Dow Jones Futures: Stocks Sell Off as Hawkish Fed Sees New Terminal Rate

On Thursday morning, S&P 500 futures and Nasdaq futures along with Dow Jones futures were little changed after Wednesday night’s declines. Stocks fell sharply on Wednesday after the Federal Reserve again hiked aggressively, signaling a higher peak or “terminal” rate hike.




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

Celsius Holdings (CELH), Shock wave medicine (Swat), We have (We have), Global Foundries (GFS) and Enphase energy (ENPH) all show strong relative strength in a weak market.

CELH Stock and Shockwave Medicine are available IBD Leaderboard Watch list. Celsius Holdings, Enphase and SWAV have shares IBD 50. ENPH has stock IBD Big Cap 20. Celsius was Wednesday IBD stock of the dayShockwave Monday.

A video embedded in this article analyzed Wednesday’s roller-coaster market action and shares of Celsius, ATI and GFS.

Ooty crowd

As expected, the central bank raised its key interest rate by 75 basis points for the third straight time, raising the target range to 3%-3.25%.

Fed policymakers now see interest rates rising from 3.4% after the June meeting to 4.4% by the end of 2022. Here’s what markets are pricing in: another 75 basis points in the November meeting, 50 basis points in December, and a year-end range of 4.25%-4.5%.

The central bank 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. It is also not out of line with what market watchers expected for a terminal rate. Policymakers expect the rate to drop to 3.9% in 2024.

Fed Chairman Jerome Powell reiterated that the Fed will not allow the Fed to fight inflation. He noted that a “soft landing” would be difficult, but could not say what the odds of a recession would be. “At some point,” the Fed will slow the pace of rate hikes, Powell said, but did not specify when that would occur. He said Fed policy should remain “restricted” for some time.

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Fed Chairman Powell said the labor market remains “out of balance,” although he said commodity prices appear to have peaked.

Dow Jones Futures Today

Dow Jones futures rose 0.2% vs. fair value. S&P 500 futures edged higher. Nasdaq 100 futures were flat after falling more than 1% at one point.

The 10-year Treasury yield rose 3 basis points to 3.54%.

Remember that it is an overnight operation Dow futures The next routine elsewhere doesn’t necessarily translate into actual trading stock market session.


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Stock market on Wednesday

The stock market rose modestly at the end of the Fed meeting, then went on a roller-coaster ride that ended the session lower.

The Dow Jones industrial average fell 1.7% on Wednesday Stock market trading. The S&P 500 index also retreated 1.7%. The Nasdaq composite fell 1.8%. The small-cap Russell 2000 fell 1.5%

US crude oil prices fell 1.2% to $82.94 a barrel.

The 10-year Treasury yield fell 6 basis points to 3.51% after briefly hitting 3.62% following the Fed’s rate hike. The two-year Treasury yield edged above 4%, nearing 4.04%, but well off session highs.

ETFs

in the middle Best ETFsInnovator IBD 50 ETF (FFTYfell 1.8%. iShares Expanded Technology-Software Sector ETF (VATIt gave up to 1.4%. VanEck Vectors Semiconductor ETF (SMH0.8% lost.

SPDR S&P Metals & Mining ETF (XMEThe US Global Jets ETF fell 2.1% (JETS) fell 4% on a bad day for travel plays. SPDR S&P Homebuilders ETF (XHB) down 1.1%. Energy Select SPDR ETF (XLEretreated 1.5% and the fund of choice SPDR ETF (45) 2.1% Health Care Select Sector SPDR Fund (XLVdecreased by 1.7%.

Reflecting the more speculative story stocks, the ARK Innovation ETF (ARKK) 2.65% and ARK Genomics ETF (ARKG) 2.7%

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CELH stock

Shares of Celsius fell 3.9% to 98.23 on Wednesday. Shares pulled back to find support at its 10-week moving average after a 209% run from early May to late August. In two weeks, CELH stock may have a new floor at 118.29 Point to buy. Investors could use 108.47 as an initial entry for the energy drink maker.

The Relative strength line CELH has the highest stake.

Shock wave share

SWAV stock fell 1.85% to 284.69 on Wednesday, down from 300.96 intraday. Shockwave stock continues to find support in its 21-day line.

ATI stock

ATI stock lost more than 2% to 29.67, trading at its 21-day range after retreating from a seven-year high of 33.31. Shares of the specialty alloys maker retreated above the previous floor and just above its 10-week line. A 10-week series bounce can provide an early entry, with a proper base a week away.

Even as ATI stock pulls back, its RS line-up remains high.

GFS stock

Shares of GlobalFoundries fell 0.9% to 56.29. It is just above its 50-day and brand new 200-day line, while GFS stock is just below its 10-week line. 2021 Chip Foundry IPO Deeper Double bottom With a handle, 66.06 offers a buy point. This weekend, with the same 66.06 entry, the handle of GFS stock will be long enough to be its own floor.

ENPH stock

Enphase shares fell 15 cents to 304.56, continuing to find support from its 21-day moving average. ENPH stock is still extended from its 50-day line, but lower. The RS line for Nphase stock has hit a new weekly high.

Stock market analysis

As usual, the stock market briefly rallied strongly following the Fed’s rate hike decision, new rate forecasts and Powell’s comments, before ending with sharp losses. The major indices ended up having ugly, outside-the-box reversal sessions.

While markets weren’t blindsided on Wednesday, the Fed’s overall tone was slightly more dovish than expected. But ultimately, the Federal Reserve is raising rates aggressively, despite growing recessionary risks, to put inflation back into its fold.

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Markets often have a day or two of federal reaction. But even if stocks rebound on Thursday, it won’t be meaningful.

All the major indices broke recent lows by Wednesday and missed their 50-day moving averages. June lows are not far away.


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What to do now

Ultimately, it’s not the news, but the market reaction to the news that matters. The stock market did not respond well to the outcome of the central bank meeting on Wednesday.

Could the market have a short-term bounce or a decent rally over several weeks? Surely. But investors will want to see more evidence.

Leading stocks like Celsius, Shockwave and Enphase may flash buy signals early in a market rally attempt. But investors must balance the desire to get into hot stocks quickly against ensuring that a broader rally is underway. Even the relative leaders can be broken if the market goes above or beyond the June low.

If the real stock market booms, there will be plenty of opportunities. The main thing is to be prepared.

Work on those watch lists. Focus on stocks with strong relative strength and names holding or retrieving key moving averages.

According to Big picture Each day should be in sync with the direction of the market and the leading stocks and sectors.

Follow Ed Carson on Twitter @IBD_ECarson For stock market updates and more.

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