Dow Jones futures fell modestly early Wednesday, along with S&P 500 futures and Nasdaq futures. Chipotle, Enphase Energy, Fortinet and Uber were notable earnings movers in premarket trade, while an AI arms race continues to heat up.
The stock market rally was volatile Tuesday as Fed chief Jerome Powell spoke, continuing to balance hawkish and dovish comments. The major indexes ultimately closed higher, still in a recent range of the past few sessions.
Microsoft held an event highlighting OpenAI's ChatGPT, with Google, Baidu and more pushing ahead with their own AI plans. Microsoft and Google parent Alphabet rose solidly Tuesday, while BIDU stock gapped higher.
MSFT stock kept rising early Wednesday, with Google set to show off its "Bard" AI chatbot today.
After the close, Vertex Pharmaceuticals, Chipotle Mexican Grill, Paycom Software, Fortinet and Enphase Energy all reported.
CVS Health released Q4 views early Wednesday, and agreed to buy Medicare-focused primary-care center Oak Street Health for $9.5 billion, or $39 a share. Uber Technologies and Taco Bell parent Yum Brands also reported, with Wendy's due before Wednesday's open.
President Joe Biden touted his economic record in his State of the Union speech Tuesday night. He also called for a special billionaire tax and quadrupling a tax on stock buybacks.
The video embedded in this article reviewed Tuesday's market action and analyzed On Holding, WillScot Mobile and Microsoft stock.
AI Arms Race Expands
Microsoft will incorporate some ChatGPT tech into its Bing search engine and Edge web browser aiming to get an edge over Google.
Microsoft significantly upped its investment in OpenAI earlier this year.
MSFT stock popped 4.2% to 267.56, clearing Thursday's high and hitting its best levels since late August. That offers a buying opportunity for Microsoft stock, still close to the 200-day line, a bottoming base and a long-term trendline.
Meanwhile, Google will hold a Search and AI event on Wednesday afternoon, two days after touting its ChatGPT rival "Bard." GOOGL stock jumped 4.6% to 107.64 Tuesday, reclaiming its 200-day.
China search giant Baidu on Tuesday confirmed it will launch a ChatGPT-style bot, named Ernie, opening it to the public in March. BIDU stock spiked 12.2% to 160.22, vaulting to clear key resistance to an 11-month high. But shares are far above their 50-day line.
MSFT stock rose 1% early Wednesday, paring gains as a U.K. regulator said Microsoft's planned Activision Blizzard deal would hurt gamers.
Alibaba advanced modestly on reports that the Chinese e-commerce giant is working on its AI chatbot.
GOOGL stock and Baidu lost more than 1% in premarket trade.
Dow Jones Futures Today
Dow Jones futures fell 0.35% vs. fair value. S&P 500 futures retreated 0.5% and Nasdaq 100 futures declined 0.4%. MSFT stock is a Dow Jones, S&P 500 and Nasdaq 100 component.
Crude oil futures rose slightly.
The 10-year Treasury yield fell 1 basis point to 3.66%.
Remember that overnight action in Dow futures and elsewhere doesn't necessarily translate into actual trading in the next regular stock market session.
Key Earnings
Vertex earnings topped while revenue was in line. The biotech giant guided in line with views for a big slowdown in growth in 2023. It also set a $3 billion buyback. VRTX stock fell slightly early Wednesday. Shares rose 1.2% Tuesday to 308.54, moving aback above the 50-day line. Vertex is working on a 324.85 buy point from a cup base.
Chipotle earnings, revenue and same-store sales fell short. CMG stock declined 5% overnight. Chipotle stock rose 1.3% on Tuesday to 1722.86, just out of buy range from a double-bottom base.
Paycom earnings topped while guidance also was solid. PAYC stock fell 2.5% in extended action. Shares popped 4.5% to 344.52 on Tuesday. Paycom stock has a 402.88 consolidation buy point, according to MarketSmith analysis. It has an early entry of 362.46.
How Did Your Online Broker Do In IBD's 2023 Best Online Broker Survey?
Fortinet earnings beat while revenue just missed. But the cybersecurity giant gave upbeat 2023 guidance. FTNT stock skyrocketed 12% in extended action, looking to vault above the 200-day line after many failed attempts over the past nine months. Shares rose 3.4% to 53.78, right on the 200-day line.
Enphase earnings comfortably beat views with the solar inverter maker also guiding higher for Q1. ENPH stock leapt 8% in premarket trade, signaling a move back to its 200-day line. Shares rose 2.45% to 228.46 on Tuesday.
CVS Health topped EPS views and especially revenue forecasts. CVS stock climbed 3%. OSH stock rose 4% after spiking 30% Tuesday on reports that a CVS-Oak Street Health deal was close.
Uber earnings and revenue topped, with the ride-share and food delivery app giant guiding up. Shares rallied 7% before the open. UBER stock already is extended from a cup-with-handle bottoming base.
Yum Brands earnings and revenue topped. Shares edged lower within a base after retaking the 50-day line Tuesday.
UBER stock is on the IBD Leaderboard watchlist. VRTX stock is on the IBD Big Cap 20. Fortinet, Microsoft and Google stock are on IBD Long-Term Leaders.
Join IBD experts as they analyze actionable stocks in the stock market rally on IBD Live
Fed Chief Powell
Fed chief Powell, speaking Tuesday afternoon, said the "disinflationary process" has begun. But he did note that Friday's strong January jobs report shows that there is a "significant road ahead" to get inflation down. He said if economic data continues to come in hot, then "we have to do more and raise rates more than is priced in."
Investors now strongly expect two more quarter-point rate hikes, bringing the target rate to 5%-5.25%, in line with Fed forecasts from late last year.
But the odds of another hike in June have risen to 38.6% from 28.8% on Monday and just 3.6% on Jan. 31.
Stock Market Rally
The stock market rally was up and down Tuesday, especially after Fed chief Powell began speaking, but ultimately closed with solid gains, near session highs
The Dow Jones Industrial Average advanced 0.8% in Tuesday's stock market trading. The S&P 500 index jumped 1.3%. The Nasdaq composite leapt 1.9%. The small-cap Russell 2000 rose 0.7%.
U.S. crude oil prices jumped 4.1% to $77.14 a barrel.
The 10-year Treasury yield rose 4 basis points to 3.67%, up 28 basis points in the last three sessions.
ETFs
Among growth ETFs, the Innovator IBD 50 ETF popped 1.7%. The iShares Expanded Tech-Software Sector ETF jumped 2.3%. Microsoft stock is a major IGV holding. The VanEck Vectors Semiconductor ETF ran up 3%.
SPDR S&P Metals & Mining ETF rose 0.6%. U.S. Global Jets ETF was unchanged. SPDR S&P Homebuilders ETF maintained altitude. The Energy Select SPDR ETF leapt 3.25% and the Financial Select SPDR ETF advanced 1.15%. The Health Care Select Sector SPDR Fund climbed 0.6%.
Reflecting more-speculative story stocks, ARK Innovation ETF climbed 1.75% and ARK Genomics ETF 1.7%.
Five Best Chinese Stocks To Watch Now
Market Rally Analysis
The stock market rally rebounded after a two-day retreat. The major indexes remain within a very recent range.
The Nasdaq and Russell 2000 are still above their late 2022 peaks. Above Thursday's highs lie their August peaks.
The S&P 500 pulled back to its December high intraday but rebounded nicely.
The Dow Jones, now the laggard, tested its 50-day line once again before coming on. But even the Dow isn't far from its December peak.
Google and Microsoft stock, along with Apple, Meta Platforms and Nvidia, helped lead the Nasdaq on Tuesday. But the Direxion Nasdaq-100 Equal Weighted Index ETF still climbed 1.65% Tuesday, much closer to its August highs than the Nasdaq or Nasdaq 100.
After big gains in the Nasdaq and leading stocks, a pause isn't a surprise. So far the pullback seems normal and healthy. The market rally is digesting gains while leading stocks are forging handles or pulling back to key levels.
This pullback could quickly end or last for weeks. There's always the possibility that the pullback becomes more significant for the indexes or specific sectors.
Time The Market With IBD's ETF Market Strategy
What To Do Now
The stock market rally still looks healthy. Investors can choose to keep adding exposure carefully. But they also may want to wait for the current pause to end.
As Tom Petty said, the waiting is the hardest part. When the market is in a confirmed uptrend, there's a temptation to stay active. But that can lead to heartbreak. A lot of money is in the sitting.
There were some buying opportunities Tuesday, including Aecom Technology and WSC stock. But there wasn't a flood. Many leaders are extended. Several are working on new setups, but generally could use more time to develop, such as ONON stock.
But keep a close eye on them as you update your watchlists. If the market rally revs up again you'll want to be ready to start or add to positions as close to buy points as possible.
Read The Big Picture every day to stay in sync with the market direction and leading stocks and sectors.
Please follow Ed Carson on Twitter at @IBD_ECarson for stock market updates and more.
