April 25, 2024

Dow Jones futures rose slightly early Wednesday, along with S&P 500 futures and Nasdaq futures, with the Federal Reserve meeting decision in focus. Tesla was in focus with a flurry of headlines.




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The stock market rallied Tuesday, with the Nasdaq hitting a 2023 high, joining the S&P 500 and the Dow Jones. The CBOE Volatility Index, or VIX, slumped once again, hitting the lowest point since early January, a sign of excessive bullishness.

More leading stocks pushed out or set up. Nvidia (NVDA) reclaimed a buy point, though volume remained lackluster.

Microsoft (MSFT), Amazon.com (AMZN), Netflix (NFLX), Datadog (DDOG) and Freshworks (FRSH) are stocks that have found support around their 21-day exponential moving averages.

Microsoft and AMZN stock are in official buy zones while arguably FRSH stock is actionable within its handle.

Tesla (TSLA) retreated Tuesday but found support at its 50-day moving average. TSLA stock fell slightly early Wednesday. The EV giant said two Model 3 variants will lose all of their $7,500 U.S. tax credits on Jan. 1. Also, Tesla will recall more than two million vehicles for Autopilot safety flaws.

Microsoft and DDOG stock are on IBD Leaderboard and the IBD 50. NFLX stock is on SwingTrader. MSFT stock also is on IBD Long-Term Leaders. Freshworks was Tuesday’s IBD Stock Of The Day.

The video embedded in the article analyzed the market action as well as Amazon stock, Netflix and Freshworks.

Federal Reserve

The two-day Fed meeting ends Wednesday, with a policy announcement due at 2 p.m. ET. Fed chief Jerome Powell will hold his news conference at 2:30 p.m. ET.

The central bank will take no action Wednesday. The big question is whether the Fed announcement or Powell will signal a shift toward Fed rate cuts in 2024.

Currently, markets are pricing a 42% chance of the first Fed rate cut coming at the March meeting, though that’s down slightly over the past week. The odds climb to roughly 75% by the early May meeting. By the end of 2024, investors are betting on four Fed rate cuts, possibly five.

Powell almost certainly won’t herald a wave of rate cuts, but if the Fed continues to push back any easing far into 2024, markets could react negatively.

Dow Jones Futures Today

Dow Jones futures rose 0.1% vs. fair value. S&P 500 futures climbed about 0.1%. Nasdaq 100 futures advanced 0.2%.

The 10-year Treasury yield edged down to 4.18%.

Crude oil futures rose slightly.

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


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Stock Market Rally

The stock market rally started off mixed after November CPI inflation data but gradually improved during the session.

The Dow Jones Industrial Average rose 0.5% in Tuesday’s stock market trading. So did the S&P 500 index. The Nasdaq composite climbed 0.7%.

The Nasdaq hit a 20-month high, finally pushing past its July peak. The S&P 500 did so on Friday and has kept moving higher. The Dow Jones cleared its summer highs back on Nov. 30.

The small-cap Russell 2000 dipped 0.1% but pared morning losses.

U.S. crude oil prices tumbled 3.8% to $68.61 a barrel, their lowest close since late June.

The 10-year Treasury yield fell 3 basis points to 4.205%.

The VIX fell Tuesday, once again hitting the lowest level since January 2020. When the market fear gauge is unusually low, it’s a sign of excessive bullishness or complacency. That raises the risk of a market pullback. But it doesn’t have to happen right away and it doesn’t have to be deep or long lasting.

ETFs

Among growth ETFs, the iShares Expanded Tech-Software Sector ETF (IGV) edged up 0.2%. Microsoft stock is a major IGV holding, with Datadog and FRSH stock also in the group. The VanEck Vectors Semiconductor ETF (SMH) gained 1.1%. Nvidia stock is the No. 1 SMH component.

Reflecting more-speculative story stocks, ARK Innovation ETF (ARKK) dipped 0.3% and ARK Genomics ETF (ARKG) declined 0.6%. Tesla stock remains a huge holding across Ark Invest’s ETFs.

SPDR S&P Metals & Mining ETF (XME) slumped 2%. U.S. Global Jets ETF (JETS) ascended 1%. SPDR S&P Homebuilders ETF (XHB) stepped down 0.3%. The Energy Select SPDR ETF (XLE) slipped 1.4% and the Health Care Select Sector SPDR Fund (XLV) rose 0.4%.

The Industrial Select Sector SPDR Fund (XLI) advanced 0.45%

The Financial Select SPDR ETF (XLF) climbed 0.7%. The SPDR S&P Regional Banking ETF (KRE) retreated 0.7%


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Stocks Near Buy Points

Microsoft stock rose 0.8% to 374.38 on Tuesday, continuing to find support around its 21-day line. The Dow Jones tech titan has been trading in a cup-base buy zone since Nov. 10. The monthlong sideways pause has let the 21-day line catch up, obviously, while the 50-day line has significantly closed the gap with MSFT stock.

Amazon stock climbed 1.1% to 147.48, continuing Monday’s modest move from the 21-day line, where it’s been finding support. Shares are just above a 145.86 consolidation buy point, according to MarketSmith. AMZN stock has been right at the entry for the past month. As with Microsoft, the 50-day line is catching up on the e-commerce and cloud giant.

NFLX stock edged up 0.7% to 463. The streaming media giant has a 482.70 handle buy point. On Monday, Netflix stock moved above its 21-day line, though it closed off lows. Investors could use Monday’s high of 470.65 as an early entry from breaking the downtrend of the handle.

DDOG stock edged down 7 cents to 114.66 on Tuesday. Two weeks ago, Datadog just topped a 118.02 buy point from either a giant cup-with-handle base or just treating the handle as its own consolidation. But Datadog stock has pulled back in the past few sessions, nearing a fast-rising 21-day line. An actual 21-day test could be healthy. The cloud-based app-monitoring platform is still well above the 50-day line, which is moving sharply higher.

FRSH stock popped 3.5% to 21.24 on Tuesday, moving toward a 21.50 cup-with-handle buy point. Shares broke a downtrend in the handle, offering an early entry. That’s after finding support just above the 21-day line.

Nvidia Stock

Nvidia rose 2.2% to 476.57, just creeping back above a 476.09 double-bottom buy point. Volume was below average, a problem for NVDA stock for the past few months. For much of 2023, Nvidia was the leading stock. But it’s not leading the market right now or even the chip sector.

Tesla Model 3 Tax Credits

Meanwhile, Tesla’s website is telling customers that the Real Wheel Drive and Long Range Model 3 variants will lose all $7,500 of the IRA tax credit in 2024, not just $3,750. The EV giant cited updated regulatory guidance. Those two variants use either Chinese batteries or Korean batteries with Chinese materials.

The news could spur some more prospective buyers to act before Dec. 31, but is likely to have a significant impact on 2024 financials.

Other Tesla News

Tesla will recall just over 2 million vehicles, essentially all its vehicles ever sold in the U.S., after the National Highway Traffic Safety Administration determined the EV giant’s Autopilot system is prone to misuse. It’s part of an ongoing NHTSA probe of Tesla driver-assistance system. Tesla will begin its over-the-air “recall” soon.

Tesla also released a new video of an updated Optimus humanoid robot, stating it’s lighter and faster than before.

Tesla Stock

Tesla stock fell 1.1% on Tuesday to 237.01, but came off a test of its 50-day line. Shares also closed just above the 21-day line, a key support area for the past several weeks. TSLA stock has a 278.98 double-bottom buy point. Investors could use the Nov. 29 high of 252.75 or even a downward-sloping trend line around 248.

The relative strength line for Tesla stock has trended lower since July.

Shares fell slightl early Wednesday amid the Model 3 tax credit news and Autopilot recall.


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What To Do Now

The Nasdaq and S&P 500 have moved out to 2023 highs, but not decisively. It’s a little like letting the cat out, but it’s a few steps past the door. Yes, it’s outside, but it’s not on a big adventure yet and could come right back in.

Meanwhile, the lack of market fear is something to worry about, or at least note.

Still the market rally’s power trend is still looking strong. A lot of leading stocks are extended, but some have been pausing bullishly, such as Microsoft and Amazon.

Investors could make some portfolio tweaks that add or subtract overall exposure, but the market rally isn’t giving a lot of reasons for major changes.

Keep working on watchlists.

Read The Big Picture every day to stay in sync with the market direction and leading stocks and sectors.

Please follow Ed Carson on X/Twitter at @IBD_ECarson, Threads at @edcarson1971 and Bluesky at @edcarson.bsky.social for stock market updates and more.

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Source: investors.com

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