Dow Jones futures fell sharply on Thursday morning, along with the S&P 500 and Nasdaq futures, reversing solid gains as Treasury yields rebounded.
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The stock market tumbled on Wednesday after the Federal Reserve raised interest rates to a record high since 1994, but rose when Fed chief Jerome Powell noted that policymakers could raise rates slightly less at the end-of-July meeting. Treasury bond yields fell sharply on Wednesday after rising to multi-year highs on Tuesday.
Enphase Energy (ENPH), Harmony Biosciences (HRMY), AutoNation (AN), Ulta Beauty (ULTA) and Onsemi (ON) are five actions to look at. They are all in consolidation, staying above or near their 50-day moving averages, with their lines of force relative to or near highs.
ON shares are on the IBD Leaderboard watchlist. The existence of AN and Harmony Biosciences are at IBD 50. AutoNation is the stock of IBD for Wednesday.
Tesla (TSLA) recovered solidly on Wednesday, even when the National Traffic Safety Administration reported that the electric vehicle giant is dominating crashes with driver assistance systems. Shares fell early Thursday, although Tesla raised vehicle prices.
Dow Jones futures today
Dow Jones futures fell 1.8% from fair value after rising 1% at some point on Wednesday evening. S&P 500 futures fell 2.2% and Nasdaq 100 futures 2.7%. They all threaten to wipe out Wednesday’s earnings at the opening.
The 10-year Treasury yield rose 4 basis points to 3.43%, reversing the significant losses on Wednesday night. The two-year yield reversed overnight losses to increase 9 basis points to 3.37%.
US crude oil prices fell slightly, with modest gains falling.
Bitcoin was trading above $ 21,000, below Wednesday night highs, but after hitting a new 18-month low of $ 20,087.90 earlier this week.
The Swiss central bank unexpectedly raised interest rates by half a point on Thursday early.
Remember that overnight action on Dow futures and elsewhere does not necessarily translate into actual trading at the next normal stock market session.
Fed meeting
Politicians voted to raise rates by 75 basis points for the first time since 1994, at the end of the two-day Fed meeting, to a range of 1.5% -1.75%.
This came after the May 10 consumer price index on June 10 showed that inflation rose unexpectedly to a 40-year high of 8.6%.
Fed chief Powell told a news conference after the policy meeting that the central bank will raise rates “quickly” and decided to raise the “initial charge”. He said “inflation is too high”, with labor markets tight.
But Powell said the Fed could raise rates by 50 or 75 basis points at the end-July meeting. He also stressed that the policy will be “sensitive and flexible”. Prior to these comments, markets had a total price of 75 basis points at next month’s meeting, according to the CME FedWatch tool. Markets still see a 70% chance of a three-quarter point move in late July.
All Fed officials see rates rising to at least 3% by the end of the year, with an average estimate of 3.4%. They see 3.8% at the end of 2023.
The central bank now sees inflation of 5.2% this year, as measured by the personal consumer spending price index. This is more than its target of 4.3% in March and 2.6% last December.
Policymakers expect their preferred inflation indicator, the core PCE index, to fall to a still-high 4.3% gain in the fourth quarter, and will slow to 2.7% by the end of 2023.
The Federal Reserve and Fed Chairman Powell tried to strike a delicate balance on Wednesday. On the one hand, they wanted to take a big step towards inflation and regain lost credibility. On the other hand, Powell and his fellow politicians do not want to crush the economy. A surprising drop in retail sales was one of the weak economic reports on Wednesday.
The central bank won Wall Street, even if only for one afternoon. Major indices, which fell sharply after the Fed’s rate hike and when Powell began talking, rose to intraday highs, as a “flexible” Fed chief left open the possibility of a semicircular movement. Shares closed at their best, but still rose solidly or sharply.
Treasury yields fell sharply with Powell’s 50 or 75 commentary, especially the two-year yield.
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Stock market Wednesday
The stock market faltered after the announcement of the rate hike, but recovered after Powell’s comments.
The Dow Jones Industrial Average was up 1% on the stock market on Wednesday. The S&P 500 rose 1.5%. The Nasdaq compound jumped 2.5%. The small Russell 2000 capitalization advanced 1.5%.
The 10-year Treasury yield fell 9 basis points to 3.39%. The two-year yield, more tied to Fed rate hikes, suffered 15 basis points to 3.28%.
The price of US crude fell 3% to $ 115.31 a barrel. Natural gas prices rose modestly after falling 16% on Tuesday.
Among the best ETFs, the Innovator IBD 50 ETF (FFTY) closed unchanged, while the Innovator IBD Breakout Opportunities ETF (BOUT) fell 0.2%. The ETF of the iShares Extended Technology Software (IGV) sector rose 2.65%. The VanEck Vectors Semiconductor ETF (SMH) advanced 1.8%.
The SPDR S&P Metals & Mining ETF (XME) rose 2.1% and the Global X US Infrastructure Development ETF (PAVE) rose 0.8%. US Global Jets ETFs (JETS) were up 1.55%. SPDR S&P Homebuilders ETF (XHB) was up 0.3%. The Energy Select SPDR ETF (XLE) sank 2.2% and the Financial Select SPDR ETF (XLF) gained 1.1%. The SPDR Fund for the Selected Health Sector (XLV) increased by 1%.
Reflecting more speculative stocks, ARK Innovation ETF (ARKK) rose 6.6% and ARK Genomics ETF (ARKG) 5.2%. Tesla shares remain one of the main holdings of Ark Invest ETFs.
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Actions to see
Shares of ENPH rose 5% to 188.48 on Wednesday, recovering from its 50- and 200-day lines. The solar-powered inverter maker emerged from a double-bottomed base within a larger consolidation on June 2nd. Emphasis stocks rose for a few days before retreating. Entry 193 is no longer valid. The shares of ENPH have formed a handle, with a buy point of 217.33, just above the intraday high of June 8.
Shares of HRMY rose 0.3% to 44.61, shifting from its 50-day line but reducing intraday gains. Harmony Biosciences has a cup base with an entry of 54.10. But it takes another day to form a handle, lowering the point of purchase to 47.21.
Shares of AutoNation reversed the decline on Wednesday, falling 1.45% to 113.40 to close just below its 50-day and 200-day lines. The shares of AN are in a long consolidation with a buy point of 133.58. But investors could use resistance just above 126 as early entry. Last Friday, the giant used car dealership reached 126.14 intraday, almost reaching the beginning of May high of 126.39, before reversing the decline.
Shares of Ulta Beauty rose 3.3% to 405.61, regaining the 50-day line after finding support for the 200-day line earlier this week. ULTA shares flirted with a 426.93 cup hotspot last week before falling again. A new 429.58 handling entry is now in play.
Shares of Onemi rose 2.45% on Wednesday to 58.04, recovering its 50-day and 200-day lines. From the end of May to the beginning of June, ON shares rebounded from the 50-day / 200-day line to 67.19 on June 8, moving towards a consolidation buying point of 71.25. But the chip maker fell again. This has created a bit of a messy handling with a 67.29 entry. The entry also coincides with a downward trend line.
Tesla stock
Shares of Tesla rose 5.5% to 699 on Wednesday, still below its 21-day line. Shares reached an 11-month low of 620.57 on May 24th.
On Wednesday, the National Highway Traffic Safety Administration reported accidents with driver assistance systems. Tesla vehicles using Autopilot were involved in 273 accidents between July 20, 2021 and May 21, 2022, out of a total of 392. One of the main reasons is that there are so many Tesla electric vehicles in the road with Autopilot.
Tesla has long claimed that Autopilot improves safety, but does not use apple-to-apple comparisons in terms of road type, weather conditions and more. The NHTSA has recently expanded its Autopilot spacecraft while investigating “ghost braking” on Tesla vehicles.
In the early hours of Thursday, Tesla raised U.S. prices for most of its vehicles, although the base price of a Model 3 is still $ 46,990. High material costs and limited global supply have allowed Tesla and other automakers to raise vehicle prices sharply over the past year.
Also Thursday, CEO Elon Musk will hold a town hall meeting with Twitter employees (TWTR), addressing staff for the first time since he reached a $ 44 billion deal, $ 54.20 per share for the social site at end of April. Musk, who relinquished due diligence rights, has since complained about fake Twitter accounts. Musk may want to step out of the deal or substantially reduce the price. But he is expected to reaffirm his desire to buy Twitter, according to The Wall Street Journal.
Shares of Twitter rose 2.1% to 37.99 on Wednesday. Shares fell nearly 4% Thursday morning as futures fell.
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Market analysis
The stock market closed higher on Wednesday after the Fed’s rate hike and Powell’s comments.
An attempt is now being made to recover the stock market. Wednesday marked the second day of the Nasdaq’s recovery attempt after technology indexes rose on Tuesday. But the attempt to concentrate is not a green light.
After the fierce losses of the last few days, the major indices are well below their 10-day moving averages, let alone more substantial resistance.
Dow futures suggest a negative reaction from the second day at the Fed meeting. Attempt to concentrate could quickly fail.
Investors should look for a follow-up day soon to confirm the new uptrend. However, confirmed market concentrations do not always work, as 2022 has shown.
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What to do now
Wednesday’s action was positive, but a decent day is not so significant, especially in a bear market.
If there is a follow-up day, investors could tip the market, adding exposure slowly if conditions start to improve.
In the meantime, stay tuned and be prepared. Create these watch lists of potential leaders.
Enphase, Onsemi and other actions for …