Stock market indexes added to Tuesday gains ahead of Wednesday afternoon’s Fed minutes, while Americans headed out to visit family and friends. Tesla (TSLA) erupted in a short squeeze after a Citigroup upgrade.
The Dow Jones Industrial Average gained just 0.1% on Wednesday morning while the S&P 500 added 0.2%. The Nasdaq composite ticked higher by 0.9% while the Russell 2000 small-cap index rose 0.1%.
Volume rose solidly on the Nasdaq but fell on the NYSE compared with Tuesday morning levels.
The 10-year Treasury note yield ticked lower to 3.73%, Crude oil resumed its downward trajectory, slumping to $77.29 per barrel. The January 2023 futures contract fell to an 11-month low overnight.
October durable goods orders rose 0.5%, beating analyst calls for almost no change. The uptick highlights continued resilience in the U.S. economy, despite macro headwinds.
October new-home sales rebounded, adding 632,000 compared with the 578,000 consensus. Final November consumer sentiment ticked up to 56.8, higher than the 55.5 consensus and preliminary 54.7 reading.
Tesla lifted off multiyear lows after Citigroup raised the EV maker rating to neutral from sell. However, the rally has already surpassed the dreary $176 price target, suggesting skepticism about the company’s intermediate outlook. TSLA stock is trading higher by 5.3%.
Rising Odds for Bitcoin, Crypto Short Squeeze
Crypto assets look like beat-up prizefighters after the FTX fiasco, but short sellers may have pressed their bets too aggressively.
Bitcoin remounted the $16,000 level on Wednesday morning while Coinbase (COIN) drifted higher by about a point.
Bitcoin’s weekly chart indicates that relative strength readings have declined to the lowest levels since January 2019.
The digital currency rocketed in the six months after that historic low, tripling in price. The one-year return was even more phenomenal, lifting Bitcoin nearly 1,000%.
Stock Market Awaits Fed Minutes
As MarketWatch reported this morning, David Donabedian, chief investment officer of CIBC Private Wealth U.S., doesn’t expect the 2 p.m. ET Fed minutes release to change the status quo.
“We’re going to see the debate and the 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 on inflation,” Donabedian said.
Afternoon stock market trading should be light despite the release, if history is any guide, because Americans will head out in great numbers to visit families and friends. U.S. stock markets are closed on Thursday and are open for half-day sessions on Friday.
But the half day doesn’t guarantee low volatility.
Back in 2009, Dubai shocked world markets on Wednesday afternoon before the holiday, warning it had to reschedule debt for its flagship Dubai World fund.
American traders were forced to sit on their hands while eating turkey legs, watching their non-American counterparts digest financial contagion risk. When Friday’s half-day session rolled around, it generated volatile whipsaw action, taking minds and pocketbooks off holiday sales.
And just last year, the Dow Jones plunged over 900 points on Black Friday, as first reports of the omicron outbreak in South Africa made the rounds.
Black Friday Vs. Inflation Monster
Investors have rewarded and punished retail earnings reports this week, highlighting mixed opinions about the 2022 holiday sales season. Tuesday’s price action showed this conflict up close, with Best Buy (BBY) soaring 12.8% while Dollar Tree (DLTR) got pummeled, dumping nearly 8%.
The National Retail Federation expects tepid 2022 holiday sales growth of 6% to 8%, compared with 2021’s outstanding 13.5% surge. The group believes high inflation will force consumers to downsize gifts to less expensive and fewer items. However, the job market remains robust, and there are few signs that credit delinquencies are rising.
Taken together with easing inflation, its possible that consumers will surprise everyone and spend lots more than expected.
Friday marks the official start to the holiday season, but ads have been running for weeks. And we’re already seeing signs of heavy discounting.
Supply will be the major piece of this year’s holiday sales puzzle because retailers are saddled with surplus inventories. It happened because they filled warehouses in early 2022, expecting a major post-pandemic buying surge.
The Russia-Ukraine war added to supply-chain disruptions. Together with massive liquidity injected during the pandemic, the catalysts set off the worst inflation in four decades.
Stock Market Movers And Shakers
The Innovator IBD 50 ETF (FFTY) traded lower by 1%.
Leading stocks are probing buy points on Wednesday morning.
Flex LNG (FLNG) tagged the 37.09 buy point and pulled back. Axcelis Technologies (ACLS) did the same with its 79.93 buy point, but has faded as well. Agricultural stock AGCO (AGCO) is also enjoying a good morning, topping the 131.16 buy point.
IBD 50 and Dow Jones component Exxon Mobil (XOM) has booked great 2022 returns, gaining more than 80%.
The fossil fuel giant mounted the buy point of a three-month consolidation pattern in October and has eased into narrow-range action. It’s trading just below an all-time high on Wednesday, despite weak action in the energy markets.
IBD 50 biotech leader Catalyst Pharmaceuticals (CPRX) consolidated at an all-time high after breaking out in heavy volume on Tuesday. It’s drifted back into the buy zone after a 12.5% rally and could settle at a low-risk/high-reward price in the next few sessions.
Enphase Energy (ENPH) probed the buy point of a cup-with-handle base early Wednesday. It’s been testing this key level for most of November, but bulls have grown more aggressive, perhaps supporting a strong follow-through rally.
Follow Alan Farley on Twitter at @msttrader.
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