Dow Jones futures rose modestly overnight, along with S&P 500 futures and Nasdaq futures. The stock market faltered on Wednesday after the Federal Reserve raised interest rates by most since 1994, but rose higher when Fed chief Jerome Powell signaled that politicians could raise interest rates a little less at the Fed meeting in late July.
Government bonds fell sharply on Wednesday after rising to several-year highs on Tuesday.
Enphase Energy (ENPH), Harmony life sciences (HRMY), AutoNation (AN), Ulta beauty (ULTA) and Onsemi (ON) are five stocks to look at. All are in consolidations and are holding above or near their 50-day moving average, with their relative strength lines at or near heights.
ON stock is on the IBD Leaderboard watch list. AN share and Harmony Biosciences are at IBD 50. AutoNation is Wednesday’s IBD Stock Of The Day.
Tesla (TSLA) recovered solidly on Wednesday even when the National Highway Traffic Safety Administration reported that the EV giant dominates accidents involving driver assistance systems.
Dow Jones Futures today
Dow Jones futures rose 0.4% relative to fair value. S&P 500 futures rose 0.5% and Nasdaq 100 futures rose 0.6%.
The US crude oil price rose slightly.
Bitcoin traded above $ 22,000 Wednesday night after reaching a new 18-month low of $ 20,087.90 earlier this week.
Keep in mind that overnight trading in Dow futures and elsewhere does not necessarily translate into actual trading in the next regular trading session.
Politicians voted to raise interest 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 consumer price index in May 10 June showed that inflation unexpectedly rose to a 40-year high of 8.6%.
Fed chief Powell, speaking at a news conference after the policy meeting, said that the central bank raises interest rates “quickly”, and decides to “frontload” increases. He said “inflation is far too high,” with labor markets very tight.
But Powell said the Fed could raise interest rates by 50 or 75 basis points at the Fed meeting in late July. He also stressed that the policy will be “sensitive and flexible.” Prior to these comments, the markets had fully priced in 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 interest rates rise to at least 3% at the turn of the year, with a median estimate of 3.4%. They see 3.8% by the end of 2023.
The central bank now sees 5.2% inflation this year, measured by the price index for personal consumption. This is up from the target of 4.3% in March and 2.6% in December last year.
Politicians expect that their preferred inflation measure, the core PCE index, will decline to a continued high rise of 4.3% in the fourth quarter, and decline to 2.7% by the end of 2023.
The Federal Reserve and Fed chief Powell tried to find a delicate balance on Wednesday. On the one hand, they wanted to take a big step against inflation and restore lost credibility. On the other hand, Powell and his other politicians do not want to ruin the economy. A surprising drop in retail trade was among several weak financial reports on Wednesday.
The central bank won over Wall Street, at least for one afternoon. The large indices, which fell to mixed after the Fed rate hike and when Powell started talking, rose to intraday highs as a “flexible” Fed chief opened up the possibility of a half-point movement. The stock closed its best levels, but was still solid or sharply higher.
Treasury yields fell sharply on Powell’s 50-or-75 comment, especially the two-year yield.
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Stock market Wednesday
The stock market faltered after the announcement of the interest rate increase, but picked up again after Powell’s comments.
The Dow Jones Industrial Average rose 1% in Wednesday’s trading session. The S&P 500 index rose 1.5 percent. The Nasdaq composite rose 2.5 percent. Small-cap Russell 2000 advanced 1.5%
The 10-year government interest rate fell 17 basis points to 3.31%. The two-year interest rate, more closely linked to interest rate movements in the Fed, fell 20 basis points to 3.23%.
The US crude oil price fell 3% to $ 115.31 a barrel. Natural gas prices rose modestly after falling 16% on Tuesday.
Among the best ETFs, Innovator closed the IBD 50 ETF (FFTY) unchanged, while Innovator IBD Breakout Opportunities ETF (BOUT) fell 0.2%. iShares Expanded Tech-Software Sector ETF (IGV) rose 2.65%. VanEck Vectors Semiconductor ETF (SMH) rose 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 ETF (JETS) rose 1.55%. SPDR S&P Homebuilders ETF (XHB) rose 0.3%. Energy Select SPDR ETF (XLE) fell 2.2% and Financial Select SPDR ETF (XLF) rose 1.1%. Health Care Select Sector SPDR Fund (XLV) rose 1% higher.
ARK Innovation ETF (ARKK) reflects more speculative history stocks, rising 6.6% and ARK Genomics ETF (ARKG) 5.2%. The Tesla stock remains a top stock across Ark Invest’s ETFs.
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Stocks to see
The ENPH stock jumped 5% to 188.48 on Wednesday, back from its 50-day and 200-day lines. The manufacturer of solar energy converters broke out of a double bottom base within a major consolidation on 2 June. The Enphase stock went up for a few days before falling back. 193 entry is no longer valid. The ENPH share has formed a handle, with a buying point of 217.33, just above the intraday high on 8 June.
The HRMY stock rose 0.3% to 44.61, moving from the 50-day line, but reducing intraday gains. Harmony Biosciences has a cupbase with 54.10 entry. But it takes another day to form a handle, lowering the point of purchase to 47.21.
AutoNation shares turned lower on Wednesday, falling 1.45% to 113.40 to close just below the 50-day and 200-day lines. The AN share is in a long consolidation with a buy point of 133.58. But investors can use resistance just above 126 as an early entry. Last Friday, the giant for used car dealers hit 126.14 during the day, reaching almost the top of the beginning of May at 126.39, before reversing lower.
Ulta Beauty shares rose 3.3% to 405.61, regaining the 50-day line after finding support on the 200-day line earlier this week. The ULTA stock flirted with a buy point of 426.93 cup-with-handles last week before falling again. A new handle introduction of 429.58 is in play now.
The Onsi share rose 2.45% on Wednesday to 58.04, rising from its 50-day and 200-day lines. At the end of May to the beginning of June, the ON share rose from the 50-day / 200-day lines to 67.19 on June 8, moving towards a consolidation buying point of 71.25. But the chipmaker fell down again. It has created a somewhat messy handle with an entry of 67.29. The listing also coincides with a trend line with falling peaks.
Tesla shares jumped 5.5% to 699 on Wednesday, still below the 21-day line. The stock reached an 11-month low of 620.57 on 24 May.
On Wednesday, the National Highway Traffic Safety Administration reported accidents with driver assistance systems. Tesla vehicles that used autopilot were involved in 273 accidents from July 20, 2021 to May 21, 2022, out of a total of 392. One main reason is that there are so many Tesla electric cars on the road that use autopilot.
Tesla has long claimed that Autopilot improves safety, but does not use apple-to-apple comparisons when it comes to road type, weather conditions and more. NHTSA recently expanded its autopilot probe, while investigating “phantom braking” in Tesla vehicles.
Separately, CEO Elon Musk tweeted on Wednesday that he would rather support GOP Florida Governor Ron DeSantis as president in 2024.
On Thursday, Musk City Hall will hold Twitter (TWTR) employees, approached employees for the first time since they reached a $ 44 billion deal, $ 54.20 per share for the social networking site in late April. Musk, who waved the rights to due diligence, has since complained about fake accounts on Twitter. Musk may want to withdraw from the agreement, or reduce the price significantly.
Twitter shares climbed 2.1% to 37.99 on Wednesday.
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The stock market closed higher on Wednesday after the Fed rate hike and Powell’s comments.
A stock exchange rally attempt is now underway. Wednesday marked day two of Nasdaq’s rally attempts after the technology-heavy indices rose on Tuesday. But the rally attempt is not a green light.
After heavy losses in recent days, the major indices are far below their 10-day moving average, let alone more real resistance.
Nevertheless, investors should soon look for a follow-up day to confirm the new trend. However, confirmed market rallies 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 meaningful, especially at a bear market.
If it’s a follow-up day, investors may tip into the market, slowly increasing their exposure if conditions begin to improve.
In the meantime, be vigilant and be prepared. Build watch lists of potential leaders.
Enphase, Onsemi and the other stocks to watch have struggled on an absolute basis, despite their strong relative strength. There is no guarantee that these names will hold up relatively well, or that they will lead in the next true trend.
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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