Dow Jones futures rose early Wednesday, along with S&P 500 futures and especially Nasdaq futures. The stock market rally climbed solidly Tuesday, even as Treasury yields continued to march higher. The major indexes remain in a recent range.
Apple (AAPL) is on the cusp of a buy signal. Investors arguably could buy Apple stock now from the 50-day line.
Meanwhile, EXPE stock broke out Tuesday, with Expedia (EXPE) earnings due Thursday. Shares of the online travel site rose 3.5% to 193.90, hitting a new high and clearing a 190.88 buy point.
Several hotel/casino stocks are flashing early entries or breaking out. MGM Resorts (MGM) cleared short-term resistance, though earnings are due late Wednesday. Hilton Worldwide (HLT) and Hyatt (H) are racing up to highs while Marriott International (MAR) cleared an official buy point. They all have earnings next week.
All of these stocks, from Expedia to MGM stock, have relative strength lines at or near highs. That reflects their outperformance vs. the S&P 500 index.
With coronavirus cases tumbling once again, travel activity should pick up. But the looming earnings reports are definitely a concern. Investors who want to play these stocks now may want to adopt an earnings options strategy.
Speaking of earnings, Paycom (PAYC), Doximity (DOCS), Enphase Energy (ENPH), Global Foundries (GFS) and Chipotle Mexican Grill (CMG) rallied overnight on results, but are well off highs. New Relic (NEWR), a database software maker that was setting up, plunged in extended trade on mixed results and weak guidance.
CVS Health (CVS) earnings topped views Wednesday morning. But 2022 EPS guidance was in line at best. CVS stock fell modestlyin premarket trading after hitting fresh highs on Tuesday. As a drugstore, pharmacy benefit and health insurance giant, its results and guidance will be important for a wide range of medical firms.
Expedia stock was added to IBD Leaderboard on Tuesday as an earnings options play.
Dow Jones Futures Today
Dow Jones futures rose 0.7% vs. fair value. S&P 500 futures climbed 0.9% and Nasdaq 100 futures jumped 1.35%.
Atlanta Fed President Raphael Bostic, seen as a relatively hawkish policymaker, said Wednesday that he sees signs that inflation will soon decline. Bostic, who recently floated the idea of a 50-basis point hike in March, told CNBC he expects three or four rate hikes this year.
The 10-year Treasury yield dipped 2 basis points to 1.93%. Crude oil prices fell slightly.
Remember that overnight action in Dow futures and elsewhere doesn’t necessarily translate into actual trading in the next regular stock market session.
Stock Market Rally
The stock market rally opened mixed, then moved solidly higher.
The Dow Jones Industrial Average rose 1.1% in Tuesday’s stock market trading. The S&P 500 index advanced 0.8%. The Nasdaq composite climbed 1.3%. The small-cap Russell 2000 popped 1.7%.
The 10-year Treasury yield rose 4 basis points to 1.95%, hitting a fresh two-year high of 1.97% intraday. U.S. crude oil futures fell 2.2% to $89.36 a barrel.
Apple stock rose 1.85% to 174.83, rebounding from its 50-day line. The RS line, the blue line in the charts provided, remains right at record highs.
After this week, AAPL stock is due to have a new base. Investors could have used Tuesday’s modest bounce from the 50-day line to start a position. Or, you could use 176.34, just above last week’s high, as a short-term resistance area. That could end up being a handle buy point in the near future.
Among the best ETFs, the Innovator IBD 50 ETF (FFTY) rose 1.5%, while the Innovator IBD Breakout Opportunities ETF (BOUT) dipped 0.25%. The iShares Expanded Tech-Software Sector ETF (IGV) advanced 1.1%. The VanEck Vectors Semiconductor ETF (SMH) popped just over 2%.
Reflecting more-speculative story stocks, ARK Innovation ETF (ARKK) dipped 0.1% and ARK Genomics ETF (ARKG) fell 0.8%. A rising rate environment is difficult for the highly valued growth plays that ARK Invest focuses on.
SPDR S&P Metals & Mining ETF (XME) jumped 3.9% and the Global X U.S. Infrastructure Development ETF (PAVE) rose 2.2%. U.S. Global Jets ETF (JETS) leapt 4.1%, reflecting broad strength in travel. SPDR S&P Homebuilders ETF (XHB) gained 1.6%. The Energy Select SPDR ETF (XLE) slumped 2.15% and the Financial Select SPDR ETF (XLF) rose 1.4%. The Health Care Select Sector SPDR Fund (XLV) advanced 0.8%.
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Market Rally Analysis
The stock market rally had a solid session Tuesday. However, the major indexes remain within a relatively narrow range, between last week’s highs and lows.
It’s positive to see the indexes, especially the Nasdaq, gain ground given the spike in Treasury yields over the past few days. But sometimes the market will take seemingly bad news in stride until it doesn’t. Thursday’s CPI inflation report looms large.
The S&P 500 continues to hold its 200-day line and closed just below its 21-day. If it gets above last week’s highs it’ll essentially be at its 50-day line. The Dow Jones did move above its 21-day line Tuesday and settled a fraction below its 50-day.
The Russell 2000 led the charge Tuesday, after rising Monday as the major indexes retreated. Some of that likely reflects strength in smaller financial stocks. Overall market breadth is improving a little bit after a long trend of weakness.
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Sectors To Watch
Travel names such as Expedia and Hilton did well of course. They closed near session highs.
Financials are ascendant with interest rates rising and positive economic signals. Banks, from regional lenders and niche investment banks to Wall Street titans and international plays, are looking well. But so are insurers and credit card firms.
Fertilizer makers continue to lead while farm equipment giant DE stock broke out Tuesday.
Energy stocks had a rough outing Tuesday, no question, but are still leaders in 2022. Oceangoing shipping firms also look good.
As for tech names, Apple stock really stands out as one of a handful that’s truly leading. There are several growth plays that are starting to set up with decent RS lines, but may need another market push to become actionable.
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What To Do Now
With the market rally moving higher, some leading stocks are beginning to move out. So investors could nibble on some of these names.
But as long as the major indexes are stuck in their narrow range, you don’t want to get too aggressive. That’s especially true for growth stocks. Even if the Nasdaq gets above last week’s highs soon, it’ll still face resistance at its 200- and 50-day lines, let alone all-time levels.
It’s hard to stay engaged and watch stocks start to move without taking part. But patience is a crucial skill and habit for active investors. When the market shows convincing strength, your discipline will pay off.
Work on your watchlists. If relative strength is your guide, you’ll be tracking a wide variety of companies and sectors.
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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