Rise of Futures;  5 winners of the winnings

Dow Jones futures rose early on Friday, along with S&P 500 futures and Nasdaq futures. The stock market rally eased Thursday morning on hawkish Fed statements, extending Wednesday’s losses. But the major indexes bounced back from some key levels to close slightly lower.




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Treasury yields rebounded while crude oil prices collapsed.

An apple (AAPL), Microsoft (MSFT) and Google Parent Alphabet (GOOGLE), the only $3 trillion stock on U.S. exchanges, rose after testing support at their 50-day moving averages. Meanwhile, Tesla (TSLA) retreated to the bottom of the bear market.

Investors should be cautious in the current market, adding exposure slowly and being prepared to take profits quickly and cut losses.

Profits

Applied materials (AMAT), Palo Alto Networks (PANW), Clearfield (CLFD) and Shops Ross (ROST) everything highest EPS and sales outlook late Thursday, with guidance generally also strong.

Shares of AMAT rose solidly early Friday, poised to move back above its 200-day line. PANW shares soared, signaling a move above its 50-day period. Shares of CLFD jumped in extended trade, looking for a race above the 50-day line as it tries to build the right side of a double-bottom base. ROST shares exploded to 2022 highs after closing a range from a bottom base.

JD.com (JD) and Atkore (ATKR) was reported early Friday.

JD.com’s earnings beat views, while revenue fell, as did Ali Baba (GRANDMA) early Thursday. JD shares rose modestly in premarket trading. On Thursday, shares jumped 7.5% on Alibaba’s results, right next to the 200-day line.

ATKR shares were still not trading on Friday, but building products maker Atkore beat its fiscal fourth-quarter outlook and pointed to higher first-quarter results and 2023 earnings. ATKR shares fell 3.5 % on Thursday, but were comfortably above their 200-day line as they work on the right side of a deep base.

Dow Jones futures today

Dow Jones futures were up 0.5% at fair value. S&P 500 futures gained 0.7%. Nasdaq 100 futures jumped 0.85%, with AMAT and PANW lifting their shares.

The 10-year Treasury yield rose 2 basis points to 3.79%.

Crude oil futures fell more than 1 percent, while natural gas sank more than 3 percent.

Remember this night action in Dow futures and elsewhere does not necessarily become an actual trade in the next regular Stock Exchange session.


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Stock market rallies

The stock market rally ended sharply lower at the open after St. Louis Federal Reserve President James Bullard and Kansas City Fed President Esther George delivered hawkish statements. Major indexes rebounded to close flat to slightly lower.

The Dow Jones Industrial Average was just below break-even on Thursday Exchange Trading. The S&P 500 was down 0.3%. The Nasdaq composite fell 0.35%. The small-cap Russell 2000 gave up 0.9%.

Apple shares rose 1.3%. Microsoft shares returned two cents, Google shares fell 0.5%. All tested their 50-day lines intraday. All are below their 200-day lines with no clear buy points. Tesla shares sank 2%, nearing bearish bottoms on Nov. 9.

U.S. crude oil prices fell 4.6% to $81.64 a barrel. In addition to the Fed’s hawkish comments, blame Beijing’s renewed emphasis on “zero Covid” policies. China’s State Council has reportedly warned cities to avoid an “irresponsible loosening” of Covid-19 measures, just a week after the top body backed easing rules. On Wednesday, Peking University was placed on lockdown due to one case. Covid infections have increased over the past two weeks in China.

Hawkish Federal Reserve raises Treasury yields

The yield on the 10-year Treasury note rose 8 basis points to 3.77%.

The St. Louis Federal Reserve’s Bullard said the Fed funds rate, currently at 3.75%-4%, may need to reach 7%, much higher than the consensus of about 5%. George of the Kansas City Federal Reserve said it may take a recession to bring down inflation.

One of the reasons policymakers sound hawkish is to raise market interest rates and limit the stock market rally. If financial conditions ease significantly relative to the Fed’s hopes, inflation could remain higher for longer, forcing the Fed to tighten policy rates even further.


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ETFs

Avg the best ETFsInnovator IBD 50 ETF (FFTY) submerged 0.1%. iShares Expanded Tech-Software Sector ETF (IGV) fell 2.65%, even with MSFT shares as a key component. PANW shares are also a holding of IGV. VanEck Vectors Semiconductor ETF (SMH) was down 0.5%, with AMAT shares occupying a significant SMH level.

SPDR S&P Metals & Mining ETF (XME) fell by 2.1%. SPDR S&P Homebuilders ETF (XHB) declined by 2%. Energy Select SPDR ETF (XLE) shed 0.5% and the SPDR Fund for Selected Healthcare Sectors (XLV) decreased by 0.2%.

Reflecting the more speculative stocks of history, the ARK Innovation ETF (ARKK) gave up 2.8% and the ARK Genomics ETF (ARKG) 3.2%. TSLA stock is a major holding in the Ark Invest ETF.


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Stock Market Rally Analysis

The stock market rally tested some key levels at Thursday’s open. The Nasdaq found support just above its 50-day moving average. The S&P 500 fell briefly to near-term highs in October. The Russell 2000 rebounded from near its 21-day line. The S&P 400 MidCap held its 200-day line.

Perhaps the market should have pulled back after a strong run and the S&P 500 near its 200-day line. Meanwhile, the market’s rally found support on Thursday in important areas. So the last few days have been normal and somewhat constructive for the major indices – assuming they can hold Thursday’s lows and eventually move higher.

However, the market’s pullback from Tuesday’s intraday high to Thursday morning’s low hit a number of stocks that broke or flashed early entries over the past few days. Several tested these records or failed completely. Some recover while others may not. In certain cases, previous purchase points are still valid, while others may need to set new handlers or other records. Still others may struggle for an extended period of time.

A wide variety of stocks and sectors are showing interesting action.

In all these cases, a healthy market rally will be key.

Shares of Apple, Microsoft and Google are not market leaders and may not be for some time. But if they can avoid falling behind, that would be a big help.


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What should we do now

The stock market rally showed encouraging action on Thursday. The overall trend has been higher over the past few weeks. But it’s been a winding road for investors.

Anyone who bought shares after Oct. 21 following day it was probably underwater until early November. While indexes rose on Nov. 10 on the tame CPI report, the Nasdaq, S&P 500 and Russell 2000 have been flat to lower since then.

The stock market rally remains volatile, with sector rotation and large intraday swings complicating matters. Buying opportunities have often been when the market pulls the rug out from investors.

So keep exposure light. Add exposure gradually — and be prepared to reduce exposure due to market conditions or individual stock selling rules.

Keep your watchlist up to date so you can spot emerging leaders.

Read it The big picture every day to stay in sync 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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