Dow Jones futures were little changed Tuesday night, along with S&P 500 futures and Nasdaq futures, after a key unit of China’s Evergrande said it would make a coming interest payment.
Adobe earnings, China markets and a key Fed meeting are also in the spotlight. The stock market rally tried to rebound Tuesday from Monday’s sell-off but faded to close mixed. Growth stocks fared relatively well, with Nvidia (NVDA) and Snap (SNAP) trading around aggressive entries. AutoNation (AN) rose to just below a buy point.
Adobe (ADBE), FedEx (FDX) and Stitch Fix (SFIX) headlined key earnings after the close. Adobe earnings modestly beat views, but ADBE stock fell after hours, signaling a move below a key level. FDX stock slumped to fresh lows on an earnings miss due to higher costs amid labor and supply-chain woes. SFIX stock surged on strong results, but shares have been trending lower for months.
Evergrande core unit Hengda Real Estate will make payments on offshore bonds due Sept. 23, easing default fears, at least in the very short term. Evergrande default fears rattled financial markets around the world on Monday. The property-led conglomerate has $300 billion in debt and has missed two other recent interest payments. There is concern that foreign bondholders in particular will take heavy losses.
The Shanghai stock exchange tradedmodestly lower after a long weekend, but not plunging.
Finally, the Federal Reserve concludes a key two-day policy meeting on Wednesday afternoon. Will policymakers agree to scale back asset purchases, or will they punt to the early November Fed meeting in the wake of sluggish U.S. job growth and Evergrande concerns? Meanwhile, will a majority of Fed policymakers back an interest-rate hike sometime in 2022? After the Fed meeting announcement at 2 p.m. ET, Federal Reserve Chairman Jerome Powell will hold a press conference at 2:30 p.m. ET.
A relatively dovish Fed announcement and Powell comments could buoy the stock market rally. But the statements and the market could go the other way.
Dow Jones Futures Today
Dow Jones futures edged higher vs. fair value, reversing from modest losses after the Evergrande debt payment news. S&P 500 futures and Nasdaq 100 futures were little changed. Adobe stock is a drag on S&P 500 and Nasdaq futures.
Stock Market Rally
The stock market rally opened with modest gains, with the major indexes generally positive during the session, before fading to mixed into the close.
The Dow Jones Industrial Average fell 0.15% in Tuesday’s stock market trading. The S&P 500 index dipped 0.1%. The Nasdaq composite climbed 0.2%. The small-cap Russell 2000 rose 0.2%.
Among the best ETFs, Innovator IBD 50 (FFTY) rose 1.5%, while the Innovator IBD Breakout Opportunities ETF (BOUT) climbed 0.6%. The iShares Expanded Tech-Software Sector ETF (IGV) advanced 0.2%. Adobe stock is a major IGV component. The VanEck Vectors Semiconductor ETF (SMH) edged up 0.2%. Nvidia stock is a big SMH holding.
SPDR S&P Metals & Mining ETF (XME) retreated 1%, and Global X U.S. Infrastructure Development ETF (PAVE) sank 0.8%. U.S. Global Jets ETF (JETS) declined 1%. SPDR S&P Homebuilders ETF (XHB) gave up 0.5%. The Energy Select SPDR ETF (XLE) edged up 0.2%, and the Financial Select SPDR ETF (XLF) dipped 0.1%.
Adobe earnings and revenue modestly beat fiscal Q3 estimates. The software giant also guided higher for the current Q4. But Adobe stock fell 4% in extended trade, signaling a move below the 50-day line for the first time since June. Shares edged up 0.7% on Tuesday to 645.89, rebounding from the 50-day.
Nvidia stock edged up 0.6% to 212.46 on Tuesday after rebounding intraday Monday from its 50-day line. At Monday’s low, Nvidia had wiped out a double-digit gain, a fairly strong sell signal for investors who bought on the late-August breakout. If NVDA stock gets above Monday’s intraday high of 214.33, aggressive investors could try initiating a position. But you might want to wait for Nvidia to get back above its 21-day line and break a downtrend, along with the broader market rally perking up.
Snap stock rebounded strongly from its 50-day line and broke a trendline, triggering an early buying opportunity. Shares closed up 6.1% to 76.08, near session highs. Snap stock has a flat base with an official buy point of 80.95, according to MarketSmith analysis. The relative strength line, the blue line in the charts provided, is close to record highs.
Is this another head fake? That’s a risk, especially in the current market climate.
AutoNation stock rose 1.9% to 121.09 on Tuesday, closing in on a cup-base breakout. The buy point is 125.31. AutoNation could be starting to form a handle, which would be a real positive given that shares have rallied almost straight from the bottom. The relative strength line for AN stock has already hit a new high, a very bullish sign.
Market Rally Analysis
Tuesday’s mixed action, along with Monday’s late afternoon rebound off the lows, could have been worse. At least the market didn’t break through Monday’s lows and trigger a correction call.
But Tuesday’s weak close wasn’t encouraging. The market rally remains under pressure and in a short-term downtrend. The Nasdaq composite, which led the major indexes, stopped short of the 50-day line even at intraday highs. The Dow Jones and S&P 500 are still some distance from that key level. The Russell 2000 is still below its 200-day.
What To Do Now
If you’re an especially aggressive trader, you might have tried to nibble on Snap (SNAP) or an ETF such as QQQ or FFTY, but there was no need to add exposure either. The major indexes are all below their 50-day lines and still trending lower for the past few weeks. Waiting for a little more strength may mean you miss out on a few buying opportunities. But you also avoid another leg down.
China markets and the Fed meeting announcement Wednesday offer possible market catalysts, but which way?
If this stock market rally is going to make another sustained run, you will have a number of quality stocks rebounding from key support or flashing other buy signals. If this is a one-day or short-lived pop, you’re probably not going to make any headway.
In the meantime, focus on building up those watchlists. When the market rally does show real strength, you’ll want to be quick to take advantage. Remain alert and open-minded.
Read The Big Picture every day to stay in sync with the market direction and leading stocks and sectors.
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