Dow Jones futures rose slightly overnight, along with S&P 500 futures and Nasdaq futures, with attention turning to Wednesday’s Federal Reserve meeting and whether policymakers will confirm or dash Fed pivot hopes.

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The stock market rally reversed lower from early gains Tuesday as stronger-than-expected economic data was not what the Fed wants to see. Megacap techs continue to weigh on the indexes, especially the Nasdaq. Amazon.com (AMZN) and Google parent Alphabet (GOOGL) tumbled to fresh bear-market lows while Apple (AAPL) and Microsoft (MSFT).

Advanced Micro Devices (AMD), lithium producer Livent (LTHM), drug distributor McKesson (MCK), Paycom Software (PAYC), and shale oil and gas producer Devon Energy (DVN) headlined key earnings overnight.

AMD stock rose despite weak results. Livent fell as hot revenue growth wasn’t quite hot enough. Devon Energy stock retreated on a dividend but. PAYC stock edged higher on strong earnings while MCK stock was not yet trading after mixed results.

DVN stock is on the IBD 50.

Meanwhile Tesla (TSLA) rival BYD (BYDDF) will report October sales soon, following lackluster-at-best deliveries from Nio (NIO), Li Auto (LI) and Xpeng (XPEV). BYD stock rose 2.6% Tuesday, while Tesla stock closed up 0.1%, both off intraday highs.

Fed Meeting

The Federal Reserve is expected to increase rates by 75 basis points for a fourth straight meeting. But the market is split over whether policymakers will hike rates by 50 or 75 basis points in December.

Some relatively tame inflation data and various central bank moves around the world — including a few hints from Fed officials — have bolstered hopes of a Fed pivot to smaller rate hikes.

The Fed policy statement is due out at 2 p.m. ET Wednesday, with Fed chief Jerome Powell’s news conference at 2:30 p.m. Investors will be looking for any Fed pivot hints. Powell may not want to give clear signals to maintain maximum flexibility.

The Fed chief will likely include caveats about reacting to key data. The October jobs report is due on Friday, following a stronger-than-expected September JOLTS survey.

Dow Jones Futures Today

Dow Jones futures climbed 0.15% vs. fair value. S&P 500 futures advanced 0.2% and Nasdaq 100 futures rose 0.3%.

The 10-year Treasury yield fell 2 basis points to 4.03%.

Crude oil futures rose 1%.

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

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Stock Market Rally

The stock market rally retreated Tuesday. The major indexes opened solidly higher, fueled by lower Treasury yields and unconfirmed chatter that China could move toward easing its strict zero-Covid policy.

But at 10 a.m. ET, job openings unexpectedly popped in September, while the ISM manufacturing index remained above the break-even 50 level in October. Treasury yields rebounded and stocks quickly turned lower.

The Dow Jones Industrial Average dipped 0.2% in Tuesday’s stock market trading. The S&P 500 index fell 0.4%. The Nasdaq composite retreated 0.9%. The small-cap Russell 2000 climbed 0.25%, its eighth straight advance.

Amazon stock skidded 5.5%, undercutting Friday’s low to the worst level since April 2020. That’s after plunging 13% last week on earnings. AMZN stock has fallen for five straight sessions in heavy volume.

Google stock slumped 4.3% to the worst since January 2021, after skidding 4.8% last week.

Apple stock fell 1.75%, reversing from near its 200-day line to close just below its 50-day. AAPL stock popped 5.75% last week.

Microsoft stock gave up 1.7%, not far from bear-market lows. MSFT stock fell 2.6% last week.

The 10-year Treasury yield fell 3 basis points to 4.05%, but finished near session highs. The 10-year yield tumbled to 3.955% soon after the open, but once again found support at its 21-day moving average. The U.S. dollar slashed early losses.

U.S. crude oil prices rose 2.1% to $88.37 a barrel. Crude futures rose on hopes that China will adjust its Covid policies, as well as a report that Saudis are on high alert for an Iranian attack. Natural gas futures plunged 10% after spiking nearly 12% Monday.

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ETFs

Among the best ETFs, the Innovator IBD 50 ETF (FFTY) climbed 0.6%. The iShares Expanded Tech-Software Sector ETF (IGV) sank 1.3%, with MSFT stock a core holding. The VanEck Vectors Semiconductor ETF (SMH) rose 0.7%, with AMD stock a major component.

SPDR S&P Metals & Mining ETF (XME) gained 1.5% and the Global X U.S. Infrastructure Development ETF (PAVE) gained 0.6%. The Energy Select SPDR ETF (XLE) advanced 1%, with DVN stock a top 10 holding. The Health Care Select Sector SPDR Fund (XLV) edged up 0.1%.

Reflecting more-speculative story stocks, ARK Innovation ETF (ARKK) rose 1 cent while ARK Genomics ETF (ARKG) climbed 1.3%

Tesla stock is a major holding across Ark Invest’s ETFs. Tesla Cybertruck mass production will begin at the end of 2023, Reuters reported early Tuesday.

Cathie Wood’s Ark owns a small stake in BYD stock. BYD’s EV and plug-in hybrid sales have surged past Tesla’s total, though the U.S. giant still leads in fully electric “BEV” deliveries.

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Key Earnings

AMD earnings and sales slightly missed lowered views, after the chip giant reported preliminary revenue that was far below consensus. AMD also signaled Q4 revenue will fall slightly short of consensus, but would be up roughly 14% vs. a year earlier.

AMD stock popped 4% in overnight trade. Shares dipped 0.7% to 59.66 on Tuesday. AMD stock has bounced slightly from the Oct. 13 bear market low of 54.57, but not much.

Nvidia (NVDA), which competes with AMD in graphics chips, advanced slightly in after-hours trading.

Livent earnings skyrocketed, topping views but revenue fell just short despite more than doubling vs. a year earlier. LTHM stock fell 6% in extended action. Shares lost 0.8% to 31.33 on Tuesday, reversing lower to around its 50-day line. Livent stock has a 36.48 cup-base buy point, according to MarketSmith analysis.

ALB stock, with a similar chart, edged lower in limited after-hours trading. Lithium giant Albemarle (ALB) reports late Wednesday.

Devon Energy earnings topped views, but the oil producer is cutting its dividend by 13%. DVN stock fell 2.7% overnight. Shares edged down 5 cents to Tuesday to 77.30, holding in range of a 75.37 cup-with-handle buy point. DVN stock remains somewhat extended from a rising 50-day line.

Paycom earnings topped views, with revenue guidance also strong. PAYC stock was little changed in extended trade. Shares retreated nearly 1% on Tuesday to 342.72, just above the 50-day line and below a trendline. A strong post-earnings move could offer an early entry. PAYC stock has a 402.88 consolidation buy point.

McKesson earnings just missed while revenue slightly topped. MCK stock was not yet trading in overnight action. Shares fell 1.85% to 382.16 on Tuesday, but holding in range from a 375.33 flat-base buy point. That flat base is part of a base-on-base pattern.

Cardinal Health (CAH), which reports Friday, also was not trading after-hours. CAH stock is slightly extended from a buy point.

Market Rally Analysis

The major indexes opened strong, but backed off on stronger-than-expected economic data.

The Dow Jones fell back below its 200-day line, while the Russell 2000 moved toward the level. The S&P 500 is still holding the 50-day line, while the Nasdaq is hitting resistance near that area.

Much of Tuesday’s weakness reflected the weakness in AMZN stock, Google and other megacaps.

The Invesco S&P 500 Equal Weight ETF (RSP) rose 0.2%, trading between the 200-day and 50-day lines.

Advancing stocks led decliners on the NYSE and Nasdaq.

Investors shouldn’t overthink Tuesday’s market rally action, coming ahead of the Fed meeting announcement and Fed chief Powell’s commentary.

But the major indexes and leading stocks have has rallied in large part in anticipation of a Fed pivot. If Powell provides a hawkish surprise, the stock market rally could see a major sell-off.

Tuesday’s stock market and Treasury yield moves could pale next to the post-Fed reaction.

The post-Fed reaction could continue, perhaps reversing, on Thursday. Friday’s jobs report likely will roil markets as well.

Leading stocks showed mixed action, with heavy earnings still driving individual names higher or lower.

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What To Do Now

The stock market rally appears to be in good shape on a technical basis, despite Tuesday’s downside reversal.

Investors should likely hold off on adding exposure until after the Fed rate hike and Powell’s commentary. They could choose to pare exposure slightly heading into Wednesday’s afternoon announcement depending on their risk tolerance.

While the Fed meeting is like an earnings report for the market rally, don’t forget actual earnings.

Earnings aren’t as market moving as last week’s megacap releases, but still have a huge impact on individual stocks.

The coming days will be key for the market rally. So have your watchlists ready. Stay engaged and ready to add or reduce exposure.

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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