Dow Jones futures fell slightly overnight, along with S&P 500 futures and Nasdaq futures. A strong stock market rally on Tuesday morning faded and was briefly mixed up after reports said Russian missiles hit Poland.
The stock market rallied Tuesday morning on another weak inflation report. Walmart (WMT) Revenue also helped. So did Warren Buffett’s Berkshire Hathaway, announcing it was taking a big new position Taiwan semiconductor (TSM).
The main indices pared gains somewhat but then quickly turned haywire on the reported Russian missile news. But the Dow recovered and turned positive again.
Missile attack on Poland
In the afternoon, shares faltered on reports that Russian missiles had struck Przevodow, a Polish village just across the border from Ukraine. The rockets reportedly killed two people. It is possible that Russian missiles missed targets in Ukraine, or that the Ukrainian military shot down the missiles and landed in Poland. Moscow launched massive attacks on Ukrainian cities on Tuesday.
Russia denies any responsibility. Poland said the strike appears to have been an “isolated incident”.
Deliberately attacking Poland would be extremely dangerous. All NATO members pledge to protect all other members from attack. NATO ambassadors will meet on Wednesday morning for an Article 4 consultation, not the more aggressive Article 5 defense provision. But a much broader conventional war would increase the risks of nuclear weapons and create an existential threat to the world and of course the stock market.
Aside from the news of the missile attack in Poland, the market rally may be in for a pause after a strong run and the S&P 500 approaching key resistance.
Target, lowes (LOW) and TJX Cos. (TJX) to report gains early Wednesday, along with October retail sales. That follows Dow Jones giants Walmart and home depot (HD) result early Tuesday. WMT stock surged 6.5% on strong earnings, forecasts and a large buyback, breaking out of a handle buy point. HD shares surged 1.6%, trying to find a grip.
TGT shares rose 3.6% on Tuesday, but faced resistance at the 200-day moving average, near a bottoming base buy point. Lowe is up 2.15% and working on a bottoming base grip. TJX stock is up 2.9%, still within the 10-month range Cup with handle Base.
Nvidia reports this on Wednesday evening. Nvidia stock rose 2.3% on Tuesday, contributing to big gains over the past month and giving a boost to the chip sector. Strong earnings and forecasts from Nvidia as well as the chip equipment giant Applied Materials (GIGANTIC) on Thursday evening, will be important for the sector and the broader market rally.
The video embedded in this article discussed Tuesday’s market rally and analyzed MELI stock, Pure Storage and Albemarle (ALB).
MercadoLibre stock has followed suit IBD Leaderboard and was on Tuesday IBD Stock of the Day. ALB stock is on the Leaderboard watch list. MercadoLibre and PSTG shares are enabled swing trader. Pure Storage is on the IBD 50.
Dow Jones futures today
Dow Jones futures fell 0.35% from fair value. S&P 500 futures were down 0.4% and Nasdaq 100 futures were down 0.5%.
The 10-year government bond yield fell 3 basis points to 3.77%.
Amazon.com (AMZN) began laying off corporate and tech staff on Tuesday, according to LinkedIn posts from affected Amazon employees. The e-commerce and cloud computing giant is reportedly planning to cut 10,000 jobs. AMZN stock fell 1% overnight.
On Tuesday night, former President Donald Trump is expected to announce that he will run for the White House again in 2024.
October retail sales are due at 8:30am ET. Economists expect the Commerce Department to report a 1% gain, or just 0.2% excluding autos and gas.
stock market rally
The stock market rally got off to a strong start as the PPI came in lower than expected, with the core PPI flat from September. Walmart earnings also helped. TSM stock soared 10.5% on news Tuesday night that Warren Buffett had taken a stake. Buffett’s Berkshire also added new positions as well as new holdings in Louisiana Pacific (LPX) and Jefferies (JEF).
But major indices pared gains and the Dow briefly turned negative as the report drew attention to Russian missile strikes on Poland.
The Dow Jones Industrial Average rose 0.2% on Tuesday stock exchange trading, even if WMT stock and Home Depot offer a lift. The S&P 500 index rose 0.5%. The Nasdaq Composite rose 1.45%. Small-cap Russell 2000 is up 1.5%.
The 10-year government bond yield fell 7 basis points to 3.8%. The US dollar also gave way.
US crude prices rose 1.2% to $86.92 a barrel after briefly rising more than 3% on Russian missile news. Natural gas futures rose 1.7%.
among the The best ETFsthe innovator IBD 50 ETF (FFTY) increase by 1.4%. The iShares Expanded Tech Software Sector ETF (IGV) increased by 2.3%. The VanEck Vectors Semiconductor ETF (SMH) jumped 3.15%, with Taiwan Semi and Nvidia stocking huge components, along with AMAT.
SPDR S&P Metals & Mining ETF (XME) rose 0.85%. SPDR S&P Homebuilders ETF (XHB) gained 2.1%, with HD shares and Lowe’s both being notable holdings. The Energy Select SPDR ETF (XL) rose just over 1% and the Financial Select SPDR ETF (45) rose by 0.2%. The SPDR Fund for Selected Healthcare Sectors (XLV) fell by 0.1%.
Stocks near buy points
MELI stock rose 6.4% to 1,020.68, overcoming a 1,018.10 cup-and-handle buy point. MercadoLibre’s volume has been below normal, but the recent consolidation has produced a string of gains on above-average volume. The Latin American e-commerce giant is enjoying strong earnings growth.
PSTG shares rose 1.6% to 31.56. For the day, Pure Storage surged to 32.47 and surmounted the 32.07 Cup with Henkel buy point for a second straight session but failed to close above this entry. according to MarketSmith. PSTG stock ended right with an early entry at 32.57.
The data storage company is also enjoying strong earnings growth.
Analysis of the market rally
The stock market rally started strong on Tuesday and boomed on the PPI inflation report. But major indices retreated from intraday highs, then turned mixed on reports of the missile attack on Poland.
Perhaps the inflation/Fed narrative has shifted. But that doesn’t mean the major indices can’t face resistance, especially after a strong run of late. And as Tuesday’s action demonstrated, there is always the potential for geopolitics or other wild cards to reverse a market trend.
The Dow Jones and Russell 2000 both surpassed their 200-day moving averages. The S&P 500 is approaching the 200-day moving average where it faced strong resistance on Aug. 16.
The Nasdaq is moving from its 50-day moving average to its 200-day moving average, but still has a long way to go.
Tech giants are recovering with the market but are definitely not leaders. Many titans hit bear market lows just last week. The only semi-exception is Nvidia stock, which has surged over the past month. But even the chip giant is still working on its 200-day moving average.
However, many sectors are showing strength.
Manufacturers of solar, network and contract electronics as well as several medical device companies are doing well. This also applies to a select number of chips while several others try to establish themselves. A range of housing-related stocks are looking interesting, from home builders to suppliers to home retailers.
Trucking companies continue to rise as investors bet the worst is over, or at least priced in, for shipping stocks.
Biotechs and health insurers have paused or pulled out, but are generally in decent shape. Energy stocks are also doing well, although many are looking up.
Major indices are looking strong, more stocks giving buy signals and settling down. Inflation data may have reached an inflection point, raising the prospect of a slowdown in Fed rate hikes and – perhaps – an end to tightening in the not-too-distant future.
Investors should therefore benefit from the current market rally. However, given the possibility of a market pullback or resistance, they want to be cautious about how much they add in the short-term.
Do not track extended stocks. Be cautious about buying stocks that deviate significantly from their 50-day moving averages, even if they are in official buy zones. Don’t be too focused. A portfolio with a focus on lithium stocks like Albemarle would have been burned on Tuesday.
But work on those watch lists, stay engaged and be ready to act.
Read The big picture every day to stay in sync with market direction and leading stocks and sectors.
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