Stock indexes added to Tuesday’s gains ahead of Wednesday afternoon’s Fed minutes as Americans headed out to family and friends. You’re here (TSLA) erupted in a short squeeze after an upgrade from Citigroup.
The Dow Jones Industrial Average gained just 0.1% on Wednesday morning while the S&P 500 gained 0.2%. The Nasdaq composite rose 0.9% while the Russell 2000 Small Cap Index rose 0.1%.
Volume rose solidly on the Nasdaq but fell on the NYSE from Tuesday morning levels.
The 10-year Treasury yield fell to 3.73% as crude oil resumed its downward trajectory, crashing closer to 4% at $77.29 a barrel. The January 2023 futures contract fell to an 11-month low overnight.
October durable goods orders rose 0.5%, beating analysts’ calls for almost no change. The rise highlights the continued resilience of the US economy, despite macroeconomic headwinds.
October new home sales rebounded, adding 632,000 from the consensus of 578,000. Consumer sentiment last November came in at 56.8, above the consensus of 55.5 and the preliminary reading of 54, 7.
Tesla hit multi-year lows after Citigroup raised the electric vehicle maker’s rating to neutral from the sale. However, the rally has already passed the dismal price target of $176, suggesting skepticism about the company’s interim outlook. TSLA stock is trading up 5.3%.
Rising Odds for Bitcoin, Crypto Short Squeeze
Crypto assets look like battered fighters after the FTX fiasco, but short sellers may have pushed their bets too aggressively.
Bitcoin rallied the $16,000 level on Wednesday morning as Coinbase (COIN) drifted higher by about a point.
Bitcoin’s weekly chart indicates that relative strength readings have fallen to the lowest levels since January 2019.
The digital currency has exploded in the six months since this all-time low, tripling in price. The one-year return was even more phenomenal, driving Bitcoin up nearly 1,000%.
Stock market awaits Fed minutes
As MarketWatch reported this morning, David Donabedian, chief investment officer of CIBC Private Wealth US, does not expect the release of the Fed minutes at 2 p.m. ET to change the status quo.
“We’re going to see the debate and discussions around the two-step process, in other words, the importance of slowing the pace of rate hikes, but also not appearing to have declared victory over inflation,” said Donabedian.
Afternoon stock trading is expected to be light despite the release, if history is any indication, as Americans will be heading out in large numbers to visit family and friends. US stock markets are closed on Thursdays and are open for half-day sessions on Fridays.
But the half day does not guarantee low volatility.
In 2009, Dubai shocked global markets on Wednesday afternoon ahead of the holiday, warning it had to reschedule the debt of its flagship fund Dubai World.
US traders were forced to sit on their hands while eating turkey legs, watching their non-US counterparts digest the risk of financial contagion. When Friday’s half-day session rolled around, it generated volatile see-saw action, diverting minds and wallets away from holiday sales.
And just last year, the Dow Jones plunged more than 900 points on Black Friday as early reports of the Omicron outbreak in South Africa made the rounds.
Black Friday vs. inflation monster
Investors rewarded and punished retail earnings reports this week, underscoring mixed views on the 2022 holiday selling season. Price action on Tuesday showed this conflict up close, with best buy (BBY) up 12.8% while dollar tree (DLTR) was clubbed, dumping almost 8%.
The National Retail Federation expects holiday sales to grow timidly by 6% to 8% in 2022, compared to the exceptional 13.5% rise in 2021. The group estimates that high inflation will force consumers to reduce the size of gifts to less expensive and fewer items. However, the labor market remains robust and there are few signs of rising defaults.
Combined with lower inflation, it is possible that consumers will surprise everyone and spend much more than expected.
Friday marks the official start of the holiday season, but the ads have been running for weeks. And we are already seeing signs of steep discounts.
Supply will be the centerpiece of this year’s holiday sales puzzle as retailers struggle with excess inventory. This happened because they filled warehouses in early 2022, expecting a surge in purchases after the pandemic.
The Russian-Ukrainian war has compounded supply chain disruptions. Coupled with massive liquidity injected during the pandemic, the catalysts triggered the worst inflation in four decades.
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Stock market movers and shakers
The Innovator IBD 50 (FFTY) ETF traded down 1.0%.
Major stocks are probing buy points Wednesday morning.
Flexible LNG (FLNG) marked the buy point of 37.09 and pulled back. Axcelis Technologies (ACLS) did the same with its buy point of 79.93, but also faded. Agricultural material AGCO (AGCO) also has a good morning, breaking above the buy point of 131.16.
IBD 50 and Dow Jones component Exxon Mobil (XOM) has had great returns in 2022, gaining over 80%.
The fossil fuel giant moved up the buying point of a three-month consolidation pattern in October and eased into narrow-range action. It is trading just below an all-time high on Wednesday, despite weak action in energy markets.
Biotech Leader IBD 50 Pharmaceutical catalyst (CPRX) consolidated at an all-time high after breaking out in major volume on Tuesday. It has moved back into the buy zone after a 12.5% rally and could settle at a low-risk, high-reward price in the coming sessions.
Enphase Energy (ENPH) probed the buy point of a cup base with a handle early Wednesday, it tested that key level for most of November, but the bulls turned more aggressive, perhaps supporting a strong rally from followed.
Follow Alan Farley on Twitter at @mstrader.
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