Dow Jones futures rose modestly overnight, along with S&P 500 futures and Nasdaq futures, following a positive market reaction to a steady Fed rate-cut outlook. Micron Technology (MU) soared overnight on earnings with a Microsoft AI event on tap Thursday.
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The stock market rally saw solid gains Wednesday, almost all in the afternoon as Federal Reserve policymakers indicated they still see three rate cuts in 2024. Fed Chief Jerome Powell once again said it’s appropriate to start easing “at some point this year.”
The Nasdaq and small caps led while the S&P 500 and Dow Jones hit record highs.
Arista Networks (ANET), DraftKings (DKNG), PVH Corp. (PVH), JFrog (FROG) and Royal Caribbean (RCL) flashed buy signals.
Dow giant Microsoft (MSFT) reaffirmed a recent entry ahead of Thursday’s AI event.
The Justice Department reportedly will sue Apple (AAPL) as soon as Thursday for violating antitrust laws related to the iPhone.
DraftKings stock is on IBD Leaderboard. DraftKings and PVH stock are on SwingTrader. Microsoft stock is on IBD Long-Term Leaders. Microsoft, DraftKings, Arista Networks, JFrog and Royal Caribbean stock are on the IBD 50. Nvidia, Arista Networks and SMCI stock are on the IBD Big Cap 20. PVH was Wednesday’s IBD Stock Of The Day.
Dow Jones Futures Today
Dow Jones futures were 0.25% above fair value, with Apple stock as slight drag. S&P 500 futures rose 0.3%. Nasdaq 100 futures climbed 0.6%. Micron stock is an S&P 500 and Nasdaq 100 component.
Remember that overnight action in Dow futures and elsewhere doesn’t necessarily translate into actual trading in the next regular stock market session.
Micron Earnings
After the close, Micron reported a surprise fiscal second-quarter profit with revenue also topping. The memory-chip giant also gave bullish Q3 guidance. MU stock soared 18% overnight, signaling a record high. Shares rose 2.4% to 96.25 in Wednesday’s session.
Fed Rate-Hike Outlook
As expected, the Fed took no action Wednesday afternoon. But policymakers, via their “dot plot” projections, see a median year-end fed funds rate of 4.6%, down from the current 5.25%-5.5%. That’s unchanged from the late 2023 forecast of three quarter-point Fed rate cuts this year. There had been some speculation that the Fed could curb its plans to just two rate cuts amid sticky inflation.
The Fed did raise its 2024 GDP and core PCE inflation estimates slightly.
Policymakers also now see the Fed funds rate at 3.9% at the end of 2025 vs. the December projection of 3.6%, indicating one fewer rate cut.
Fed chief Powell said the central bank is making good progress in fighting inflation. He said rate cuts should start “at some point” in 2024, but gave few specifics. Powell also said there were no discussions about the balance sheet, indicating policymakers aren’t ready to scale back quantitative tightening quite yet.
Notably, Powell seemed unconcerned with the stock market rally and generally easy financial conditions.
The odds of a June rate cut rose to 75% vs. 59.2% on Tuesday.
The central bank appears willing to take a wait-and-see approach on rate cuts. There are still several key inflation and economic reports before the June 11-12 meeting.
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Stock Market Rally
The stock market rally gained momentum into the close as the Federal Reserve stayed the course on rate-cut plans and Fed chief Powell didn’t say anything to undercut that.
The Dow Jones Industrial Average popped 1% in Wednesday’s stock market trading while the S&P 500 index gained 0.9%, both setting all-time highs. The Nasdaq composite advanced 1.25% to a record close. The small-cap Russell 2000 jumped 1.9%, back above the 21-day line and near 23-month highs.
Financial markets often have a day two reaction to Fed meetings that reverse course.
But on Wednesday, the market rallied, with a number of stocks flashing buy signals as well as other leaders rebounding and setting up.
The window of opportunity may not last long. The S&P 500 is 4.6% above its 50-day moving average, not far from the 5% level that would seem extended. The Nasdaq has a little more room at 4.2% above its 50-day.
Bullish sentiment remains excessive, something that is a concern.
U.S. crude oil prices fell 2.1% to $81.68 a barrel.
The 10-year Treasury yield fell 2.5 basis points to 4.27%.
ETFs
Among growth ETFs, the iShares Expanded Tech-Software Sector ETF (IGV) rose 1%, with Microsoft stock a major holding. The VanEck Vectors Semiconductor ETF (SMH) gained 1.6%. Micron stock is a big SMH holding.
Reflecting more-speculative story stocks, ARK Innovation ETF (ARKK) jumped 3.5% and ARK Genomics ETF (ARKG) advanced 1.85%.
SPDR S&P Metals & Mining ETF (XME) ran up 2.4%. The SPDR S&P Homebuilders ETF (XHB) rallied 1.8%. The Energy Select SPDR ETF (XLE) edged down 0.1% and the Health Care Select Sector SPDR Fund (XLV) dipped 0.2%.
The Industrial Select Sector SPDR Fund (XLI) and Financial Select SPDR ETF (XLF) climbed 1.2%.
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Stock In Buy Areas
Arista stock rose 3.4% to 296.58, clearing a 292.66 flat-base buy point. On Tuesday, shares tumbled to their 10-week line soon after the open, but slashed losses. The relative strength line hit a new high on the breakout, a bullish sign marked by a blue dot at the end of the RS line on a MarketSurge chart.
DraftKings stock jumped 5.7% to 46.27, clearing a short consolidation that wasn’t quite long enough to be a flat base. Earlier Wednesday, shares topped a short trendline. DKNG stock has rebounded from the 21-day and 10-week lines this week as March Madness gets underway, fueling sports betting.
PVH stock popped 3.7% to 137.40, rebounding from the 21-day line and breaking a short downtrend. That extended Tuesday’s bounce from the 10-week line modestly above a prior consolidation.
JFrog stock gained 3.9% to 44.65, bouncing from the 21-day line and breaking a downward-sloping trendline. Volume was below average. FROG stock is in an emerging consolidation following an earnings gap-up on Feb. 15.
Royal Caribbean stock rallied 4.7% to 135.53, clearing a 133.77 cup-base buy point. That came hours before RCL stock would have completed a handle, though that would have only lowered the entry by a fraction.
Microsoft stock edged up 0.9% to 425.23, just making a record close a penny above its March 14 close at 425.22. Shares flashed a buy signal on March 13 as they cleared a not-quite flat base.
The Dow giant will hold its “New Era of Work” event on Thursday. Microsoft will discuss AI innovations, along with what’s new with Windows and Surface computers.
What To Do Now
The stock market rally made a bullish move following the Fed meeting and Powell’s comments. The major indexes are at or near highs while a number of leading stocks flashed buy signals.
That offered opportunities for investors to add some exposure. There could be more opportunities on Thursday, assuming the market doesn’t have second thoughts.
But with this week’s gains pushing the S&P 500 close to extended and bullish sentiment high, investors might want to add exposure incrementally, especially after Wednesday.
But look for those stocks that are actionable or setting up. Have your watchlists up to date.
Read The Big Picture every day to stay in sync with the market direction and leading stocks and sectors.
Please follow Ed Carson on Threads at @edcarson1971 and X/Twitter at @IBD_ECarson for stock market updates and more.
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