Dow Jones futures rose modestly on Wednesday night, along with S&P 500 futures and Nasdaq futures. The stock market rally rebounded Wednesday, boosted by Evergrande debt news and a Fed meeting that walked a line between hawkish and dovish statements and hints.
Snap stock extended Tuesday’s move above a trendline entry. snap (SNAP) is recovering as FB shares lose track of the 50-day line, with facebook (FB) warning that Apple (AAPL) Changes to iOS ad tracking remain a headwind.
Accenture stocks are trying to recover from the 10-week line for the first time since a breakout in late June. Accenture (ACN) reports earnings ahead of Thursday’s opening.
Policymakers said in the statement after the Fed meeting that “a moderation in the pace of asset purchases may soon be warranted,” but did not go ahead with a deleveraging decision at the current meeting.
The Fed statement didn’t give specific timing for a winding down, but Fed chief Jerome Powell said a winding down decision could happen “easy” in November if the economy continues to improve. In his press conference after the meeting, Powell said several FOMC members were already ready to wind down. He added that a taper could end in mid-2022, although he said the Fed could speed up or slow down the taper if circumstances warrant it.
But the end of bond tapering would clear the way for Fed rate hikes. Policymakers are now evenly split on whether they expect a Fed rate hike next year versus seven out of 18 at the previous meeting. There had been speculation that a majority would push for a Fed rate hike in 2022.
Policymakers now also expect inflation to remain above 2% until 2024.
Dow Jones Futures Today
Dow Jones futures were up 0.35% from fair value. S&P 500 futures rose 0.25% and Nasdaq 100 futures climbed 0.2%.
Keep in mind that an overnight action in Dow futures and elsewhere does not necessarily lead to actual trading in the next regular trading session.
stock market rally
The stock market rally had a strong session on Wednesday. Major indices opened higher, supported by a major Evergrande unit that promised to make a major interest payment on domestic debt Thursday. Following the announcement of the Fed meeting, stocks continued to build momentum into the afternoon.
Stocks gained slightly as Fed chief Powell discussed bond tapering in November, but strengthened somewhat before a strong close.
The Dow Jones Industrial Average rose 1% in stock market trading on Wednesday. The S&P 500 index climbed nearly 1%. The Nasdaq composite was up 1%. The small-cap Russell 2000 finished 1.55% higher.
Facebook shares fell 4% to 343.21, a two-month low. Shares are down 5.9% so far this week. Facebook acknowledged in a blog post that Apple iOS privacy changes continue to take their toll. FB shares already fell 3.7% last week, amid Wall Street Journal reports that Facebook’s top executives knew Instagram was harmful to teenage girls and did nothing about it.
Following the shutdown, Facebook said Chief Technology Officer Mike Schroepfer will step down next year. But FB stock rose overnight.
Apple stock, in turn, closed 1.7% higher, but is still below the 50-day mark. AAPL shares began to retreat significantly from record highs after a major App Store legal defeat against Fortnite video game publisher Epic Games. On Wednesday, it confirmed that it will continue to ban Fortnite from the App Store until all appeals are exhausted.
One of the best ETFs, the Innovator IBD 50 ETF (FFTY) gained 2.1% and reached a record high. The Innovator IBD Breakout Opportunities ETF (BOLT) rose 2.3%. The iShares Expanded Tech Software Sector ETF (IGV) was up 0.9%. SNAP shares are a significant IGV holding. The VanEck Vectors Semiconductor ETF (SMH) rose 1.8%, with NVDA shares a top SMH component.
SPDR S&P Metals & Mining ETF (XME) recovered 2% and Global X US Infrastructure Development ETF (PAVE) 1.4%. US Global Jets ETF (JETS) rose 2.7%. The SPDR S&P Homebuilders ETF (XHB) rose 1.15%. The Energy Select SPDR ETF (XLE) rose 3.1% and the Financial Select SPDR ETF (XLF) climbed 1.7%. WFC stocks are a large XLF holding company.
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Snap shares were up 3.3% to 78.60, still within range of a trendline just cleared in Tuesday’s 6.1% rise from the 50-day line. Wednesday was the third above-average volume up session in four, interrupted only by Monday’s low volume pullback. Snap Stock also broke a short-term high of 77.88 in the middle of its current flat base. The flat base, part of a base-on-base formation, has an official buy point of 80.95, according to MarketSmith’s analysis.
It’s possible that Facebook issues are driving advertisers to shift more digital ad spend to Snap. If nothing else, speculation that this could happen has likely fueled Snap stock.
Nvidia shares climbed 3.3% to 219.41, above Monday’s intraday high and the 21-day line. That — along with a 50-day/10-week line rebound — gives investors an aggressive entry into NVDA stocks, which had seen double-digit gains at Monday’s low. Nvidia stocks, which trade briskly on a weekly basis, could be flat after next week.
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Monolithic energy supply
MPWR shares were up 3.1% to 507.93 with the recovery of the 21-day and 10-week lines continuing and reaching new highs. Investors could use this as an opportunity to start a Monolithic Power stake.
Digital Turbine stock
APPS stocks jumped 7.5% to 70.41, jumping above the 200-day moving average after recently breaking a long downtrend. Digital Turbine’s stock was a huge pandemic winner, peaking at 102.56 in early March. Shares then tumbled to 47.57 on August 19, as markets recovered from short-term lows.
Wednesday’s move could be an opportunity to initiate a position in APPS stock, but this is a high-risk, high-reward bet. There is sufficient overhead.
Wells Fargo Stock
WFC stock rose 2.7% to 47.10, moved above the 50-day line and broke a trendline, providing an early entry. That’s despite Fed chief Powell saying caps on Wells Fargo assets will remain until chronic issues are addressed.
Wells Fargo stocks should be at a base by the end of this week with a buy point of 51.51. That consolidation would be next to a flat base that had a short-lived breakout in early August.
Market rally analysis
The stock market rally saw a strong rebound on Wednesday after Tuesday’s anemic reaction to Monday’s sell-off. The Dow Jones and S&P 500 remain below their 50-day moving average, but the Nasdaq moved above that important level again. The Russell 2000 has regained its 200-day line, finishing around the 50-day mark.
Growth stocks were strong, with the FFTY ETF nearing record highs, although ARK ETFs pointed to a mixed response to speculative growth. But as major indices and sector ETFs showed, Wednesday’s market rally was broad-based. Energy stocks were big winners, along with miners, financial institutions, airlines and more.
Although Wednesday was a good first start, the market rally is still under pressure. It wouldn’t take much for the Nasdaq and Russell 2000 to fall back below the 50-day mark — or push the indices to new lows.
What to do now
Investors should be able to make a few purchases on Wednesday with a little more confidence. The Fed meeting is out of the way, while an Evergrande default is off the table, at least for a few days. But a one-day advance doesn’t mean the market will continue to climb Thursday and beyond.
So when you make purchases, gradually increase your exposure. Wait for the market rally to prove itself again. Meanwhile, run your screens and build your watchlists. Look for pullbacks to key support levels. Identify your top candidates and set alerts. If and when they flash buy signals, you can act quickly.
But be ready to sell quickly if your new positions or the wider market moves south.
Staying alert and flexible are absolute musts in the current market environment.
Read The Big Picture every day to keep up to date with market direction and leading stocks and sectors.
Follow Ed Carson on Twitter at @IBD_ECarson for stock updates and more.
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