Dow Jones futures fell modestly after hours, along with S&P 500 futures and Nasdaq futures, with attention turning to the Federal Reserve meeting announcement Wednesday. Advanced Micro Devices (AMD) and SNAP stock headlined overnight earnings.

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The stock market rally rebounded Tuesday, recouping much of Monday’s retreat. The Nasdaq composite is now in a power trend.

Ahead of the Fed meeting announcement Wednesday afternoon, several key economic reports and an OPEC+ meeting will come in the morning.

AMD and Snapchat parent Snap (SNAP) reported after the close.

AMD earnings and revenue slightly beat views. The chipmaker sees Q1 revenue down 10%, worse than consensus but better than feared. AMD stock rose slightly after hours. Shares rose 3.7% to 75.15 on Tuesday. AMD stock is working on a bottoming base with a 79.33 buy point. It’s well below the 200-day line, but a real breakout would involve clearing that key level.

AMD rival Nvidia (NVDA) edged lower in late trading. NVDA stock rose nearly 2% to 195.37 on Tuesday, in buy range from a short cup base.

Snap earnings topped views, but revenue just missed. The social network sees Q1 revenue tracking for a 2%-10% decline. SNAP stock plunged 15% overnight. Shares climbed 4.2% to 11.56 on Tuesday.

Snap earnings and guidance presage Meta Platforms (META) and Pinterest (PINS). Facebook parent Meta Platforms (META) reports Wednesday night, with Pinterest (PINS) due next Monday. META stock fell slightly late, after closing just below the 200-day line. PINS stock declined modestly. Pinterest has a three-weeks-tight entry modestly above key moving averages.

The video embedded in this article discussed Tuesday’s market rally and the upcoming Fed rate hike decision, and analyzed Nvidia stock, Arista Networks (ANET) and Etsy (ETSY).

China EV Sales

Early Wednesday, Tesla China rivals Nio (NIO), Li Auto (LI) and Xpeng (XPEV) will report January deliveries. The Lunar New Year holiday, as well as heavy Covid infections, hit sales last month. So it’s hard to draw conclusions about February and beyond, especially in the wake of Tesla (TSLA) price cuts that rivals are still reacting to.

Nio stock and Xpeng are in bottoming bases, but well below their 200-day lines. Li Auto is butting up against the 200-day. EV and battery giant BYD (BYDDF) is flashing an aggressive entry from its 200-day line, with January sales due later this week. Tesla stock soared nearly 41% in January, vaulting above its 50-day line, but doesn’t have a clear buy point.

Fed Rate Hike Outlook

The Federal Reserve is set to slow rate hikes for a second straight meeting, increasing the fed funds rate by a quarter point at 2 p.m. ET Wednesday, to a 4.5%-4.75% range. That follows a half-point hike in December after four straight 75-basis-point increases in November.

Markets overwhelmingly expect another quarter-point Fed rate hike in late March, to 4.75%-5%. But then investors are leaning toward no more hikes.

So central bank hints about the rate hike outlook, inflation and the economy will be key. Will the Fed policy statement keep language expecting “ongoing increases?”

Fed chief Jerome Powell, speaking at 2:30 p.m. ET, will certainly stress the Fed’s commitment to keeping rates high to bring down inflation. But with rate hikes slowing and close to a pause, Fed chief Powell may be more subtle, keeping the central bank’s options open.

Before the Fed meeting announcement, investors will get another batch of economic data. The ADP employment report for January will be out at 8:15 a.m. ET, with December job openings and the January ISM manufacturing index at 10 a.m. ET.

On Friday, the January jobs report is due. Before the March meeting, the Fed will get the February jobs report, as well as the January and February CPI inflation reports.

Early Tuesday, the employment cost index came in slightly lighter than expected. The ECI, a broad measure of worker compensation, rose 1% in Q4, the third straight quarter of decelerating growth.

Dow Jones Futures Today

Dow Jones futures fell 0.2% vs. fair value. S&P 500 futures dipped 0.3%. Nasdaq 100 futures declined 0.5%.

The 10-year Treasury yield dipped 2 basis points to 3.51%.

The Caixin China manufacturing index edged up 0.2 point in January to 49.2. A day earlier, the official China manufacturing index jumped 3.1 points to 50.1, just over the break-even 50 level.

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

Join IBD experts as they analyze actionable stocks in the stock market rally on IBD Live

Stock Market Rally

The stock market rally had a strong session, bouncing back from Monday’s retreat.

The Dow Jones Industrial Average rose 1.1% in Tuesday’s stock market trading. The S&P 500 index popped 1.5%. The Nasdaq composite jumped 1.7%. The small-cap Russell 2000 leapt 2.4%.

U.S. crude oil prices rose 1.25% to $78.87 a barrel. OPEC+, which includes the oil cartel and key allies such as Russia, is meeting Wednesday morning. Markets are expecting no change in OPEC+ production quotas.

The 10-year Treasury yield dipped 2 basis points to 3.53%, helped by the relatively tame ECI report.

ETFs

Among growth ETFs, the Innovator IBD 50 ETF (FFTY) climbed just over 2%. The iShares Expanded Tech-Software Sector ETF (IGV) advanced 1.4%. The VanEck Vectors Semiconductor ETF (SMH) rose 1.5%, with AMD and NVDA stock major holdings.

SPDR S&P Metals & Mining ETF (XME) gained 1.15% and the Global X U.S. Infrastructure Development ETF (PAVE) drove 2.3% higher. U.S. Global Jets ETF (JETS) ascended just over 1%. SPDR S&P Homebuilders ETF (XHB) surged 4.8% amid strong earnings. The Energy Select SPDR ETF (XLE) rose 0.9% and the Financial Select SPDR ETF (XLF) 1.4%. The Health Care Select Sector SPDR Fund (XLV) climbed 1.3%

Reflecting more-speculative story stocks, ARK Innovation ETF (ARKK) leapt 3.7% and ARK Genomics ETF (ARKG) popped 3.1%. Tesla stock is a major holding across Ark Invest ETFs. Cathie Wood’s Ark also owns a small stake in Tesla rival BYD’s stock.

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Market Rally Analysis

The stock market rally rebounded Tuesday, making Monday’s retreat look like a normal pause around key levels amid a robust advance.

The Nasdaq composite regained the 200-day line, right around its December peaks. The S&P 500 and Dow Jones rose solidly, with blue chips finding support near their 50-day lines.

The Russell 2000 index recouped all of Monday’s losses and then some, now clearly above its late 2022 highs.

The major indexes decisively clearing their late 2022 highs would be a very bullish sign.

The Nasdaq composite and Russell 2000 are now in a power trend, meeting all four conditions. The S&P 500 and Dow Jones are not there. A power trend is a positive signal, but last year the market stalled out multiple times soon after power trends came into force.

The Fed meeting looms large Wednesday. The market rally is expecting an end to rate hikes in March or possibly May. Wednesday’s economic data and Friday’s jobs report will help markets interpret Fed chief Powell’s statements.

Don’t forget about earnings. AMD reported late Tuesday. Meta Platforms is due Wednesday night and Apple (AAPL), Amazon.com (AMZN) and Google parent Alphabet (GOOGL) are on tap Thursday night, along with hundreds of others.

Those earnings reports could roil the major indexes as well as sectors and, of course, individual names.

Just as AMD earnings will influence Nvidia stock and Snap moves Meta, Meta’s spending plans will influence the likes of Arista Networks and Pure Storage (PSTG). Amazon earnings will likely be a catalyst for Etsy stock. Apple earnings will swing the iPhone ecosystem while Google earnings will hit on a wide variety of companies.

ANET stock and Pure Storage are near early entries, while Etsy, a SwingTrader holding, is just below a buy point.

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What To Do Now

The stock market rally is acting well, with a strong uptrend and only minor pullbacks. Leading stocks are flashing buy signals that are generally working. It’s been a good time to add exposure.

The Fed meeting announcement and Fed chief Powell could be a catalyst for big market moves. But so could earnings and economic data. Investors should not too aggressive about taking on new positions for the next couple of days, even if the technical picture for the market and specific stocks looks promising.

Remember, if you’re going to be aggressive getting into stocks, you have to be ready to get out just as quickly.

Work on your watchlists. Dozens of stocks are setting up or flashing buy signals. You want to have your eyes on them, analyzing potential targets before pulling the trigger.

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.

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