Dow Jones futures fell early Wednesday, along with S&P 500 futures and Nasdaq futures, with Treasury yields and the dollar moving higher. OPEC+ is expected to announce a larger production cut at today’s meeting.
The stock market rally attempt continued Tuesday, as Treasury yields and the dollar retreated, amid hopes that the Federal Reserve could slow rate hikes. TWTR stock skyrocketed as Tesla CEO Elon Musk agreed to go ahead with the $44 billion Twitter (TWTR) takeover.
But, the Musk-Twitter saga isn’t quite over.
The major indexes are moving higher, but haven’t retaken key levels or confirmed the new rally attempt yet.
Still, leading stocks are offering reasons to tiptoe into the market, or at least get ready.
Arista Networks (ANET), Enphase Energy (ENPH), Paylocity (PCTY), On Semiconductor (ON) and Devon Energy (DVN) are all at or approaching early buy points. If the market rally keeps gaining momentum, these stocks should be actionable. All have relative strength lines at or near highs.
Paylocity stock is on the IBD Leaderboard watchlist and was Tuesday’s IBD Stock Of The Day. Microsoft and Google stock are on the IBD Long-Term Leaders list. Enphase, On Semiconductor and DVN stock are on the IBD 50 list. ENPH stock, Onsemi and Arista Networks are on the IBD Big Cap 20.
The video embedded in this article highlighted Tuesday’s market action and analyzed PCTY stock, On Semiconductor and Neurocrine Biosciences (NBIX).
Dow Jones Futures Today
Dow Jones futures fell 0.8% vs. fair value. S&P 500 futures declined 0.9%. Nasdaq 100 futures retreated 0.85%.
The 10-year Treasury yield rose 8 basis points to 3.7%. The dollar also moved higher after pulling back over the last several days.
The dollar also rebounded, in large part on those higher yields.
The British pound fell as U.K. Prime Minister Liz Truss said she’ll continue to push for tax cuts at a Conservative Party conference. Her budget plan spurred a run on the pound and British debt in late September, spurring the Bank of England to resume bond buys and Truss to back down on some of the tax cuts.
New Zealand’s central bank raised its key rate by 50 basis points overnight, after Australia hiked rates by just 25 basis points a day earlier.
Crude oil futures were little changed Wednesday after strong gains in the prior two sessions on expectations of an OPEC+ production quota cut. OPEC+, which includes OPEC and allies such as Russia, are meeting this morning to discuss the size of a likely cut. There were reports that OPEC+ could cut output quotas by roughly 1.8 million barrels per day.
Remember that overnight action in Dow futures and elsewhere doesn’t necessarily translate into actual trading in the next regular stock market session.
Elon Musk Says He’ll Go Ahead With Twitter Deal
Musk agreed to proceed with the $44 billion, $54.20-a-share Twitter deal.
The Musk-Twitter saga isn’t quite over. Twitter has not publicly accepted Musk’s latest terms, which don’t provide any real guarantees and includes a demand that the upcoming trial be suspended.
The Musk-Twitter trial had been set to begin on Oct. 17, with the Tesla CEO seen as highly likely to lose.
As of now, pre-trial events are still going ahead. That includes Twitter lawyers being scheduled to depose Musk later this week.
Still, Musk could officially own the social media site in a few days.
Twitter stock, which was halted for much Tuesday, skyrocketed 22% to 52 as Musk blinked. While TWTR stock had been trading well below the $54.20 takeover price, it had significantly outperformed Facebook parent Meta Platforms (META) and Snap (SNAP) in recent months.
Tesla (TSLA) rose 2.9% to 249.44, backing off from intraday highs of 256.89 following the latest Musk-Twitter news.
Investors may wonder if Musk will sell TSLA stock to pay for the Twitter deal. He has already sold shares with the Twitter deal as a reason, but analysts estimate that he may still need several billion dollars’ worth of TSLA stock sales.
Longer term, Tesla stock investors may fear Musk’s attention will be further divided from the EV giant as he adds Twitter to his portfolio of companies.
Still, TSLA investors may be happy to get the Musk-Twitter furor in the past.
Twitter stock edged lower early Wednesday. TSLA stock fell more than 1%1%.
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Stock Market Rally Tuesday
The stock market rally followed up Monday’s advance with strong gains on Tuesday, though the major indexes backed off intraday highs.
Australia’s central bank raised rates for a sixth straight month, but unexpectedly only by 25 basis points. That followed the Bank of England resuming bond buys last week as the new British government’s budget roiled the pound and U.K. debt.
The rally attempt gained momentum at 10 a.m. ET after the JOLTS report showed job openings fell sharply in August, well below views. Fed chief Jerome Powell has specifically cited job openings as being too high. While openings and the number of workers quitting are still high, the trend is Fed-friendly. On Friday, the Labor Department will release the September jobs report.
The Dow Jones Industrial Average rose 2.8% in Tuesday’s stock market trading. The S&P 500 index popped 3.1%. The Nasdaq composite jumped 3.3%. The small-cap Russell 2000 shot up nearly 4%.
Apple stock rose 2.6%, while Microsoft popped 3.4%. Both are members of the Dow Jones, S&P 500 and Nasdaq. Google stock climbed 3% and Amazon gapped up 4.5%. All added to solid gains Monday, but need a lot of repair work.
U.S. crude oil prices popped 3.5% to $86.52 a barrel. OPEC+ meets Wednesday, with reports that the cartel could cut production by 1-to-2 million barrels per day.
Gasoline futures jumped 6.8%, signaling a further increase at the pump. Natural gas futures popped 5.7%.
The 10-year Treasury yield fell 3 basis points to 3.62%, after tumbling 15 basis points on Monday. For a second straight day the 10-year yield found support at its rising 21-day line.
Among the best ETFs, the Innovator IBD 50 ETF (FFTY) gained 3.4%. The iShares Expanded Tech-Software Sector ETF (IGV) rallied 3.8%, with MSFT stock a major IGV holding. The VanEck Vectors Semiconductor ETF (SMH) ran up 4.3%.
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Stocks Near Buy Points
ANET stock rose 4.3% to 120.81, retaking its 200-day and 50-day lines, though volume was light. A decisive move above the 50-day line would likely break a short downtrend. Arista stock is working on a 132.97 buy point from a consolidation within a much-longer base.
ENPH stock edged up 0.6% to 288.55, but fell back from 297.67 intraday. At its highs, Enphase stock retook its 50-day and 21-day lines and broke a short downtrend.
PCTY stock popped 3.55% to 252.33, rebounding from its 50-day line in strong volume. Paylocity stock is right at a trendline entry, with a move above the Sept. 28 high of 253.26 as a possible specific trigger point. The human resources software maker is in a consolidation with a 276.98 buy point, according to MarketSmith analysis.
ON stock leapt 6.4% to 68.92, retaking its 50-day line, though trading was modestly below average. A little more strength could see Onsemi clear a trendline within a new consolidation next to a prior, deeper base.
DVN stock gained 5.7% to 69.07, rallying from its 50-day as it works on a cup-with-handle base and 75.37 buy point. Devon stock is coming up to a trendline within the handle.
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Market Rally Analysis
The stock market rally attempt continued to power higher, with a second strong gain for the major averages. The Dow Jones, S&P 500 and Nasdaq composite got above their 10-day moving average and moved close to their 21-day lines. The small-cap Russell 2000, continuing to lead, did retake the 21-day.
All of the indexes still have some distance to reach their falling 50-day and 200-day moving averages, with the mid-August peaks yet another key resistance area.
Megacaps such as Apple stock are doing their part this week, but have a long way to go.
However, leading stocks are outperforming the major indexes, with several stocks breaking out, flashing early entries or moving into position for possible entries.
The stock market arguably was due for a bounce. The decline in Treasury yields and the dollar has clearly helped drive this week’s gain in equities. But if yields and the greenback resume their uptrends, the market rally could quickly fizzle.
While stocks are rising on hopes that the Fed will slow the pace of rate hikes, markets continue to price in a fourth 75-basis-point hike in November and a half-point move in December.
Tuesday was day two of a stock market rally for the Dow, S&P 500 and Nasdaq. A follow-through day could come later this week to confirm the new uptrend.
Some might argue that the Russell 2000 and the S&P MidCap 400 staged “follow-through days” on Tuesday. It’s a positive sign, but won’t trigger a change in market direction. Why? There’s a low success rate for FTDs that don’t include the Dow Jones, S&P 500 and Nasdaq.
A confirmed market rally might only mark the start of a tradable, bear market rally vs. a long-term uptrend. The 50-day and 200-day lines would be key levels to watch following a FTD.
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What To Do Now
The stock market rally attempt is gaining steam, with a number of leaders flashing buy signals. Investors could take some pilot positions in certain stocks or broad market ETFs. But anyone jumping in early has to be ready to jump out just as fast if the market rebound falters.
There’s still nothing wrong with being nearly or entirely in cash.
But it’s definitely a time to work on your watchlists and pay close attention to the market. Look for quality stocks that are actionable or nearly so.
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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