Dow Jones futures tilted lower overnight, along with S&P 500 futures and Nasdaq futures, with Fed chief Jerome Powell set to give his much-anticipated Jackson Hole policy speech Friday morning.
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The stock market rally had a strong session Thursday, with the major indexes rising back above a key short-term level, despite concerns that Fed chief Powell will signal the need for tight monetary policy for the long term.
Axcelis Technologies (ACLS), GlobalFoundries (GFS), Steel Dynamics (STLD), Insulet (PODD) and RPM International (RPM) were among several stocks breaking out or flashing buy signals.
Earnings
Ulta Beauty (ULTA) was actionable Thursday, but it had earnings after the close. ULTA stock rose modestly on strong results and guidance. Shares closed up 1.75% on Thursday to 419.25, clearing buy points at 417.08 and 418.89.
Workday (WDAY) and Affirm Holdings (AFRM) also reported. WDAY stock leapt 10% overnight, but was still below its 200-day line. AFRM stock tumbled more than 10% on big losses and weak guidance.
Axcelis and STLD stock joined IBD Leaderboard on Thursday. GFS stock and Steel Dynamics are new swingers on SwingTrader. ACLS stock is on the IBD 50. Steel Dynamics stock is Thursday’s IBD Stock Of The Day.
The video embedded in the article discussed Thursday’s market rally and what to expect from Fed chief Powell. It also analyzed Axcelis, Steel Dynamics and PODD stock.
Fed Chair Powell’s Speech: The Two Words That Could Upset The S&P 500
Fed Chief Powell’s Speech Seen Hawkish
Fed chief Powell, scheduled to speak at 10 a.m. ET Friday at the Jackson Hole symposium, likely won’t provide much insight into the size of the September Fed rate hike. Instead, he’s expected to stress long-term inflationary pressures. That would include chronic labor shortages but also perhaps, sustained higher energy and commodity prices, rising trade barriers and tight housing supply.
All of that would suggest that the Federal Reserve will need to push interest rates significantly higher — and keep them there for the foreseeable future. Fed chief Powell may even imply that a recession or a long stretch of subpar growth will be necessary to lift unemployment to curb wage-inflation pressures.
That could mean sluggish demand, a strong dollar and sustained higher Treasury yields. That could weigh on companies’ profitability and valuations, especially highly valued growth.
Just a few weeks ago, markets saw rate hikes quickly cooling after September and perhaps reversing lower sometime next year.
Dow Jones Futures Today
Dow Jones futures lost a fraction vs. fair value. S&P 500 futures edged lower and Nasdaq 100 futures dipped 0.1%.
The 10-year Treasury yield edged up 2 basis points to 3.05%.
Crude oil futures rose 1% while natgas prices climbed nearly 2%.
Ahead of Powell’s speech and the opening bell, the Commerce Department will release its July income and spending report. That report includes the personal consumption expenditures index, the Fed’s favorite inflation gauge.
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 solid session, especially techs and small caps, moving back above some key levels despite mixed earnings and guidance from some notable companies.
The Dow Jones Industrial Average rose 1% in Thursday’s stock market trading, even with Salesforce.com (CRM) falling solidly on earnings. The S&P 500 index popped 1.4%. The Nasdaq composite jumped 1.7%. The small-cap Russell 2000 advanced 1.55%.
U.S. crude oil prices fell 2.5% to $92.52 a barrel.
The 10-year Treasury yield fell 8 basis points to 3.03% after running up 23 basis points in the prior four sessions.
ETFs
Among the best ETFs, the Innovator IBD 50 ETF (FFTY) rose 1.7%, while the Innovator IBD Breakout Opportunities ETF (BOUT) climbed 1.1%. The iShares Expanded Tech-Software Sector ETF (IGV) gained 0.8%, despite CRM stock being a big component. The VanEck Vectors Semiconductor ETF (SMH) shot up 3.4%.
SPDR S&P Metals & Mining ETF (XME) popped 2.6%, with STLD stock a major holding. SPDR S&P Homebuilders ETF (XHB) rose 1.8%. The Energy Select SPDR ETF (XLE) rose 0.8%. The Health Care Select Sector SPDR Fund (XLV) advanced 1.1%.
Reflecting more-speculative story stocks, ARK Innovation ETF (ARKK) gained 2.9% and ARK Genomics ETF (ARKG) 2.5%.
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Stocks In Buy Zones
ACLS stock blasted higher in massive volume, surging 13% to 81.73. Axcelis stock first broke above downtrend of a handle, then moved past the official cup-with-handle buy point of 79.93, according to MarketSmith analysis. The relative strength line hit a new high, a bullish signal on a breakout as ACLS stock outperforms the S&P 500 index.
GFS stock popped 6.8% to 64.50 in heavy trade, breaking the downtrend in a handle. The official handle buy point is 66.06 as part of a very deep double-bottom-like consolidation. GlobalFoundries stock came public in October 2021.
Steel Dynamics stock rallied 6.6% to 86.76, breaking the downtrend of a handle and the 86.04 official cup-with-handle buy point. Volume was well above normal. Nucor (NUE) and Commercial Metals (CMC) also broke handle downtrends, but in lighter volume.
On Wednesday, Cleveland-Cliffs (CLF) announced a price increase of at least $75 per ton for carbon steel products.
PODD stock rose 3.35% to 282.86, clearing a 276.48 handle buy point. Volume was slightly below normal, but Insulet stock rebounded from its 21-day line Wednesday in above-average trade.
RPM stock gained 5.6% to 97.83, clearing a 95.80 entry from a “handle” that needed one more day to be proper. The RS line for RPM stock hit a new high.
Market Rally Analysis
Fed chief who? The stock market rally came on strong Thursday, despite the big news on tap Friday.
The Dow Jones, S&P 500 and Nasdaq composite moved back above their 21-day moving averages, after hitting resistance there in the prior two sessions. The small-cap Russell 2000 and S&P Midcap 400, which both reclaimed the 21-day line on Wednesday, are pointed toward the 200-day line.
Even better, a growing number of stocks are flashing buy signals, and from a variety of sectors. The moves by ACLS stock, Steel Dynamics and more reflect handles that developed or expanded during the market rally’s pullback.
Earlier breakouts continue to work.
So there’s a lot of positive action out there. But it’s coming right before Powell’s speech.
Powell may or may not be especially hawkish, but ultimately it’s the market reaction that matters. The good news is that markets have been bracing for a hawkish speech.
Fed chief Powell could propel the major indexes higher, giving a turbo boost to leading stocks and potential leaders that are setting up. But a negative reaction to Powell’s speech could push the market rally significantly lower, erasing strong gains in winning stocks.
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What To Do Now
Well, now we wait. Thursday’s breakouts and buy signals certainly gave investors reasons to take some new positions. If you decided discretion was the better part of valor heading into Powell’s speech, that’s OK. If the market continues to advance in the coming days, a number of setups will soon turn into buy signals.
Build up your watchlists. Make sure to cast a wide net to find leading stocks from an array of industries. Pay close attention to a select group in or near buy zones.
Be ready to act Friday. The market rally could whipsaw on Powell’s speech, but at some point you may want to add or reduce exposure.
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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