. fair value. S&P 500 futures rose 0.2%. Nasdaq 100 futures climbed 0.6%. AVGO stock is an S&P 500 and Nasdaq 100 component.
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 leading stocks and the market on IBD Live
Stock Market Rally
The stock market rally jumped Wednesday on surprisingly tame inflation before the open. It held those gains despite the somewhat-hawkish Fed rate outlook and as Powell spoke, but wilted somewhat in the final half hour as Treasury yields kept paring losses.
The Dow Jones Industrial Average dipped 0.1% in Wednesday’s stock market trading, sitting out the broad market advance even with strong gains from Apple and Microsoft (MSFT). The S&P 500 index climbed 0.85%. The Nasdaq composite popped 1.5%.
The small-cap Russell 2000 jumped 1.6%, gapping back above the 50-day line, but closing near session lows. The Invesco S&P 500 Equal Weight ETF (RSP) climbed 0.5%, also retaking the 50-day. The First Trust Nasdaq 100 Equal Weighted Index ETF (QQEW) advanced 0.8%, nearing all-time levels.
Leading stocks generally had a strong session, but many faded late.
The Nasdaq closed 7.4% above its 50-day line, above the 5-6% level that starts looking extended. The tech-heavy composite could keep getting more extended, but the risks of a pullback would increase as well. Nvidia stock is 31% above its 50-day line, though it’s gotten above 40% a couple of times in the past year. Apple stock is 17% above its 50-day.
U.S. crude oil prices rose 0.8% to $78.50 a barrel.
The 10-year Treasury yield 11 basis points to 4.29%, though it crept up to 4.32% after the official 3 p.m. ET close. The yield hit a two-month low of 4.25% before the slightly hawkish Fed rate outlook.
Megacap Winners
Apple stock jumped 2.9% Wednesday after soaring 7.3% on Tuesday. Nvidia stock gained 3.55%. Microsoft stock rose 1.9%, moving within a buy zone. Microsoft remains the most-valuable company at $3.277 trillion. AAPL stock is close behind at $3.267 trillion and Nvidia is at $3.086 trillion.
Tesla stock, for its part, popped 3.9% as Cathie Wood’s Ark Invest set a new 2,600 price target. The EV giant retook its 50-day line but is still well below the 200-day. TSLA stock has a $565.4 billion market cap.
ETFs
Among growth ETFs, the iShares Expanded Tech-Software Sector ETF (IGV) gained 2.3%, with MSFT stock a major holding. The VanEck Vectors Semiconductor ETF (SMH) leapt 3%. Nvidia is the No. 1 SMH holding, with ASML and Broadcom stock also key components.
Reflecting more-speculative story stocks, ARK Innovation ETF (ARKK) rose 2.1% and ARK Genomics ETF (ARKG) popped 2.6%. Tesla stock is the No. 1 holding across Ark Invest’s ETFs.
SPDR S&P Metals & Mining ETF (XME) edged up 0.4%. The SPDR S&P Homebuilders ETF (XHB) leapt 3.55%. The Energy Select SPDR ETF (XLE) fell 1.1% and the Health Care Select Sector SPDR Fund (XLV) dipped 0.2%.
The Industrial Select Sector SPDR Fund (XLI) gained nearly 0.95%. The Financial Select SPDR ETF (XLF) edged down 0.1%.
Time The Market With IBD’s ETF Market Strategy
Broadcom Earnings
Broadcom earnings slightly beat fiscal Q2 views, with the chip-and-software giant also guiding up on full-year revenue. The company announced plans for a 10-for-1 stock split.
AVGO stock soared more than 10% overnight. Shares climbed 2.4% in Wednesday’s session to 1,495.51, rising within a 5% buy zone from a 1,438.17 flat-base entry.
Stocks In Buy Zones
Oracle stock vaulted 13.25% 5o 140.29 on Wednesday, gapping above a 132.77 cup-base buy point. The database software giant missed on EPS and revenue Tuesday night but announced AI-related deals with OpenAI and Google-parent Alphabet (GOOGL).
Booking stock rose 2.3% to 3,876.41, clearing a 3,853 buy point. Investors could view that as an early entry within a flat base or as the official handle buy point in a double-bottom pattern.
ASML stock climbed 3.2% to 1,068.86, clearing a 1056.34 alternate entry. Shares gapped above the 992.88 handle entry on June 5 on sales to a key customer, then paused right at the consolidation highs for a few days.
Fellow chip-equipment giant Lam Research (LRCX) showed similar action Wednesday, while Entegris (ENTG) cleared a trendline entry.
Reddit stock jumped 7.1% to 65.93 after briefly moving above a 66.15 cup-with-handle IPO base. Investors could use 63.80 as an early entry. The recent IPO is growing rapidly and is expected to turn profitable in 2024.
ELF stock rose 4.1% to 197.32, teasing a 202.58 cup-with-handle buy point and breaking the handle’s downtrend. It’s already an outside, upside week after the ELF rebounded from the 10-week line on Monday.
Mr. Cooper stock climbed 3% to 83.35, rebounding from the 50-day line and breaking a short downtrend. It’s the first 50-day line test since a February breakout, according to MarketSurge. Mr. Coop is a mortgage origination and services firm.
What To Do Now
The stock market rally is looking strong, with the Nasdaq and S&P 500 hitting fresh highs. The Fed meeting is out of the way, though there could still be a day-two reaction.
The Nasdaq is looking extended, buoyed by Nvidia and Apple, even as small caps and the Dow fight around their 50-day lines.
Investors can be adding exposure, but do so gradually. If you have heavy exposure, you can stand pat or simply reshuffle your portfolio.
Read The Big Picture every day to stay in sync with the market direction and leading stocks and sectors.
Please follow Ed Carson on Threads at @edcarson1971 and X/Twitter at @IBD_ECarson for stock market updates and more.
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