Dow Jones futures fell modestly overnight, along with S&P 500 futures and Nasdaq futures, as Treasury yields rose.
The stock market fell after the Federal Reserve meeting, with the S&P 500 and Nasdaq falling below critical levels. The Fed stuck to its expectations of raising interest rates again this year and indicated that interest rates will remain high for longer. However, Federal Reserve Chairman Jerome Powell said the central bank “will act cautiously.”
while, Celsius (CELH), one of the last strong leaders, sold off strongly on Wednesday. Dwarf beauty (dwarf) for the ninth session in a row. Investors should look to limit exposure and wait for real market strength before making new purchases.
CNBC reported Wednesday night that Hollywood studios are close to reaching an agreement to end the writers’ strike. That would be good news for Walt Disney (Dis), Netflix (NFLX), Paramount Global (Paragraph) and other large media players.
Federal Reserve meeting
Policymakers left interest rates steady in the 5.25%-5.5% range at the end of the Fed’s two-day meeting, as expected. The focus was on the Fed’s expectations for rate hikes for the rest of the year and 2024. Twelve FOMC members still expect another rate hike in 2023, as was the case in June, versus seven who see no change.
Fed Chairman Powell said policymakers can “proceed cautiously,” suggesting there is no rush to raise interest rates again. But he also said another rate hike by the Fed would not be a big deal for the economy.
For 2024, policymakers now expect the federal funds rate to end at 5.1%, versus the June forecast of 4.6%.
What’s going on? The Fed feels more confident in a soft landing, reducing the downside risks of raising interest rates again and keeping interest rates high. GDP is expected to rise by 2.1% in 2023 and 1.5% next year, up from June estimates of 1% and 1.1%, respectively. Unemployment is expected to end the year at 3.8% and rise only to 4.1% in 2024, both below June forecasts.
Meanwhile, the Fed now expects core PCE inflation to slow to 3.7% in 2023, versus a June forecast of 3.9%. But this is still higher than recent annual trends indicate. The result is that if inflation is lower than the Fed’s latest forecast, policymakers will have an easy excuse not to raise interest rates again.
Markets now see the odds of the November 1 interest rate reaching 30%, which is little changed from 29% before the Fed’s announcement. The odds of a Fed rate hike in December rose to 46% from about 41%.
Dow jones futures today
Dow Jones futures were 0.2% below fair value. S&P 500 futures fell 0.35%, and Nasdaq 100 futures fell 0.4%.
The yield on the 10-year Treasury note rose several basis points to 4.44%, the highest level since late 2007. The two-year yield rose to 5.19%, another long-term high.
Remember, an overnight move in Dow Jones futures and elsewhere does not necessarily translate into actual trading in the next regular stock market session.
Key earnings lag
FDX stock rose sharply in extended trading after FedEx beat earnings expectations and raised its minimum earnings per share target for the full year, despite revenue falling more than expected. FedEx stock rose 0.2% to 250.52 on Wednesday. Shares are running at a firm buy point of 270.95 but are below the 50-day line.
KBH stock fell modestly overnight. KB Home’s earnings and revenue fell less than expected, but average selling prices fell more than the homebuilder expected. KB Home stock fell 0.7% to 48.06 on Wednesday. Shares are near the bottom of a deep 16% consolidation with a buy point of 55.37, according to MarketSmith.
The stock market fell after the Fed meeting decision and Powell’s comments, led by the Nasdaq.
The Dow Jones Industrial Average fell 0.2% in stock market trading Wednesday. The Standard & Poor’s 500 index fell 0.9%. The Nasdaq Composite Index fell 1.5%, its worst loss since August 24
After attempting to do so on Tuesday, the Nasdaq and S&P 500 closed below the intraday low set on the follow-up day on August 29. Closing below the FTD low is a very bearish signal that the market rally will eventually fail. The Nasdaq is already closer to its August 18 low than its 50-day line.
Market breadth remained weak. The small-cap Russell 2000 index encountered resistance at its 200-day line, then fell 0.9%, hitting a three-month low.
Invesco S&P 500 Equal Weight Fund (RSP) fell 0.5% after bouncing back above the 200-day line before the Fed’s announcement.
More leaders are collapsing.. CELH stock, which had barely fallen from its highs, fell 8.3% on Wednesday. ELF stock fell 6.1%, falling for the ninth straight session.
Keep in mind that the stock market often has a reaction on the second day of Fed meetings that reflects the initial move.
US crude oil prices fell 1% to $90.28 per barrel.
The yield on the 10-year Treasury note fell 2 basis points to 4.35%, down from a 15-year high on Tuesday. The two-year Treasury yield, closely tied to Fed rate expectations, rose 1 basis point to 5.12%, a new 17-year high.
Among growth ETFs, the Innovator IBD 50 (FFTY) decreased by 1.3%. iShares Extended Technology Software Fund (ETF)IGV) decreased by 0.9%. VanEck Vectors Semiconductor ETF (Trait) gave up 1.6%, with Nvidia stock taking first place.
SPDR S&P Metals and Mining Fund (XME(down 0.5%, Global X US Infrastructure Development ETF)cradle) decreased by 0.6%. American World Aircraft (Planes) decreased by 0.85%. SPDR S&P Homebuilders (XHB) decreased by 1.2%. Energy Select SPDR ETF (XLE(lost 0.9%, SPDR Healthcare Sector Fund)Forty-fifth) just rose.
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Nvidia stock fell 2.9% to 422.39, holding above an intraday low Monday but reaching its lowest closing level in more than a month. Shares are 7.1% below their 50-day line.
Meta stock reversed lower to close down 1.8% to 299.67. Shares are back below the 50-day line, but may be close to forming a handle on the cup base.
TSLA stock also turned lower, closing up 1.5% to 262.59. The electric car giant is close to adding a handle to the base of its cup.
GOOGL stock fell 3.1% to 133.74, closing below its 21-day line. The stock is back on the top shelf above the handle mug base.
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What are you doing now
The market continues to face resistance on the upside and break below the support level. More and more leading stocks are falling. It’s not a good environment.
Yes, there are a number of stocks that are about to be created, or about to be. But they need a healthy rise in the market to have a good chance of success.
For now, investors should have small to modest exposure, and perhaps hold on to some winners longer. Keep working on your watch lists. Look for stocks that are holding support levels or showing strong relative strength. These are the names that could lead the next strong advance.
Read The Big Picture every day to stay on top of the market trend and leading stocks and sectors.
Please follow Ed Carson on X/Twitter at @IBD_ECarson For stock market updates and more.
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