Dow Jones Futures Rise: Fed Rate Hike Looms, But It’s What Matters; Tesla flirts with buy points
There was little change in Dow Jones futures early Wednesday, along with S&P 500 futures and Nasdaq futures, the Fed meeting announced. Major indices retreated on Tuesday as the Federal Reserve began its two-day policy meeting.
Tesla stock briefly posted an aggressive buy signal, despite more signs of weak Tesla (TSLA) demand in China. It comes amid supply costs as well as a big Ford Motor (F) warning on unfinished vehicles. Ford’s stock fell 12% despite an EV supply deal with Hertz (HTZ), with General Motors (GM) down 5.6%.
In addition to Tesla, chipmakers ON Semiconductor (ON) and Impinj (PI) are showing strength with Neurocrine Biosciences (NBIX) and lithium giants SQM (SQM).
Apple (AAPL) extended for the second consecutive season. Apple stock remains below key levels. Meanwhile, fellow megacap tech stocks Microsoft (MSFT) and Google parent Alphabet (GOOGL) are at 52-week lows.
NBIX stock is on the IBD leaderboard. TSLA stock and ON Semiconductor, also known as OneSemi, are at IBD 50. The stock IBD Big Cap is at 20. Impinjs is Tuesday’s IBD Stock of the Day.
Video embedded in this article discusses Tuesday’s market action and analysis of Neurocrine Biosciences, Wolfspeed (WOLF) and PI stocks.
Policymakers are locked in on a third straight increase in the Fed rate by 75 basis points, with an announcement due at 2 p.m. ET. The market shows a small potential for full-point growth.
The key is what the Fed sees now. The quarterly projections will indicate where the central bank sees the fed funds rate at the end of 2023, and under what economic conditions. Fed chief Jerome Powell made it clear in his August 26 Jackson Hole speech that the Fed is willing to risk a recession to bring inflation under control.
Powell will speak at 2:30 p.m. ET, perhaps giving some indication of the Fed raising rates in the near future. Currently, the markets are betting on a 75-basis-point fourth move in November, followed by 50 basis points in December. It would raise the fed funds rate at the end of the year to 4.25%-4.5% from the current 2.25%-2.5%. Before the August Consumer Price Index on September 14, the markets were looking for 3.75%-4% at the end of 2022.
Meanwhile, Russia’s Vladimir Putin announced a partial mobilization to address the manpower shortage in his Ukraine invasion. Their terms will be automatically expanded, with reservists also being called for, along with other measures, including new nuclear threats.
Northrop Grumman (NOC) climbed 2%, indicating a consolidation exit. Lockheed Martin (LMT) and other defense giants also rose.
dow jones futures today
Dow Jones futures rose 0.2% versus fair value. S&P 500 futures were up 0.2% and Nasdaq 100 futures were flat.
The 10-year Treasury yield fell 2 basis points to 3.55%.
US crude oil futures rose 2%. US natural gas prices climbed 3%. Putin’s partial military mobilization could lift energy futures.
Remember that overnight action in Dow futures and elsewhere does not necessarily entail actual trading in the next regular stock market session.
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stock market tuesday
The stock market fell on Tuesday with the announcement of the Fed meeting. One late afternoon the boom faded in close.
The Dow Jones Industrial Average fell 1% in Tuesday’s stock market trading. The S&P 500 index dropped 1.1%. The Nasdaq Composite lost 0.95%. The small-cap Russell 2000 declined 1.4%.
Apple stock, a member of the Dow Jones, S&P 500 and Nasdaq Composite, rose 1.6% to 156.90. AAPL stock hit its 21-day resistance and remains below its 50-day and 200-day lines after a major downside reversal from last week. But a decisive move above the 50-day and 200-day lines could offer a fresh opening entry.
October US crude fell 1.5% to $84.45 a barrel. November crude futures, now near-month contracts, fell 1.7% to $83.94.
The 10-year Treasury yield rose 8 basis points to 3.57%, yet another 11-year high.
Among the best ETFs, the Innovator IBD 50 ETF (FFTY) trailed 1.3%. The iShares Extended Tech-Software Sector ETF (IGV) dropped 1.5%. The VanEck Vector Semiconductor ETF (SMH) fell 1.4%.
The SPDR S&P Metals & Mining ETF (XME) dropped 2.7%. The Energy Select SPDR ETF (XLE) dropped 0.7% and the Financial Select SPDR ETF (XLF) 1.5%. Health Care Select Sector SPDR Fund (XLV) gave a discount of 1.2%.
Reflecting more speculative story stocks, the ARK Innovation ETF (ARKK) declined 2.5% and the ARK Genomics ETF (ARKG) pulled back 1.6%. TSLA stock is a major holding in Ark Invest’s ETF.
The five best Chinese stocks to watch right now
Impinj’s stock fell 2.5% to 89.66 on Tuesday. The tracking chips maker is finding support on the 21-day and 10-week lines. PI stock is trading on a fresh consolidation which should be a fair basis with Friday’s close of 99.10 buy point. Investors can use 93.46, which is just above the short-term high, as an early entry that is still near the 10-week line.
The relative strength line is at a higher, a bullish signal for the PI stock as it outperforms the S&P 500 index.
The stock on Semiconductor fell 2.4% to 68.48 on Monday after rising 1.8%. Shares of the EV-focused chipmaker closed just below their 21-day and 10-week lines.
The RS line for Onesemi stock is near the higher.
After a breakout from a long base in late August, ON stock could have a new, shallow base at the end of next week. Investors can use 73.03 as an aggressive entry, which will also be above the top of the previous consolidation.
Neurocrine stock fell 0.7% to 107.09, once again finding support at the 21-day moving average. As per MarketSmith analysis, NBIX stock has a flat base with 109.36 buy point. The flat base is just above an earlier consolidation, making it a base-on-base formation. Investors can use a move from Monday’s high of 108.71 as an entry slightly lower. RS line is at new high for NBIX stock.
SQM stock fell 2.4% to 104.66, right on its 21-day line. Shares of the Chilean lithium-and-fertilizer giant tried to exit a messy cup-with-handle base earlier this month, but never closed above the 113.80 buy point. The good news is that the 50 day line is starting to pick up.
The RS line for the SQM stock is close to the height.
Tesla stock soared to 313.33, slightly increased gains and moved above a very aggressive 309.22 buy point. But the stock closed down 0.1% at 308.73. TSLA stock is close to a 314.74 buy point from a minor consolidation, within a much larger consolidation that could be a reasonable base this weekend.
The RS line has recently been rising below the early April highs.
Buying TSLA stock, or any stock, would be extremely aggressive in the current market environment.
CEO Elon Musk tweeted on Tuesday about Optimus, the humanoid Tesla bot that he might show off at the company’s AI Day on Sept. 30. Most experts say a useful general-purpose humanoid robot is decades away. He also hinted at an improved Smart Summon or Autopark feature, which has had problems for years.
However, Tesla China sales are behind expectations. Local sales should still hit a record in September, as Shanghai’s capacity expands again. But Tesla auto insurance registrations fell in the latest week, at a time when they are generally working hard.
Tesla China wait times have fallen sharply over the past few weeks, with the EV giant resorting to a sizable insurance subsidy to boost sales at the end of the quarter. With this, the actual price cut can be estimated at the end of this year.
Tesla Vs. BYD: Which EV giant is the better buy?
stock market analysis
Well, this is a stock market correction. The S&P 500 and the Dow Jones hit last Friday’s lows on Tuesday, before taking some losses.
The good news about Tuesday is that stocks weren’t rallying in big news related to the Fed. This is in contrast to Fed chief Powell’s August 26 Jackson Hole speech or the September 14 CPI inflation report.
It is no coincidence that the stock market is struggling with the Treasury yield and screaming higher.
The Summer Bull case revolved around the Fed. At first, the Fed was expected to slow rate hikes soon, then start cutting rates in 2023. Then, there was still hope that the Fed would hold off on raising rates until the end of the year.
But now the Fed is on track to aggressively raise rates through the end of the year, with more likely in 2023. This means a lot of pain for the economy.
The current low-growth, high-inflation environment hasn’t been easy for companies at all. Ford, FedEx (FDX) and General Electric (GE) are among those warned last week.
The sell-off of Ford stock on Tuesday, following last week’s FDX and GE, shows that the price of significant earnings hasn’t disappointed investors. Expect more warnings in the next few weeks.
Given the weakness over the past several weeks, it is possible that markets will bounce back on Wednesday after the Fed meeting and Fed chief Powell’s talk. Keep in mind that the market often reverses in a day or two in response to a Fed meeting.
It’s hard to see markets making meaningful progress until it becomes clear when the Fed may begin to slow down and halt its tightening. It is not difficult to test the major indices or break their June lows.
Time Markets with IBD’s ETF Market Strategy
What should we do now
The market correction has come into force again as the Fed continues to raise rates sharply again, with no end in sight. Amid tough macroeconomic conditions, companies are announcing major warnings that are likely to get worse.
Investors should invest little or no at all and should not make fresh purchases. Wait until a certain uptrend occurs, which will likely include major indexes retesting their 50-day moving averages. Even in that scenario, the Fed and economic background, along with other technical hurdles, should keep investors cautious.
For now, investors should work on their watchlists, focusing on relative strengths like NBIX stock, On Semi and Tesla. Remember, today’s relative winners may start to break if the correction is bullish.
Read The Big Picture every day to keep up with the market direction and key stocks and sectors.
Please follow Ed Carson on Twitter @ibd_ecarson For stock market updates and much more.
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