Dow Jones futures rose slightly overnight, along with S&P 500 futures and Nasdaq futures. The stock market rally suffered heavy losses after the Federal Reserve meeting on Wednesday.
Major indices rebounded after the Fed again aggressively raised interest rates, but indicated that the could slow the pace of tariff increases. However, Fed chief Jerome Powell suggested that interest rates will peak at an even higher level than previously forecast.
Investors should be cautious as the stock market rally is hurting. But it’s not ready yet.
Albemarle (ALB), CF Industries (CF), Qualcomm (QCOM), Sarepta Therapeutics (SRPT), fortinet (FTNT), Robinhood Markets (CAP), World Wrestling Entertainment (WWE) and elf beauty (ELF) reported after closing time. There were several losers with ELF shares and Robinhood, both profit winners.
Fed revolves around slower rate hikes
As expected, the Federal Reserve raised interest rates by 75 basis points for a fourth meeting in a row, to a range of 3.75%-4%.
The Fed hinted at a slower pace for rate hikes, citing the delayed impact of “cumulative” tightening this year.
In determining the pace of future increases in the target range, the Committee will take into account the cumulative tightening of monetary policy, the delays with which monetary policy affects economic activity and inflation, and economic and financial developments. mail from the Fed. – meeting statement.
Powell sees higher peak speed
Fed chief Jerome Powell, speaking shortly after announcing the Fed meeting, agreed that policymakers could slow rate hikes as early as December. He said the “speed” of rate hikes is now less important than where rates land.
But Powell suggested that the Fed Funds rate could turn out higher than the Fed’s September forecast of 4.6%. That suggests a fed funds rate of 4.75%-5%.
Markets now expect a 57% chance of a 50 basis point rate hike in December, up slightly from just over 50% on Tuesday. That would push the Fed Funds rate up to 4.25%-4.5%. The odds currently favor at least 50 basis points at the February meeting, up to 4.75%-5%.
Friday’s jobs report will be important in determining expectations for the rate hike. The November jobs report, as well as two CPI reports, will also arrive before the next rate hike decision on December 14.
Dow Jones Futures Today
Dow Jones futures were up 0.1% from fair value. S&P 500 futures were up 0.1% and Nasdaq 100 futures were up 0.2%.
Ten-year government bond yields rose by 5 basis points to 4.11%.
Crude oil futures fell 1%.
stock market rally
The stock market rally initially recovered after a Fed rate hike and a moderate policy statement, then declined sharply as Powell announced a higher end point for Fed Funds rates.
The Dow Jones Industrial Average fell 1.55% on Wednesday stock market. The S&P 500 index fell 2.5%. The Nasdaq composite sold 0ff 3.4%. The small-cap Russell 2000 slipped 3.3%.
10-year Treasury yields rose 1 basis point to 4.06%, recovering from an intraday low of 3.98% shortly after the Fed meeting. The US dollar also bounced higher.
The price of crude oil in the US rose 1.8% to $90 a barrel. Natural gas futures were up 9.7%, continuing this week’s trend of huge daily moves.
Below the best ETFsthe Innovator IBD 50 ETF (FFTY) fell 2.1%, while the Innovator IBD Breakout Opportunities ETF (BOLT) gave up 2%. The iShares Expanded Tech Software Sector ETF (IGV) fell 4.6%. The VanEck Vectors Semiconductor ETF (SMH) slipped 2.9%, with QCOM shares a notable SMH stake.
SPDR S&P Metals & Mining ETF (XME) fell 6.1% and the Global X US Infrastructure Development ETF (PAVE) 3.1%. US Global Jets ETF (JETS) fell by 2.9%. SPDR S&P Homebuilders ETF (XHB) sank 3.8%. The Energy Select SPDR ETF (XLE) fell 2.4% and the Financial Select SPDR ETF (XLF) lost 1.3%. The Health Care Select Sector SPDR Fund (XLV) fell by 1.7%.
Albemarle’s earnings reported rising earnings, easy to beat, but the lithium giant’s booming earnings lagged.
ALB shares fell 4% in overnight trading. Shares retreated 4.5% to 266.52, back below the 50-day line on Wednesday. Albemarle stock partially sank after Levent (LTHM) sales missed views late Tuesday. ALB stock has a 308.34″ buy pointaccording to MarketSmith Analysis. But a move above Thursday’s high of 287.88 could provide an early entry.
CF income and income missed. The fertilizer giant announced a $3 billion buyback, but CF shares fell 5% after hours. Shares of the fertilizer giant fell 4.3% to 103.17 on Wednesday, undercutting the 50-day line. CF shares are in a base with a buy point of 119.70.
Best viewed Fortinet earnings and the cybersecurity business led slightly higher for the fourth quarter. But third quarter billing was in line, while billing guidance was light. FTNT shares plunged 11% in prolonged action, signaling a test of bear market lows. Shares already fell 5.65% to 53.23 on Wednesday, after encountering resistance again near the 200-day line on Tuesday.
Sarepta reported a larger-than-expected loss, while sales also lagged. SRPT shares fell 3.5% overnight. Shares fell 0.6% to 113.42 on Wednesday, holding it above the 50-day position. Sarepta stock has a 120.33 flat base buy point.
Qualcomm earnings were in line, while revenues just missed fiscal Q4 displays. But the wireless chip giant went down sharply for the current Q1, seeing more handset weakness. QCOM shares fell nearly 8% in extended trading. The stock fell 4.1% to 112.50 on Wednesday. Qualcomm stocks are outside the October bear market lows but below a 50-day sliding line.
Eleven earnings easily beat views while sales are top notch too. ELF shares rose 11% after hours, back near all-time highs. Shares of the affordable cosmetics manufacturer lost 4.7% to 41.66 on Wednesday.
WWE earnings were slightly behind, while earnings were higher. WWE said it has closed an investigation into alleged misconduct by founder and ex-CEO Vince McMahon. Stocks were not active in late action. WWE shares fell 1.5% to 77.54 on Wednesday, still within the range of a 75.33 buy point from a shallow cup basic.
Robinhood reported a smaller-than-expected loss, while sales lagged just behind. The trading app has positively adjusted EBITDA in the third quarter and lowered its full-year operating expense guidance. HOOD shares rose 2.6% overnight to 17.70, signaling a return to a buy point of around 11.73 from a bottom. Shares fell 4.4% to 11.40 on Wednesday and fell out of the buy zone.
Market rally analysis
The stock market rally had a whiplash on Wednesday. After a rally to session highs on the Fed meeting’s meek policy statement, equities plunged to session lows following Powell’s more aggressive comments.
Investors have been betting on a Fed pivot to smaller rate hikes, but implicitly expected a rapid transition from slower rate hikes to an outright pause. Fed chief Powell signaled that the latter is still a long way off.
No doubt Powell and his Fed colleagues have achieved three goals: 1. To signal a slower pace of rate hikes. 2. Still looking hard for inflation. 3. Don’t trigger a big market rally that could undermine their inflation fight.
The Nasdaq composite, which had encountered resistance near its 50-day line, plunged below its 21-day line. Notably, the Nasdaq closed below the low of its October 21 follow-up day. That’s a bearish sign.
The other major indices did not break their FTD lows, but still suffered damage.
The S&P 500 dipped below the 50-day line and closed below the 21-day line. The Dow Jones fell below the 200-day mark. The small-cap Russell 2000, which was close to the 200 day, almost dove to the 50 day.
For the time being, the stock market rally has hit the bull’s eye. The Nasdaq, which had lagged on the way up, looks the weakest. Megacap techs and cloud software names are having a hard time. On the other hand, the Dow Jones was arguably ready for a pullback.
What matters now is how the major indices and leading stocks react.
The whipsaw market action may continue on Thursday. Stocks and Treasury bond yields often have big reactions to second-day Fed meetings, often changing course from the first move.
Then on Friday, the jobs report looms large.
What to do now
There was a reason to be cautious ahead of the Fed meeting, and it proved justified. Investors may be entitled to sell certain stocks, either to reduce overall exposure or simply to take profits or limit losses on individual names.
Even barring the Fed’s plans for rate hikes and the upcoming jobs report, it’s in the midst of earnings season. Several stocks that were in or near buying zones sold on gains on Wednesday, including: Devon Energy (DVN), Levent (LTHM), ATIA (ATIA) and Paycom software (PAYC).
Investors may want to review their positions to see if other positions need to be reduced due to technical measures, looming profits or general portfolio management.
The stock market could remain volatile due to Friday’s jobs report.
But this is still a confirmed market rally. Many stocks are still close to buying areas despite Wednesday’s losses. So keep your watchlists handy and stay involved.
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.
YOU MAY ALSO LIKE THIS: