Dow Jones futures were little changed Wednesday night, along with S&P 500 futures and Nasdaq futures. The stock market rally had a disappointing session Wednesday, with the Nasdaq retreating from a key level after the Federal Reserve meeting and Fed chief Jerome Powell’s press conference. Apple stock, Amazon.com (AMZN), Microsoft (MSFT), PayPal (PYPL), Netflix (NFLX) and Adobe (ADBE) struggled, while software IPOs Snowflake (SNOW) and JFrog stock had powerful debuts.
The Fed meeting ended with policymakers signaling no Fed rate hikes through 2023. But the meeting statement and Fed chief Jerome Powell also gave no indication they would step up asset buys to boost inflation.
The stock market rally initially strengthened on the Fed news but selling took hold with the major indexes closing at session lows. The Nasdaq composite took the hardest hit after briefly peeking above its 21-day exponential moving average. The S&P 500 index reversed lower while the Dow Jones just stayed positive as some real economy names fared well.
Apple hit resistance at its 21-day line, like the Nasdaq. Adobe stock fell back below that key level despite strong earnings. Amazon stock, Microsoft, Netflix and PayPal hit resistance at their 50-day lines.
New IPO Stocks Shine
Warren Buffett-backed Snowflake stock surged 112% to 253.93 after hitting 319 intraday. The Snowflake IPO raised $3.4 billion, a record for a software IPO. If Snowflake was the IPO king then JFrog (FROG) was still a prince, leaping 47% to 64.79. JFrog stock raised $504 million. Both priced above their expected ranges. Meanwhile, Recent China IPO KE Holdings (BEKE) broke out. KE Holdings stock, which debuted last month, was Wednesday’s IBD Stock Of The Day.
But Wednesday’s action in the major indexes and leading stocks underscored that investors should remain cautious until the market direction decisively improves.
Apple, Amazon.com, Adobe, Microsoft, Netflix and PayPal are on IBD Leaderboard, with KE Holdings joining that elite group. Microsoft stock, Adobe and PayPal are IBD Long-Term Leaders. Netflix stock, Adobe, Microsoft, Amazon and PayPal are all on the IBD 50.
Dow Jones Futures Today
Dow Jones futures were flat vs. fair value. S&P 500 futures edged higher and Nasdaq 100 futures climbed 0.1%. Remember that overnight action in Dow futures and elsewhere doesn’t necessarily translate into actual trading in the next regular stock market session.
Coronavirus cases worldwide reached 30.02 million. Covid-19 deaths topped 944,000.
Coronavirus cases in the U.S. have hit 6.82 million, with deaths above 201,000. India now has more than five million Covid-19 cases.
Paul Mango, deputy chief of staff for policy at the Department of Health and Human Services, said every American should be able to get a shot by next April. Anthony Fauci, head of the National Institute for Allergy and Infectious Diseases, said that timeline is “aspirational,” with mid- to late 2021 more likely.
Meanwhile, Eli Lilly said a coronavirus antibody treatment reduced hospitalization rates. That boosted LLY stock, though it pared gains to just 0.6%.
Coronavirus Stock Market Rally
U.S. Stock Market Today Overview
Last Update: 4:12 PM ET 9/16/2020
The coronavirus stock market rally had a mixed but generally bearish session.
The Dow Jones Industrial Average rose more than 1% intraday but closed up just 0.1% in Wednesday’s stock market trading. Dow Jones components Boeing (BA), Caterpillar (CAT) rallied, while non-Dow stocks General Electric and airlines also rallied on economic recovery hopes. The S&P 500 index fell 0.5%, back below its 21-day line after nudging above that level Wednesday. The Nasdaq composite sank 1.25%.
Apple fell slid 2.9%, with the Dow Jones tech titan now worth $1.92 trillion. Adobe opened higher on strong earnings but reversed down 4.35%. Shares are still above a buy point.
Microsoft fell 1.8% while Amazon sank 2.5% to a one-month low. PayPal stock also hit 50-day line resistance, sinking 2.75% to its worst level since July 29. Netflix retreated 2.45%, turned back from its 21-day and 50-day lines.
Among the best ETFs, the Innovator IBD 50 ETF (FFTY) fell 1%. The iShares Expanded Tech-Software Sector ETF (IGV) slid 1.5%, with Adobe and Microsoft stock major components. The VanEck Vectors Semiconductor ETF (SMH) 1.2%.
Stock Market Rally Rangebound
Wednesday’s action showed that the stock market rally remains rangebound. The Nasdaq moved above its 21-day line for the third time in a week, but once again failed to close above that resistance area.
The tech-heavy index continues to move between the 21-day and 50-day line, with the S&P 500 largely following suit. Just as stocks start breaking out and looking positive, luring investors in, the overall market hits a wall. Once again, the Nasdaq is slightly closer to the 50-day than the 21-day.
The stock market rally remains “under pressure.”
With the 21-day line falling toward the still-rising 50-day line, that leaves little room to trade. The danger is that investors buy stocks that look good in the moment, but then those holdings quickly retreat with the market. That could wear down hard-won stock market rally gains, while wearing down your psyche.
What Investors Should Do
Investors can make buys in the current market, but keep them small.
If the stock market rally decisively moves higher and begins a new leg higher, then many recent buys — but perhaps not all — will deliver solid gains.
But if the market goes on another run over several weeks, many other buying opportunities will present themselves. Keep in mind that getting above the 21-day line will merely push the S&P 500 and Nasdaq into a higher section of a broader range going back to the Sept. 2 peak.
Meanwhile, if the stock market rally breaks below its 50-day line and moves into a correction, investors will likely need to cut most recent buys. Further, in a stock market correction, you may need to make hard decisions about big winners that you’ve held through the strong market rally.
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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