Dow Jones futures tipped higher overnight, along with S&P 500 futures and Nasdaq futures. The stock correction had a mixed increase on Tuesday, as government interest rates continued to rise sharply. Investors are focused on Wednesday’s announcement of the Federal Reserve meeting, with decision-makers set to approve either a large or very large Fed rate hike.
Quanta services (PWR), HelseEquity (HQY), Cheniere energy (LNG), Dollar tree (DLTR) and Li Auto (LI) are stocks to look at. All show strong relative strengths, even though stock prices are struggling to hold up.
LNG stock is on IBD Leaderboard. The PWR stock is on the leaderboard watch list and on the IBD Big Cap 20. The Li Auto stock is on the IBD 50. HealthEquity was Tuesday’s IBD Stock Of The Day.
The video embedded in the article discusses the market action and analyzes Cheniere Energy, Li Auto and DLTR shares.
Meanwhile, Tesla (TSLA) turned modestly higher after moving to its lowest on May 24 at 620.54. The Tesla share closed up 2.4% to 662.67, but far from the November high of 1,243.49. The National Highway Traffic Safety Administration is likely to release collision data involving driver assistance systems over the next few days, highlighting the high number of Tesla Autopilot incidents.
A two-day Fed meeting ends Wednesday with an announcement at 2 p.m. ET, followed by Fed Chairman Jerome Powell’s press conference. In the wake of Friday’s hot CPI report showing that inflation reached a 40-year high of 8.6%, speculation grew that Fed politicians would raise interest rates by 75 basis points on Wednesday, not just 50 basis points.
The Fed does not like to surprise, and Powell said after the Fed meeting in May that 75 basis points were off the table. It is still possible for the central bank to raise interest rates by 50 basis points, while Powell signals that 75 basis points are on the table for July and September.
But after Fed officials apparently leaked to The Wall Street Journal on Monday that a supersize rate hike is being considered, markets see a move of 75 basis points as overwhelmingly likely.
Dow Jones Futures today
Dow Jones futures rose 0.2% relative to fair value. S&P 500 futures rose 0.3%. Nasdaq 100 futures rose 0.45 percent.
The Bitcoin price traded below $ 22,000, up slightly from Monday night’s 18-month low below $ 21,000.
Keep in mind that overnight trading in Dow futures and elsewhere does not necessarily translate into actual trading in the next regular trading session.
Join IBD experts as they analyze powerful stocks in the stock market rally on IBD Live
Stock exchange Tuesday
The stock market traded mixed in Tuesday’s session, with low volume ahead of Wednesday’s Fed meeting announcement.
The Dow Jones Industrial Average fell 0.5 percent in Tuesday’s trading session. The S&P 500 index retreated 0.4%. The Nasdaq composite rose 0.2 percent. Small-cap Russell 2000 fell 0.4%.
The 10-year government interest rate rose 12 basis points to 3.48%, after major movements in recent days. The two-year interest rate jumped 15 basis points to 3.43%. The 30-year government interest rate rose 6 basis points to 3.43%, but is now below the 10-year interest rate and even the 2-year interest rate. If the two-year return moves above the 10-year return, the curve will be inverted from the two-year return to the 30-year return. The rising, flattening yield curve reflects stagflation risk, with recession odds rising as inflation and interest rate hikes in the Fed take their toll.
The US crude oil price turned down to close 1.7% to 118.93 dollars per barrel.
The prices of natural gas fell by 16 percent. The Freeport LNG terminal, closed due to a fire on June 8, will not reopen in 90 days and will not be fully up and running until late in the year. This means less exports of natural gas.
Among the best ETFs, Innovator IBD 50 ETF (FFTY) rose 0.8%, while Innovator IBD Breakout Opportunities ETF (BOUT) fell 0.6%. iShares Expanded Tech-Software Sector ETF (IGV) rose 0.6%. VanEck Vectors Semiconductor ETF (SMH) rose 0.7%.
The SPDR S&P Metals & Mining ETF (XME) fell 1.3% and the Global X US Infrastructure Development ETF (PAVE) fell 0.7%. The US Global Jets ETF (JETS) gave up 1%. SPDR S&P Homebuilders ETF (XHB) fell 0.8%. Energy Select SPDR ETF (XLE) rose 0.2% and Financial Select SPDR ETF (XLF) retreated 0.9%. Health Care Select Sector SPDR Fund (XLV) gave up almost 1%.
ARK Innovation ETF (ARKK) reflects more speculative history stocks, up 1.1% and ARK Genomics ETF (ARKG) 1.3%. The Tesla stock remains a top stock across Ark Invest’s ETFs.
Five best Chinese stocks to see now
Stocks to see
The Quanta Services share fell 1.8% to 123.55 on Tuesday, just above the 50-day limit. The PWR bearing is in a cup with handle with a buying point of 138.56.
HealthEquity shares fell 5.9% to 68.42 on Tuesday, rebounding from its 50-day line, removing some short-term levels and breaking a trend line. In a better market, Tuesday’s action would have offered early entry. At this point, the HQY stock has now expanded from that listing. It is approaching an official purchase point of 72.80 from a cupbase. HealthEquity has almost doubled since the beginning of December after a long decline, while earnings have had a lower trend for several quarters.
LNG shares rose 2.2% to 130.40, still below the 50-day moving average. The Cheniere stock fell below its lowest level on Monday, potentially setting the stage for a double-bottom base with a buying point of 146.45. Cheniere Energy, with its LNG export terminal, should take advantage of the Freeport LNG terminal’s problems, which cut domestic night gas prices and raise global LNG prices.
The DLTR share rose 0.65% to 156.02, and met resistance on the 50-day line. The Dollar Tree stock has a buying point of 166.45 cups with handles, according to MarketSmith analysis. Shares plunged and rose back in the second half of May at first Goal (TGT) earnings miss and warning, followed by strong Dollar Tree earnings and guidance.
Li Auto shares shot up almost 11% to 32.22, reaching their best level since January 3. The stock has shot up from 18.82 on May 9, and returns above the 200-day line on June 6. The LI share is crashing on the right side of a deep consolidation, with a potential buy point of 37.55. But stocks can use a long handle or even a separate base within the deep consolidation to let the big averages catch up, especially the 50-day line. Li Auto rises with other Chinese electric car stocks Nio (NIO), Xpeng (XPEV) and BYD (BYDDF), as the Covid headwind decreases, local authorities expand subsidies for electric cars. The car manufacturers have all new models in the coming weeks, and Li Auto will unveil a new SUV hybrid later this month. More generally, US listed Chinese stocks, including the Internet, have risen in recent weeks.
The Dow Jones, S&P 500 and Nasdaq composites all undermined Monday’s lowest levels, but closed mixed. Russell 2000 undermined its lowest in May, reaching its worst levels since November 2020. The small-cap index is below its highs before Covid.
Given the huge Fed meeting in print on Wednesday afternoon, Tuesday’s low-volume market action is not so meaningful.
Whether the Federal Reserve raises interest rates by 50 basis points or 75 basis points on Wednesday, the macroeconomic climate is not favorable for the market, and may not be favorable for some time to come. The risk of recession is high, while inflation will remain high for the foreseeable future.
Still, the reaction to the news is what really matters. The stock market may return after Wednesday’s Fed rate hike and Powell comments, but it will not signal a rating change in itself. Investors must see a follow-up day to confirm any rally attempts. Even then, a confirmed upward trend may be another short-lived rally in the bear market.
Right now, the Nasdaq Composite and S&P 500 are in the bear markets, while the Dow Jones is in a sharp correction.
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What to do now
A bear market is no time to be brave. Investors should be on the sidelines. The only exceptions may be long-term winners or some positions in the energy sector, but here too investors must consider taking at least partial profits.
Right now, investors should work on their watch lists, review past trades and historic bear markets.
Read The Big Picture every day to stay in sync with the market direction and leading stocks and sectors.
Follow Ed Carson on Twitter at @IBD_ECarson for stock market updates and more.
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