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Dow Jones Futures: Stock Market Sells As US Fed Sees New End Price

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Dow Jones futures fell overnight, along with S&P 500 futures and Nasdaq futures. The stock market fell sharply on Wednesday after the Federal Reserve made another aggressive hike and announced a higher peak or “terminal” interest rate.




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This is a stock market correction. Investors should remain cautious, but look for leading names.

Celsius Holdings (CELH), Shockwave Medical (SWAV), ATIA (ATIA), GlobalFoundries (GFS) and Enphase Energy (ENPH) all show strong relative strength in a weak market.

CELH shares and Shockwave Medical are on the IBD standings watchlist. Shares Celsius Holdings, Enphase and SWAV are on the IBD 50. ENPH stock is on the IBD Big Cap 20. Celsius was from Wednesday IBD Stock of the Daywhile Shockwave was from Monday.

The video in this article discussed Wednesday’s roller coaster market action and analyzed Celsius, ATI and GFS stocks.

Fed meeting

As expected, the Fed raised its key interest rate by 75 basis points for a third consecutive meeting, raising the target range to 3%-3.25%.

Fed policymakers now see the Fed Funds rate at 4.4% at the end of 2022, up 3.4% after the June meeting. That’s what the markets are pricing in: another 75 basis points at the November meeting, followed by 50 basis points in December, for a year-end range of 4.25%-4.5%.

The central bank also signaled some modest tightening in 2023, forecasting a fed funds rate of 4.6% by the end of next year versus a forecast of 3.8% in June. That is also not in line with what market viewers expected for the final rate. Policymakers expect the percentage to fall to 3.9% by 2024.

Fed chief Jerome Powell reiterated that the central bank will not give up on inflation. He noted that a “soft landing” will be difficult, but would not say what the chances of a recession are. “At some point,” the Fed will slow the pace of rate hikes, Powell said, but did not specify when that could happen. He added that the Fed’s policy will have to remain “restrictive” for some time to come.

Fed chief Powell said the labor market is still “out of balance,” although he added that commodity prices look like they’ve peaked.

Dow Jones Futures Today

Dow Jones futures fell 0.6% from fair value. S&P 500 futures fell 0.85%. Nasdaq 100 futures fell 1.05%.

Ten-year government bond yields rose by 5 basis points to 3.56%.

Remember that nighttime action in Dow Futures and elsewhere does not necessarily translate into actual trading in the following regular stock market session.


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Stock market Wednesday

The stock market rose modestly in the Fed meeting decision, then went on a rollercoaster ride that ended at session lows.

The Dow Jones Industrial Average fell 1.7% on Wednesday stock market. The S&P 500 index also fell 1.7%. The Nasdaq composite fell 1.8%. The small-cap Russell 2000 fell 1.5%

The price of crude oil in the US fell by 1.2% to $82.94 a barrel.

The yield on 10-year Treasuries fell 6 basis points to 3.51%, after briefly reaching 3.62% following the Fed rate hike. Two-year Treasury yields rose above 4%, closing around 4.04%, but well short of session highs.

ETFs

Below the best ETFsthe Innovator IBD 50 ETF (FFTY) fell by 1.8%. The iShares Expanded Tech Software Sector ETF (IGV) gave up 1.4%. The VanEck Vectors Semiconductor ETF (SMH) lost 0.8%.

SPDR S&P Metals & Mining ETF (XME) fell 2.1% while US Global Jets ETF (JETS) fell 4% on a bad day for travel games. SPDR S&P Homebuilders ETF (XHB) loss 1.1%. The Energy Select SPDR ETF (XLE) fell 1.5% and the Financial Select SPDR ETF (XLF) 2.1%. The Health Care Select Sector SPDR Fund (XLV) fell by 1.7%.

Due to more speculative story stocks, ARK Innovation ETF (ARKK) lost 2.65% and ARK Genomics ETF (ARKG) 2.7%.


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CELH Stock

The Celsius share fell 3.9% to 98.23 on Wednesday. Shares have retreated to find support from the 10-week moving average, after rising 209% from early May to late August. In a few weeks, CELH stock could be on a new footing, hitting 118.29 buy point. Investors could use 108.47 as an early entry point for the energy drink maker.

The relative strength line for CELH, the stock is at record highs.

Shockwave stock

SWAV shares fell 1.85% to 284.69 on Wednesday, falling lower from 300.96 intraday. Shockwave stocks continue to find support around the 21-day line.

ATI stock

ATI shares lost just over 2% to 29.67 and traded around the 21-day line after pulling from a seven-year high of 33.31. Shares of the specialty alloy maker have retreated to the top of a previous base and just above the 10-week line. A 10-week line bounce could provide early entry, with a good base still a week away.

While ATI stocks have pulled back, the RS line is right at the highest level.

GFS stock

GlobalFoundries share fell 0.9% to 56.29. That’s just above the 50-day and brand-new 200-day lines, while GFS shares are slightly below the 10-week line. The chip foundry IPO in 2021 has a very deep double bottom with a handle, with a 66.06 point of sale. By the end of this week, the GFS stock’s handle will be long enough to be its own base, with the same entry of 66.06.

ENPH Stock

Enphase shares fell 15 cents to 304.56 and continued to find support near the 21-day moving average. ENPH stocks are still expanding from the 50-day line, but are declining. The RS line for Enphase stocks has been hitting new highs for weeks.

Stock market analysis

As usual, the stock market was in turmoil following the Fed’s decision to hike rates, new interest rate projections and Powell’s comments, before recovering strongly for a short period of time before closing with significant losses. The major indexes ended up having ugly, remote reversal sessions.

While markets were not taken by surprise on Wednesday, the Fed’s overall tone was likely a little more aggressive than expected. But in the end, the Federal Reserve is aggressively raising interest rates despite mounting recession risks to bring inflation back on track.

Markets will often have a Fed reaction on day two. But even if stocks recover on Thursday, that wouldn’t make sense.

Major indices all undercut Wednesday’s recent lows and lose track of their 50-day moving averages. The lows of June are not that far away.


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What to do now

In the end, it’s not about the news, it’s about the market’s reaction to the news. And the stock market did not react well to Wednesday’s Fed meeting decision.

Could the market see a rebound in the near term, or even quite a rally over several weeks? Secure. But investors will want to see a lot more evidence.

Leading stocks such as Celsius, Shockwave and Enphase can send buy signals early in a market rally attempt. But investors have to balance the urge to get into popular stocks quickly and ensure a broad uptrend is underway. If the market moves towards lows of June or beyond, even relative leaders are likely to collapse.

If there is a real stock market rally, there are plenty of opportunities. The key is to be ready.

Work on those watchlists. Focus on stocks with strong relative strength and those names that hold or regain key moving averages.

Read The big picture every day to stay in sync with market direction and leading stocks and sectors.

Follow Ed Carson on Twitter at @IBD_ECarson for stock updates and more.

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