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Dow Jones Futures: Stocks sell off as Fed Hawkish sees new final interest rates

Dow Jones futures fell slightly overnight, along with S&P 500 futures and Nasdaq futures. Stock markets fell sharply on Wednesday after the Federal Reserve rallied once again and signaled a higher high, aka “finally” interest rates.




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

C Holdings (CELH), Shockwave Medical (SWAV), ATI (ATI), GlobalFoundries (GFS) and Enphase Energy (ENPH) are all showing relatively strong strength in a weak market.

Shares of CELH and Shockwave Medical are available on IBD Rankings watchlist. Shares of Celsius Holdings, Enphase and SWAV on IBD 50. ENPH securities are available on IBD Big Cap 20. Celsius is Wednesday IBD shares of the daywhile Shockwave is Monday.

The video embedded in this article discusses Wednesday’s rollercoaster market action and analysis of C, ATI and GFS stocks.

Fed meeting

As expected, the Fed raised its key interest rate by 75 basis points for the third consecutive meeting, raising the target range to 3%-3.25%.

Fed policymakers now see lending rates at 4.4% by the end of 2022, up from 3.4% after the June meeting. That’s what the market is pricing in: 75 points another fundamental at the November meeting, followed by 50 basis points in December, for a year-end range of 4.25%-4.5%.

The central bank also signaled some modest tightening in 2023, predicting lending rates of 4.6% by the end of next year compared with a forecast of 3.8% in June. That is also not out of the question of market watchers for the final rate. Policymakers expect this rate to fall to 3.9% by 2024.

Fed Director Jerome Powell once again stressed that the central bank will not let inflation happen. He noted that a “soft landing” would be difficult, but wouldn’t say how likely a recession is. “At some point, the Fed will slow the pace of rate hikes, but did not say when that might happen,” Powell said. He added that Fed policy will need to remain “restrictive” for a while.

Fed chief Powell said that the labor market continues to be “out of balance,” though he added that commodity prices appear to have peaked.

Dow Jones Futures Today

Dow Jones futures are down 0.3% from fair value. S&P 500 futures fell 0.6%. Nasdaq 100 futures fell 0.7%.

The yield on the 10-year Treasury note rose 4 basis points to 3.55%.

Remember that action overnight in Dow futures contract and elsewhere it doesn’t necessarily translate into actual trading the next week stock market meeting.


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Wednesday Stock Market

Stocks rose slightly after the Fed meeting decision, then went on a roller coaster ride that ended at session lows.

The Dow Jones Industrial Average fell 1.7% on Wednesday stock market trading. The S&P 500 index also fell 1.7%. The Nasdaq composite fell 1.8 percent. Small-cap Russell 2000 drops 1.5%

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

The yield on the 10-year Treasury note fell 6 basis points to 3.51% after briefly touching 3.62% after the Fed raised interest rates. Two-year Treasury yields rose above 4% to close around 4.04% but below session highs.

ETF

Among the Best ETFsThe Innovator IBD 50 ETF (FFTY) decreased by 1.8%. iShares Expanded Software-Technology Sector ETF (IGV) spent 1.4%. VanEck Vectors Semiconductor ETF (SMH) lost 0.8%.

SPDR S&P Metals & Mining ETF (XME) slipped 2.1% while the US Global Jets ETF (JETS) down 4% on a bad day for travel. SPDR S&P Homebuilders ETF (XHB) decreased by 1.1%. SPDR Select Energy ETF (XLE) fell 1.5% and the financial SPDR ETF (XLF) 2.1%. SPDR Fund for the Healthcare Sector (XLV) decreased by 1.7%.

Reflecting a more speculative narrative on stocks, the ARK Innovation ETF (ARKK) fell 2.65% and the ARK Genomics ETF (ARKG) 2.7%.


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CELH shares

Shares of Celsius fell 3.9% to 98.23 on Wednesday. Shares have returned to find support at the 10-week moving average after dropping 209% from early May to late August. In a few weeks, CELH stock could have a new base, with 118, 29 buy points. Investors can use 108.47 as an early entry for the energy drink maker.

The relative strength line for CELH stock is at a record high.

Shockwave Stock

SWAV stock fell 1.85% to 284.69 on Wednesday, reversing lower from 300.96 on the day. Shockwave stock continues to find support around its 21-day line.

ATI . stock

ATI stock lost just over 2% to 29.67, trading around the 21-day line after pulling back from a seven-year high of 33.31. Shares of the special alloys maker have retreated to previous base highs and just above its 10-week threshold. The 10 week bounce line can provide an early entry, with a proper facility for another week.

While ATI stock has fallen back, its RS line is right at the high end.

GFS Stocks

GlobalFoundries shares fell 0.9% to 56.29. This is just above its brand new 50-day and 200-day lines, while GFS stock is slightly below its 10-week line. The chip foundry IPO in 2021 has a very deep value double bottom sole with handle, offers 66.06 buy point. By the end of this week, the handle on GFS stock should be long enough to become its own base, with the same entry 66.06.

ENPH Stocks

Enphase stock dropped 15 cents to 304.56, continuing to find support from its 21-day moving average. ENPH stock is still extended from the 50-day limit, but less and less. The RS line for Enphase stock has hit a new multi-week high.

Stock market analysis

As usual, the stock market fluctuated wildly after the Fed’s rate hike decision, new rate forecasts and Powell’s comments, briefly recovering strongly before closing with heavy losses. The major indexes finally had ugly downside outside reversals.

While markets were unchallenged on Wednesday, the Fed’s overall tone could be a bit more hawkish than expected. Ultimately, however, the Federal Reserve is raising interest rates aggressively despite growing recession risks, aiming to bring inflation back to normal.

The market will usually have a two-day Fed response. But even if stocks recover on Thursday, that won’t make sense.

All major indexes are down from recent lows on Wednesday and are losing their 50-day moving averages. The June low is not far off.


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What to do now

In the end, it’s not the news but the market’s reaction to the news that matters. And the stock market didn’t react well to the Fed’s decision to meet Wednesday.

Can the market have a short-term rally, or even a good one in a few weeks? Sure. But investors will want to see a lot more evidence.

Top stocks like Celsius, Shockwave and Enphase could issue early buy signals in an attempt to recover the market. However, investors must balance the urge to jump into hot stocks quickly with making sure that a broad uptrend is underway. If the market heads towards June lows or higher, even the relative leaders are likely to break out.

If a stock market rally really holds up, there are plenty of opportunities. It is important to be ready.

Work on those watchlists. Focus on relatively strong stocks and those that are holding or retrieving key moving averages.

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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