Market Rally Reclaims Key Levels Ahead Of CPI Inflation Report; Medpace, First Solar Flash Buy Signals

Dow Jones futures rose slightly early Wednesday, along with S&P 500 futures and Nasdaq futures.


The stock market rally was largely uncertain on Tuesday, but the major indexes gained steam, with the S&P 500 moving above its 50-day moving average. Investors await the December CPI inflation report on Thursday morning.

Medpace (MEDP) rose strongly on Tuesday, flashing a new buy signal after a similar move failed at the end of 2022. First Solar (FSLR) bounced back from its 50-day line, also providing an early entry. but ELF Beauty (ELF) and Super Micro Computer (SMCI) collapsed after Monday’s reversals.

MEDP stock and ELF Beauty are on the IBD Leaderboard. SMCI stock is in the IBD 50. Medpace was the IBD Stock Of The Day on Tuesday.

Tesla (TSLA) and UnitedHealth (UNH) with a lower edge, as many big caps continue to struggle.

Investors should remain cautious, especially with the arrival of the CPI inflation report.

Business News

US airline flights were severely affected Wednesday morning, due to an FAA computer outage. There were reports that all flights were temporarily grounded, but some took off. The FAA hopes to “repopulate” the system soon, but airlines will have to scramble to get back on schedule. Aircraft stocks including Delta Air Lines (DAL) and United Airlines (UAL) is small.

Vince McMahon is once again the chairman of World Wrestling Entertainment, after his daughter Stephanie resigned as chairwoman and co-CEO on Tuesday night. Mr. McMahon, a major shareholder, resigned last year over charges related to sexual misconduct claims. WWE stock jumped in premarket trading, after rising in recent days on reports of his expected return to lead the company’s sales.

Meanwhile, Wells Fargo (WFC) is largely exiting the mortgage business amid regulatory pressure, CNBC reported late Tuesday. It will only offer home loans to existing bank and wealth management customers and borrowers in minority communities. WFC stock was little changed in extended trading.

Axcelis Technologies (ACLS), which has made a strong move in the past few sessions, said revenue for the December-ended fourth quarter topped $250 million against the chip-equipment maker’s first guidance of $232 million to $240 million. ACLS stock rose after hours.

Imp (PI) said Q4 sales topped $76 million compared to the RFID-chip maker’s prior guidance of $71.5 million-$73.5 million. PI stock, which is already slightly above the 50-day line, rose strongly overnight. That could offer an early entry or near-flat base for buying Impinj stock. PI stock is also on the Leaderboard.

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The earnings season also started to pick up late in the week. Taiwan Semiconductor (TSM) reported on Thursday morning. On Friday, JPMorgan Chase (JPM), Bank of America (BAC), Citigroup (C) and Wells Fargo all reported ahead of the open, along with Delta Air and UnitedHealth.

Dow Jones Futures Today

Dow Jones futures rose 0.2% compared to the fair value. S&P 500 futures rose 0.2% and Nasdaq 100 futures advanced 0.2%.

The 10-year Treasury yield fell 5 basis points to 3.57%.

Crude oil futures edged higher despite what the American Petroleum Institute estimated was a big weekly jump in US inventories. The Energy Information Administration will release US crude and petroleum data at 10:30 am ET.

Remember that overnight action in the Dow futures and elsewhere does not necessarily translate into actual trading in the next regular stock market session.

Join IBD’s experts as they analyze stock market rally action on IBD Live

Stock Market Rally

After a disappointing fade on Monday, the stock market rally strengthened on Tuesday afternoon, closing near session highs.

The Dow Jones Industrial Average rose 0.6% in stock market trading on Tuesday. The S&P 500 index rose 0.7%. The Nasdaq composite rose 1%. The small-cap Russell 2000 popped 1.5%

Tesla stock fell 0.8% after bouncing 5.9% on Monday. Shares returned higher Friday after settling in a bear market low of 101.06 after the EV giant announced major price cuts in China and other key Asian markets. TSLA stock needs a lot of recovery.

Tesla has applied to Texas for a major expansion of its Austin assembly plant, the Austin Business Journal reported Tuesday. Tesla Austin is still operating at its current capacity.

UNH stock fell 0.8%, hitting its worst level since June. The Dow Jones health insurer fell 8.3% in 2023, after ending 2022 in good shape. UnitedHealth’s earnings and guidance on Friday will be important for the suddenly embattled sector.

US crude oil prices rose 0.7% to $75.12 per barrel. Natural gas prices fell by 6.9%.

The 10-year Treasury yield jumped 10 basis points to 3.62% after skidding 20 basis points in the previous two sessions.

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Among growth ETFs, the Innovator IBD 50 ETF (FFTY) rose 1.1%, while the Innovator IBD Breakout Opportunities ETF (BOUT) rose 0.15%. The iShares Expanded Tech-Software Sector ETF ( IGV ) gained 0.1%. VanEck Vectors Semiconductor ETF (SMH) advanced 1.3%, topping its 200-day line after 50 days on Friday. TSM stock is a large SMH holding.

Reflecting the more speculative stocks in the story, the ARK Innovation ETF (ARKK) jumped 2.5% and the ARK Genomics ETF (ARKG) 3.6%. Tesla stock is still a major holding at Ark Invest, with Cathie Wood strengthening her position in recent weeks.

The SPDR S&P Metals & Mining ETF (XME) ran up 2.5% and the Global X US Infrastructure Development ETF (PAVE) rose 1.6%. The US Global Jets ETF (JETS) rose 2.4%, with DAL stock among the top holdings. The SPDR S&P Homebuilders ETF (XHB) rose 1%. The Energy Select SPDR ETF (XLE) advanced 0.7% and the Financial Select SPDR ETF (XLF) gained 0.6%. The Health Care Select Sector SPDR Fund (XLV) closed up 0.8%, with UNH stock a top XLV holding.

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Market Rally Analysis

The stock market rally spent most of the morning around break-even, but finished Tuesday with a relatively strong performance.

The S&P 500 rose above the 50-day line. The 200 day average is slightly above that.

The Dow Jones rebounded from a test of its 50-day line after moving above key levels on Friday. The Nasdaq rose from its 21-day line with the 50-day line not far behind.

The Russell 2000 is back above its 50-day line, just below its 200-day.

The S&P MidCap 400 rallied on Tuesday after finding 50-day support. That’s after jumping above its 21-day, 50-day and 200-day lines on Friday. The Invesco S&P 500 Equal Weight ETF (RSP) is very similar.

Both the RSP and the MidCap 400 highlight how large the caps are Apple (AAPL), Tesla and UNH stock weighed on the market.

A sustained rally in the stock market may not continue until there is clarity on when the Federal Reserve will stop hiking rates. Markets strongly expect a quarter-point hike at the policy meeting on February 1 and again in late March.

Thursday’s CPI inflation report could lock in expectations for a quarter-point increase. Inflation should continue its downward trend in the coming months, if only because year-over-year comparisons are so steep.

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Top Stocks Mixed

Many top stocks have flashed buy signals in recent days and weeks. But most get tired easily. In some cases, such as MEDP stock, they return after a few days.

Medpace jumped 5.9% to 223.29 on heavy volume, rebounding from the 50-day line and clearing the December 29 high, when MEDP tried to move.

First Solar rose 7.4% to 171.01, continuing a mini-winning streak. The move from the 50-day line offers an early entry into a new base, but now looks somewhat extended. But the 173.78 official buy point is not far away.

Other names keep falling.

ELF stock had a promising breakout on Friday, but gave up most of Monday’s gains and fell 8.3% on Tuesday to 51.15, knifing below its 50-day line and dropping below its flat base.

SMCI stock surged on Monday morning, offering early entry, but closed only slightly higher. On Tuesday, shares fell 7.55%, below the 50-day line, following a short-selling report.

Several other stocks are hovering around potential buy points.

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What To Do Now

The stock market rally is still ongoing, but the major indexes, sectors and especially the leading stocks are recovering quickly. Thursday’s CPI inflation report could trigger big gains, with major indexes pushing decisively above some key levels. But it can also go the other way.

Investors should be cautious about their exposure and be wary of new purchases, especially ahead of the CPI report.

If you make new purchases, know your exit strategy before entering. Consider taking partial profits immediately to lock in some gains.

It is still a window shopping market. But there are many interesting stocks to watch from different sectors. Get those watchlists ready.

Read the Big Picture every day to stay in tune with 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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