Dow Jones drops 530 points as banks lead the Fed sell-off; Apple mask market weakness, 5 Titans
Dow Jones futures were little changed after hours, along with S&P 500 futures and Nasdaq futures. The stock market recovery effort suffered a nasty reversal on Wednesday after the Fed meeting.
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The Federal Reserve raises interest rates by a quarter point and signal just one more increase this year. Shortly after, Fed Director Jerome Powell said he remained committed to fighting inflation. But he also said that tighter conditions from banking problems should ease pressure on monetary policy.
Meanwhile, Treasury Secretary Janet Yellen, testifying before a Senate committee, denied a report that regulators were considering expanding FDIC insurance to all deposits. On Tuesday, Yellen, Powell’s predecessor as Fed chief, signaled regulators’ willingness to cover deposits more widely at smaller banks, if needed.
Banking stocks struggled, notably Bancorp First Republic (FRC) And PacWest Bancorp (PACW).
More broadly, the market recovery effort relies heavily on six supercaps: Apple stock, Microsoft (MSFT), parent company of Google Alphabet (GOOGLE), Tesla (TSLA), Meta . Platform (META) And Nvidia (NVDA). They have moved higher in recent weeks, masking the weak overall breadth. Apple (AAPL), Google and Meta stocks could both be active now, despite Wednesday’s reversal. Microsoft is just below the buy point while Tesla stock is setting up. Nvidia is greatly expanded.
Nvidia and Meta stocks are bouncing IBD Rankings. AAPL and Meta Stocks Are On SwingTrader. Microsoft and Google are on Long-term leadership of IBD.
But even with these six megacaps, this is still not a confirmed uptrend. Investors should be cautious.
Fed raises interest rates
The Fed raised interest rates by a quarter point to 4.75%-5% as expected. New quarterly projections show policymakers expect the Fed’s base rate to end 2023 at 5.1%, implying another rate hike.
But even that increase is not obvious. The Fed’s policy statement said “some additional policy of consolidation may be appropriate”, being a bit less hawkish than the “continuous rate hikes” language of previous statements. Fed chief Powell said people should pay attention to “maybe” and “some”.
The Fed’s interest rate outlook will depend greatly on the banking system. Fed chief Powell said bank deposits are “safe” thanks to the Fed, FDIC and Treasury. However, he said it was too early to say how monetary policy would respond to banking stress.
The statement also noted that the banking woes “are likely to lead to tighter credit conditions.” That means monetary policy has less work to do, Powell said.
So despite the Fed’s projections of one more rate hike, the Market now sees only a 44% chance of rate hikes by a quarter point in May, down from 59.8% on Wednesday. . Investors still see rate cuts over the summer.
Income at home KB
KB Homepage (KBH) reported after closing. KBH stock rose modestly in extended trading after KB Home earnings surpassed views and management offered a bullish direction. Shares rose 0.4% to 36.80 on Wednesday, a day after retrieving the 50-day line. KB Home stock has 41.02 buy points in a new facility after running 62% from late September to February 2.
Darden restaurant (DRI), commercial metal (CMC), General factory (geographic information system), highlight (ACN) And FactSet Research System (FDS) reported early Thursday.
Dow Jones Futures Today
Dow Jones futures are up 0.2% above fair value. S&P 500 futures rose 0.1%. Nasdaq 100 futures were unchanged.
Remember that action overnight in future index and other places that don’t necessarily translate into actual transactions the next time stock market meeting.
Join IBD experts as they analyze stocks that could act in the stock market rally on IBD Live
Stock market recovers
The stock market rally was pretty quiet until the Fed raised rates and Fed Chair Powell’s comments, then blown away in the final two hours of trading, closed at the lows. in session. Bank stocks fell significantly on Wednesday, plunging according to Powell’s comments.
The Dow Jones Industrial Average fell 1.6% on Wednesday stock market trading. The S&P 500 lost 1.6%, with FRC stock having the worst performer of the day. Nasdaq composite rose 1.65%. The financial-heavy Russell 2000 small-cap index sold off 2.9%
U.S. crude oil prices rose 1.8% to $70.90 a barrel, up 6.2% this week. Copper futures, which closed ahead of the Fed meeting decision, rose 1.2%, the fifth straight gain.
The yield on the 10-year Treasury note fell 11 basis points to 3.5%. Yields on the 2-year Treasury note fell 20 basis points to 3.98%. Carrying losses that last in the last hour of trading in the stock market.
The US dollar plummeted to its lowest level since early February, extending a bearish streak.
ETFs
Among the growth ETFs, the Innovator IBD 50 ETF (FFTY) fell 1.3%, while the Innovator IBD Breakout OPPORTUNITY ETF (HOUR) lost 1%. iShares Expanded Tech-Soft Sector Sector ETF (IGV) fell 2%, with MSFT stock being the core IGV component. VanEck Vectors Semiconductor ETF (SMH) decreased by 0.6%. Nvidia stock is the big holding SMH stock.
Reflecting more speculative stocks, the ARK Innovation ETF (ARKK) slipped 4.8% and the ARK Genomics ETF (ARKG) lost 4.3%. Tesla stock is a huge holding on Ark Invest ETFs.
SPDR S&P Metals & Mining ETF (XME) fell 2.2% and the Global X US Infrastructure Development ETF (PAY THE ROAD RED) decreased by 2.1%. US Global Jets ETF (jet plane) decreased by 2.3%. SPDR S&P Homebuilders ETF (XHB) gave up 1.7%. Energy Select SPDR ETF (XLE) decreased 2.1% of the healthcare sector SPDR Fund (XLV) 1.5%.
bank stocks
Financial Options SPDR ETF (XLF) decreased by 2.3%. SPDR S&P Regional Bank ETF (KRE) fell 5.7% after gaining 5.8% on Tuesday.
FRC stock and PACW stock, among many KRE holdings, fell 15.5% and 17%, respectively. The First Republic could get government support to help ease the investment or takeover, Bloomberg reported on Tuesday. PACW shares said on Wednesday that it had abandoned the capital raise and obtained $1.4 billion in liquidity from Atlas SP, which is owned by Apollo Global Management (ONE PO). While bank deposits can be “safe,” as Powell has stated, bank shareholders can still suffer heavy losses or be wiped out.
The five best Chinese stocks to watch right now
Analysis of market recovery
The stock market rally initially responded well to the Fed’s rate hikes and Powell’s comments, but sold off sharply later in the session.
The S&P 500 briefly rose above the 50-day line, but reversed lower just above the 200-day line. Nasdaq composite hit 12,000 mark before falling again.
The Dow Jones index reversed back below the 200-day line. The Russell 2000 index fell sharply, much lower than the major moving averages.
The losers led the winners by nearly 3 to 1 on both the NYSE and Nasdaq. Breadth has been a concern throughout the market recovery effort.
Nvidia shares were up slightly on Wednesday while Apple, Google, Meta and Microsoft shares were down slightly and Tesla was down slightly. But over the past few weeks, those six supercaps have boosted the S&P 500 and Nasdaq. But the Invesco S&P 500 Equal Weight ETF (RSP), which only came close to the 200-day moving average this week, fell 2.25% on Wednesday, to its worst close in four months. Meanwhile, the large-cap Nasdaq 100 reversed course lower, but after hitting its best level in nearly seven months. The Direxion Equal Weight Index NASDAQ-100 (QQQE) fell 2.1%, back below the 50-day moving average.
The market usually reacts on Monday to Fed meetings that reverse the initial move. But the Fed-led sell-off could continue. This is still just an attempt to recover the market. Find a the next day to confirm a new uptrend.
Market Timing with IBD’s ETF Market Strategy
What to do now
The stock market recovery attempt has at times shown some promising hints, but it remains divided, volatile, and news-driven. Until the banking crisis subsides and the market shows a big advance, investors should be cautious.
Investors may have modest exposure, assuming that their positions are active. But don’t let losses pile up.
There’s nothing wrong with waiting for a confirmed market uptrend to start breaking out of the margin.
Don’t try to force the problem. Prepare for the market’s next sustained bull run by building your watch list.
Read Big picture every day to stay in sync with market trends and top stocks and sectors.
Please follow Ed Carson on Twitter at @IBD_ECarson for stock market updates and more.
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